Board Turnover

A lot of co-op and condo boards in New York City have been in place for years. That can be good or bad, but a lot of shareholders and unit-owners don’t like it. What have you found is an effective way to get rid of an entrenched board?

In these circumstances, the goal is not to get rid of an entrenched board per se, but to open up the nomination and election process and change perceptions that things are not being run properly. Unless your bylaws are restrictive, that’s certainly doable.

Can you walk through the steps boards should take?

Several weeks before the annual meeting materials go out, you should send a letter to all shareholders telling them that anyone who wants to run can do so, provided they give their name and their biography to the managing agent no later than a specified date. Once candidates have submitted their names, they are included in the proxy materials that go to all shareholders so people can vote for them on the proxy forms.

At the meeting, can there be nominations from the floor?

No, because anyone who wants to run will have already submitted their names in advance. The board can still endorse its own slate if it wants to. But since the field has been opened up to everyone, you get rid of the perception, real or unwarranted, that the board is a closed operation.

What has been your experience when boards first implement this process? Is there a tidal wave of candidates running for office, like the current Democratic presidential field?

You might get a lot of people in the first year the procedure is adopted, but after a while things go back to normal, and it's like pulling teeth to get people who are willing to run. When soliciting candidates, some boards will say, “By the way, if you're running, be expected to attend X number of meetings during the course of a year” – and these are meetings that last two to three hours. Or they’ll say you must be on a board committee and do this or that. Many people would rather sit back and complain than put in all that time and work.

Shocking. Let's not forget that they'll also have their neighbors yelling at them in the elevator, which is another benefit of board service. Still, opening up the field is a good thing, but would you recommend it for all buildings?

You have to look at the bylaws, because some specify a certain nomination procedure, and to adopt this process would require changing them, which some boards don’t want to get involved with. But in buildings where the bylaws allow it and the boards have been doing this for a number of years, their annual meetings proceed much more smoothly. The perception has gone from “we vs. they” to “we’re all in it together,” and the legitimacy of board decisions is really no longer in question. And that’s a new day.