Board Resource Guide: A Look at the Board Member Election Process
Election Day Q&A
It is an annual rite of passage for owners of co-ops and condos. Once a year or thereabouts, they gather in a common area—in my co-op in Astoria it was the basement, right off the washers and dryers—and vote for next year’s board. Sometimes the elections are closely contested. Often, the same people stay on the board for decades. Sometimes—as was the case with my building—we owners were so desperate to not be on the board that we elected a president, who didn’t even live in the building.
Elections, therefore, are not necessarily as simple as they seem, especially in bigger, more populated buildings. There are many ins and outs, pros and cons. Let’s do a question-and-answer session, and shed some light on the subject:
Q: How often must a building hold a board election?
“Generally, the bylaws provide for annual elections,” says Ronald A. Sher, founding partner of the law firm of Himmelfarb & Sher in White Plains, and general counsel to the Council of Westchester Cooperatives & Condominiums. “The organizing documents provide for an annual meeting of shareholders. Included in that annual meeting will be the election of directors—either all or some.”
Q: Some? Why some?
“All in one year, or in staggered terms,” says Sher.
Q: What, if any, laws govern this?
“New York Business Corporation Law (BCL) 602(b) requires that board elections occur annually on the date fixed by the co-op’s bylaws,” explains attorney Robert Tierman, of Litwin & Tierman, PA in Hackensack. “BCL 603(a) provides that if this does not occur by one month after the date fixed, or 13 months after the last election, and the board does not call an election within two weeks or conduct one within two months thereafter, then one shall be held, within 60 to 90 days,on the petition of at least 10 percent of shareholders.”
Q: So even a small group of shareholders has the ability to oust a dictatorial board, at least in theory. But how can ten percent of shareholders hold an election? Don’t they need a quorum?
“And at such a meeting, the presence of a quorum (usually at least a majority of shareholders) is not required,” says Tierman.
Q: Do the elections really take place on the same date every year, as per the bylaws?
“As a practical matter, co-ops don’t feel bound to conduct the elections on the date set in the bylaws, and sometimes allow far more than a year to pass without an election,” says Tierman. “But most feel compelled to conduct them annually even though boards don’t frequentlylook forward to taking heat from shareholders about their performance of their frequentlydifficult and thankless roles as directors.”
Q: Does the election process differ between co-ops and condos?
“No, it’s just the shares. They’re either a share voting or percentage voting,” says Linda Gibbs, executive director of the Honest Ballot Association, an organization, based in Floral Park. The original association was started by Theodore Roosevelt in 1909 to run fair and honest elections.
“One difference is that condos do not allow cumulative voting, which for co-ops commonly allows shareholders to ‘bullet vote’ all of their shares, multiplied by the number of board seats up for election, for even just one nominee,” says Tierman. “In addition, for co-ops, shareholder get one vote per share owned. For condos, unit owners sometimes get only one vote per apartment, even though some apartments have higher or lower common interest allocations.
Q: What about the legal distinctions?
“The election process is fairly similar between co-ops and condos,” says Tierman. “The BCL does not strictly govern condos, because they’re not corporations, as are co-ops. But condo bylaws have provisions regarding elections that closely mirror the BCL, and standard co-op bylaws. And courts will often apply BCL concepts to condo issues.”Q: Whatare the responsibilities of the board with respect to promoting and facilitating the election to building residents?
“The board has a fiduciary duty to comply with the bylaws to facilitate and effectuate the annual meeting process,” says Sher. “They are required to give proper notification—generally no less than 10 days—that the meeting is happening.”
Q: What is their motivation?
“Smart boards exercise thorough oversight over the process because co-op/condo boards have substantial and critical decision-making power and the results of elections, determining who will serve, thus can drastically affect the performance of the co-op or condo,” says Tierman.
Q: What are proxies?
“A proxy is a designation,” says Sher. “The usual type of proxy permits a shareholder to designate someone else to vote in the election, or to do anything they could have done in the meeting.”
Q: How do proxies work?
“Shareholders/unit owners are asked to return proxy forms to the managing agent whether they plan to attend or not,” says Tierman. “The goal is to secure a quorum, so that the election can occur. At the meeting, the managing agent’s staff asks attendees, as they enter, to tender any other proxies that they may have in their possession. After nominations and speeches of nominees, ballots are handed out, voted and collected. Sometimes proxy holders will wait until then to vote their proxies.”
Q: So a proxy is like a limited power of attorney?
“A power of attorney is stronger,” says Sher. “Proxies do not need to be notarized or acknowledged—signed in front of a witness. A limited proxy is similar to an absentee ballot.
Q: That would seem to open the door for problems.
“It’s always a problem with proxies,” says Gibbs. “Candidates knock on doors, they try to get proxy votes. It’s a matter of who got there first.”Q: How is the actual voting process carried out?
“There are different procedures,” says Sher. “If you have an uncontested election [i.e., only one person running for each office], you can have what’s called viva voce—a voice vote of shareholders. If it’s a contested election, inspectors of elections will be appointed.”
Q: Who are the inspectors of elections?
“The management company’s staff usually does the actual counting,” says Tierman. “For hotly-contested elections, independent election tabulation firms are sometimes retained.”
Q: Why spend the money on an independent election tabulation firm?
“We like to do an election from beginning to end,” says Gibbs, of the Honest Ballot Association. “We’re objective—we don’t care one way or the other who wins.”
Q: What else do you provide?
“We try to help make sure they get a quorum,” says Gibbs.
Q: Yes, I’ve heard that the hardest part of elections is getting enough people in the room to make them official. I’ve heard of boards offering door prizes and raffles, in addition to coffee and cake, just to get people to show up.
“The boards do whatever they can,” says Gibbs, to get shareholders to show up.
Q: Do you recommend using them?
“I prefer to have the tabulators do them,” says Sher.
Q: What if the election is close? Can you demand a recount?
“Generally, if it’s close, the inspectors of elections will recount before the announcement,” says Sher.
Q: What happens if the results of an election are contested?
“BCL 619 provides that the New York Supreme Court (the principal trial level court) has jurisdiction to hear challenges to corporate elections, and to overturn or modify them if improprieties are found,” says Tierman. “This applies to co-op elections, and is likely applicable to condo elections also. But, according to the applicable statute of limitations,these challenges must be commenced within four monthsafter the elections.”
Q: How long does the entire election process take?
“Twenty-one to 30 [days], from start to finish,” says Gibbs.
Though elections in your building probably aren’t as heated as the furor over “hanging chads’ were in Florida during a certain presidential election, or as intense as the run-up to the 2008 Democratic National Convention, it’s still important to get them right. With the help of competent legal and management professionals, and a reputable tabulation company, your building’s elections can go smoothly and successfully.
Greg Olear is a freelance writer and a frequent contributor toThe Cooperator.