Posts Tagged ‘majority’

Cooperatives: Empty Seats

December 8, 2014

2014-12-08 - IMAGE,

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 DURING THE APPROACH AND ONSET OF THE HOLIDAY PERIOD attendance at cooperative board meetings typically dwindles. Often there are more empty seats than attendees. Unfortunately, this not only applies to shareholders but to board members as well.

Gift shopping, setting decorations, travel plans, company holiday parties, dinners, family gatherings and visiting friends generally occur in a fairly short time span, causing folks to be unreachable or unable to be at the assembly. Recognizing this, many cooperatives schedule their board of directors meetings in a manner that has the least negative effect on attendance, especially for board members.

But sometimes the business of the cooperative requires a scheduled or special board meeting in the thick of the holiday season, such as in the case of approving a new shareholder applicant or authorizing an unexpected repair. In circumstances like these convening a quorum of board members can be a challenge when more enticing seasonal festivities beckon, and it can be even more of a challenge to pull together a quorum at the last minute for a special meeting.

What is a quorum? It is the least number of members who need to be present in order for the meeting to be considered official. If there is no quorum, there cannot be a meeting and, therefore, no action may be taken on any cooperative business.

As technical advisers to cooperatives we often see a board of directors that consists of five or seven members (five members is most common) who are elected to board positions by shareholders. A quorum for a five-seat board usually is three members and for most cooperative actions a majority vote of the board is necessary.

Yet, as is apt to happen during holidays, cooperatives sometimes stumble at a point when one or more board members are absent and only a quorum is present. The stumble is likely to occur due to a misinterpretation of the word “majority.” Unless the cooperative documents explicitly state otherwise, a majority board vote typically means a majority of all the seats on the board ― not a majority of the board members in attendance.

For example, on a five seat board having a quorum requirement of three members and with only the quorum present, all three of the members must vote to approve an action. Too many times, when reviewing board minutes, we found a board secretary had improperly declared an action approved when just two of the three-member quorum voted to support a motion. The rationale, of course, was that a majority of the three members voted to approve the action. However that rationale is incorrect since two votes on a five member board do not constitute a majority, only three or more would be a majority. Consequently, in such an instance, a matter the cooperative thought was approved actually had not been, leaving the door open for opponents to the action to argue it was not authorized.

In some situations, with just two votes in favor, we had to request the full board to vote again on those measures to obtain proper authorization.

Bottom line: To better avoid potential controversy and disputes, ensure the term “majority vote” in the cooperative documents is properly defined and upheld before declaring a measure to have been approved.



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