Schedules are busy; time is short. You serve on the board of directors for your favorite charity, your friend’s business or another corporation that has sought your expertise. You cannot make it to an important upcoming meeting but you want to make sure that there is a quorum and your vote counts. You decide to give another director your proxy or a power of attorney to vote in your place. Problem solved, you think. Unfortunately, the problem is not solved and too many directors and corporate boards – whether for-profit or nonprofit – are not aware that they may be taking actions without appropriate authority.
It is a basic tenet of corporate law that a board member may not give his or her proxy to another person, including a fellow director, to appear and vote in his or her place. The rule is grounded in a director’s duties of due care and loyalty to the corporation and obligation to act in good faith. These duties are personal to the director and may not be delegated to another. Although a director may seek out, consider and rely on the reports and opinions of experts and others, he or she may not ask another to vote for him or her.
In North Carolina, that rule is supported by language contained in provisions of both the corporation and nonprofit corporation statutes. Directors may act in only one of two ways: in a meeting or not in a meeting. There is no hybrid of the two. A meeting may be conducted through the use of any means of communication that permits the participating directors to simultaneously hear one another. This means in a face-to-face meeting, telephone conference call, Skype, or other teleconference. A director who is not there cannot hear the other directors and therefore cannot be said to be participating in the meeting.
Directors who are acting outside of a meeting – meaning they are acting by a means that does not permit them to simultaneously hear each other – must do so by unanimous written consent. Email actions require the affirmative response of each and every board member. Without unanimity, the action fails. The action of a majority of directors is insufficient, notwithstanding the usual comment, “well, majority rules.” Unanimity is required because the directors are not afforded the benefits of deliberative interaction and possible airing of dissenting views in real time that are inherent in a meeting.
At times, a board of directors must act quickly and there is no certainty that all the directors will respond to an email request for approval in a timely manner. This is a situation where an executive committee of the board may be useful. The committee may be authorized to act between board meetings with the full authority of the board. As long as the executive committee has a quorum at its meeting or acts by unanimous written consent and the action does not, by its nature, require full board action and approval, the executive committee may act on behalf of the board. It should report its actions to the other directors at the next board meeting.
Another, albeit risky, alternative taken by some boards is for the action to be taken on the basis of the consents of a majority of the directors, followed by approval and ratification by the board at its next meeting. Why risky? At the ensuing meeting, directors who already indicated their consent to the action may have their minds changed by the dissenting views of their persuasive fellow directors or subsequent events and information that was not available earlier. What was thought to be majority support for the action may evaporate after the action was already taken. At that point, the board may best resemble Wile E. Coyote in mid-air just off the cliff, with nothing but churning legs working to keep him from the canyon floor below.
If your board must take action quickly, has no committee authorized and available to act on the matter, and is unable to muster affirmative consents in writing from all of its directors, it is best to call a board meeting promptly and work to make sure that a quorum will be in attendance. Make it easy for your directors to attend by setting up a conference call or other communications method that permits them the ability to hear one another at the same time. Do not, however, accept the notion that an absent member voted earlier or is represented by proxy held by someone else. That, like Wile E. Coyote, will not fly.
— Melanie S. Tuttle
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