Q&A: Uncooperative Cooperator

Q I am vice president of our board and we have 102 shareholders. One shareholder in particular seemingly has a vengeful axe to grind with the board and distributes critical letters to all shareholders condemning every action or board decision. He also gathers other contentious people to come with him to the monthly shareholder meetings for which 30 minutes of Q&A are allowed. This person then proceeds to filibuster and harangue board members who attempt to respond to his allegations, thus causing meetings to go on to 10:00 p.m. or 11:00 p.m. Is there nothing we can do to stop this behavior?

—Exasperated Board Member

A “The chances in these circumstances of a successful slander or libel claim against the abusive shareholder is small,” says Thomas D. Kearns, partner at Olshan Grundman Frome Rosenzweig & Wolosky LLP in New York. “New York law protects opinions and discussions between members of group with a common interest such as shareholders of a corporation. While the question does not go into detail over the statements made, any such claim would face an uphill battle if it involved the business of the co-op.

“With respect to the corporate governance issues, however, the board and the majority of shareholders have several weapons to fight an abusive shareholder. While it sounds like the monthly meetings are informational and not the required annual meeting or a meeting for official shareholder action, the board will still be able to use typical meeting rules to control the meeting. Robert’s Rules of Order is the volume most often consulted.

“Of course, in a hostile environment it may still be difficult to impose order. Outside experts are available to run meetings. They are sometimes hired to run an annual shareholder’s meeting including the voting for the board, but there is no reason why they could not be hired to run an informational meeting. There is an expense involved with those services, of course. One of the downsides to the democratic process is that vocal minority is able to disrupt and ruin the harmony of a building, frequently for personal issues.

“While the question does not mention it, one area famous for abuse is the proxy solicitation for the annual meeting. Federal rules govern the typical public company but New York’s laws on proxy solicitation for co-ops and condos are lax. Vocal minority shareholders often make misleading statements to obtain proxies so that they may vote themselves or their allies on to the board. The only practical defense is to educate the shareholders about the issues and caution them as to their proxy and votes.

“Your monthly informational meetings are a noble effort in that regard but you may wish to speak to shareholders individually and investigate the possibility of changing the way you communicate to make it more effective. Unless there is an unusual provision in your charter documents, monthly informational meetings are not required.”

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