Board Members and Privacy An Issue of Confidence

 As the leaders of a private corporation in which shareholders own stock that  entitles them to live in an apartment within the corporation’s building, residential co-op board members have a lot of responsibility. Along  with this responsibility comes questions about what can and cannot (as well as  what should and should not) be openly discussed among board members,  management, and non-board shareholders.  

 Certain processes and decisions are more appropriately made behind closed doors,  while others benefit from total transparency and the light of day. What's okay  to discuss? What's not? What can building administrators do to foster open  communication and trust? These are issues that conscientious building  administrators must consider and take seriously.  

 Doing Business

 On its face, a cooperative apartment building in Tribeca might seem like it has  little in common with an investment bank headquartered in the Financial  District—other than the fact that both happen to be in Manhattan. The latter’s objective is to make as much money as possible and to enrich the coffers of  the shareholders; the former’s concerns are to run a residence as efficiently as possible and to enrich the  quality of life of the shareholders. Plus, you can buy stock in an investment  bank—you can only buy the units, shares in a co-op and with board approval, that is.  In the eyes of the law however, they are both more or less the same animal:  business corporations, with shareholders, and a detailed set of operating  procedures.  

 “The Business Corporation Law (or BCL) governs the management of cooperative  affairs in general,” explains Bruce Cholst, a partner attorney with Rosen Livingston & Cholst in Manhattan. The said BCL “does not mandate that board meetings be open to shareholders. Actually, the  standard operating procedure of any cooperative corporation is that board  meetings are not open to shareholders.”  

 If Joe Smith logs onto to Ameritrade and buys a single share of stock in Exxon,  for example, this allows him a voice (however miniscule) in elections, and the  opportunity to attend the annual meeting—plus a small share in profits and losses. If Joe Smith attempted to crash a  meeting of Exxon’s board of directors however, explaining that his stock share permitted his  attendance, he wouldn’t get very far—and he certainly wouldn’t be privy to the decision-making process of the board.  

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4 Comments

  • In my experience it's shareholder apathy that keeps them away from annual meetings. They are apathetic when the existing Board doesn't encourage shareholder involvement not because they are satisfied with how their building is run.
  • I am a board member and have concerns regarding our President's unobliging to our sublet policy and using areas in the building to store personal items when there are storage units for rent. Also, major concern with income to the building that has not been represented on the year-to-dates. In both sitatuions I have addressed the board, managing agent and other board members and there is either no reply or empty promises made with no outcomes. This has been going on for several months. What are some suggested next steps I can take.
  • How can you get board members who just sit there to become active. They mean well but do ablsoluely nothing to contribute to the well being of the cooperation.
  • Ask why they are on the board? If to take space and not contribute they are doing nothing for the shareholders who voted for them. They should resign if its not what they want to do.