Two Shareholders' Personal Animus Keeps a Board Prez's Sale Unapproved

It's revenge plain and dingle" Their stated reason for objecting to the sale is their belief that the president should stay in the building and “suffer” along with other shareholders because of the mortgage (and high debt service) that the president so strongly advocated.

Legal Lesson

The only concern of these

two shareholders was

to make the president

miserable and disrupt her life.

Our mantra in advising boards is that their decisions should always be reasonable, consistent, made in good faith and with a view as to what is best for the shareholders and the corporation. We preach this to the individual board members as well. We do not want anyone to accuse the board, or any of its members, of “bad faith.”

Even the Business Judgment Rule, which protects board decisions from judicial review, requires that decisions be made in “good faith.” 

In our case, the two board members acted out of vengeance only. There was no concern for the actual financial background of the purchaser. There was no concern for the specific transaction, or for the good of the cooperative. The only concern these two shareholders had was to make the president miserable, and to disrupt her life. This sort of thinking is dangerous, and can only lead to problems.

Andrew Brucker is a partner at Schechter & Brucker

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