Board Matters: Keeping Discord Among Shareholders to a Minimum

Best Intentions

Some boards try to keep shareholders happy by letting them vote on big-ticket projects, such as a lobby renovation or a roof replacement. We've covered plenty of these types of renovations and illustrated how challenging they are to organize and carry out successfully. We've also shown you how once work gets underway on a project, contractors unearth unexpected problems that need to be addressed — which means the board has to spend a lot more money than it originally anticipated. You can see how the idea of spending more money might lead shareholders who aren't as intimately involved in the minute details of a project to unfairly accuse the board of everything from not knowing what it's doing to getting kickbacks from a shady contractor who's trying to fleece the building.

Rather than letting shareholders vote on these types of large projects, the board might instead have a meeting announcing its intent to, say, replace all the windows, but also share the reasons for its decision. The board should be upfront about costs, possible additional costs, how shareholders will be personally affected during work, and how the project will translate to savings in the long term. This allows boards to include the shareholders without also hamstringing itself.

Sometimes boards also require approval from a majority of shareholders for any capital outlay greater than $500,000 — or any amount deemed too high for a board to decide without shareholder input. This might sound like a good idea, but it can also prevent a board from acting quickly should an emergency occur.

Make Them Walk Their Talk

There are going to be dissidents who want to watch closely a board's every move. Consider calling their bluff, so to speak, and encourage them to work within existing bylaws and proprietary leases to remove board members they deem unsatisfactory or to run for the board themselves.

Transparency

Dissidents tend to appeal to people who are ill-informed. The best weapons in a board's arsenal, therefore, are information and communication. If shareholders are getting upset because they feel like they are being kept in the dark, then keep let them know the goings-on in the building in newsletters and special bulletins sent in e-mails and posted in common areas.

Share the good news, too. Don't make them feel like every e-mail they get is news of more money the building has to spend. Gain the trust of the majority of shareholders by holding meetings in addition to the annual one, where shareholders are welcomed to participate. They will not only feel like they are being kept well-informed but also feel like they are being heard — and that goes a long way toward keeping almost everybody happy.

You certainly can't please all the people all of the time, but that, as the saying goes, is the nature of the beast.

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