The old adage that knowledge is power holds doubly true when it comes to assuring ethical conduct and adherence to bylaws by a governing board, regardless of the size of a community size or the severity of a given crisis.
But the laws that govern certain aspects of board performance and accountability aren't just arbitrarily assigned rules and regulations; they're spelled out in the state's Business Corporation Law, or BCL. Supporting the framework of the BCL are a few other, more common-sense pillars: open communication, proactivity, and initiative on the part of not only board members and managing agents, but shareholders themselves.
An ethical, competent agent can help serve his or her building community and keep its board accountable, but ethics and common sense go both ways; they can raise a red flag for an aware, involved, shareholder faced with questionable action by their board or agent. Such situations often call for shareholders to challenge decisions made by their representatives and hired professionals.
"Shareholders [should] communicate with their management and with other shareholders and take advice from their own lawyers and accounting firm," says Robert Grant, director of management for Manhattan's Midboro Management. According to most bylaws, shareholders can petition for a special shareholder meeting - and sometimes bring legal action - with 25 percent approval, as well as pursue, if necessary, a legal avenue.
Stephen W. O'Connell, an attorney with the Manhattan-based law firm of Hartman & Craven LLP, has 18 years experience in real estate law with a concentration in co-ops and condos. O'Connell explains that a board's conduct is primarily governed by the state's BCL and the provisions of the business judgment rule, which came out of a 1990 legal decision that gives boards of directors the right to make reasonable business decisions in the best interests of their shareholders. Thus, it's been routine policy of the courts to avoid second-guessing the business decisions of boards, be they commercial corporations or cooperative apartment buildings.