On rare occasions, a board with a robust delegation system and a clear set of policies, may need to make a decision between board meetings. These days, it would be relatively easy to call a special meeting of the board to make the decision via video-conferencing. But convening the board on short notice may be like herding cats given the busy lives of board members. Furthermore, if the proposal does not seem contentious, why meet? Can the board simply make a decision via email?
Before I go any further, note the conditions I’ve listed: “a board with a robust delegation system and a clear set of policies.” Some will argue that the board should have an executive committee with authority to make board decisions between meetings. Although not out of the question, I generally discourage executive members having that authority. If they commonly need to make decisions between board meetings, either the board needs to rethink its delegation to management, or its policies are lacking.
However, if the board does give an executive committee authority to make decisions between board meetings, the committee’s scope of authority should be tightly constrained. That’s subject for another day.
Back to our scenario. A board decision is needed before the next meeting and the board’s leadership would rather not call a special virtual meeting. Instead, it sends an email to each board member asking them to vote on the motion. Six of eight respond. The responses are unanimous in favour of the motion.
Although two other board members have not responded, obviously the responses satisfy a quorum and the majority rules. Correct?
Perhaps not!
In most jurisdictions, the standard for board decision via email is different than that which applies when the board is meeting in real-time. This applies whether the meeting is in person or virtually.
Why the difference? A meeting in real-time allows participants to engage in debate. Hopefully, partisanship is not a governance feature. In other words, some might be persuaded to change their minds based on new insights brought up in the debate. One would hope that the board seeks collective wisdom.
Emails don’t lend themselves to quite as robust a discussion.
Depending on the jurisdiction, the law often allows email voting, but the standard usually differs. For example, the Canada Not-for-Profit Corporations Act states:
140 (1) A resolution in writing, signed by all the directors entitled to vote on that resolution at a meeting of directors or of a committee of directors, is as valid as if it had been passed at a meeting of directors or committee of directors.
Whoa! “All the directors entitled to vote?” And they all need to vote in favour of the resolution? That’s a fairly high bar! If Monica is sitting on a beach in the Caribbean, her affirmative vote is still needed.
Oregon Nonprofit Corporation Law, Chapter 65 has similar requirements:
65.341 Action without meeting. (1) Unless the articles of incorporation or bylaws specify that a board of directors’ meeting is necessary to take an action, action required or permitted by this chapter to be taken at a board of directors’ meeting may be taken without a meeting if the action is taken by all members of the board of directors. The action must be evidenced by one or more written consents describing the action taken, signed by each director, and included in the minutes or filed with the corporate records reflecting the action taken.
Check out that last requirement. A decision made in this process needs to be kept in the official records of board decisions. If it is entered in the minutes, those minutes will be adopted by the board making them the official record.
The Canada Not-for-Profit Corporations Act requires similar record keeping:
140 (2) A copy of every resolution referred to in subsection (1) shall be kept with the minutes of the meetings of directors.
But what if email doesn’t result in consent from each director? A special virtual meeting can be called. In that case only a quorum is needed and, depending on the law and your bylaws, likely just a majority of those voting is needed.
Still, an email vote would make the exercise much simpler if you can get all to respond. Monica, who is still sitting on the beach sipping from that glass with the little umbrella on top, needs to understand that her vote is required. Otherwise, you will need to go to the B plan.
As a final note, be sure to check the legislation for your type of organization and your jurisdiction. If you are unable to find reference to requirements for the board’s action without meeting, check with legal counsel.
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