Q&A: Dysfunctional Board

Q. We have a board that just doesn’t get along. I am the president, and one of the other board members is a big bully. It’s really hard to deal with him, and I hear from contractors that he is nasty. He wants to run it all. No matter what I or others say, he overrides us. He didn’t show his true colors until recently, and it’s affecting the board’s ability to function. He has two more years to serve. What can we do?

                                   —Losing Control

A. “To begin with,” says attorney Michael Kim of the Chicago-based firm Michael C. Kim & Associates, “while a diversity of directors and their differing perspectives may be of value, a director who is a rogue or bully is a problem that should be addressed by the board as a group. Such intemperate and irresponsible behavior by a director not only undercuts the ability of the board to function efficiently, but can even result in liability for the board and association.  I suggest that you consider the following approaches:  

“Have a discussion among all board members to address the legitimate assigned roles for each of the officers and directors, as well as the converse (meaning that non-officer directors are not to undertake any initiative on their own in any matter involving the association or third-party vendors, unless such action is specifically authorized in writing by the board).  In general, the president as CEO for the board/association is responsible for interacting with outside parties.  It is crucial that third parties have a single source of contact so as to avoid misunderstanding, confusion and frustration.  Of course, there may be occasions where a director may be appointed to handle a particular task, but that should be an assignment given by the board to that director – not assumed by the director him or herself.  

“If a director disregards those limitations, then they may be subject to certain disciplinary actions by the board.  If an informal reminder is insufficient to deter the director’s misconduct, then the board can exercise its own authority to censure the director by a resolution to that effect adopted at the board meeting, stating the misconduct and the board’s express renunciation of it.  In addition, assuming that state law or the association’s own governing documents may mandate a notice requirement and/or the opportunity for a hearing, the director could be charged for the violation and, if found guilty, sanctioned with a monetary fine.  

“If the director continues their misconduct and refuses to abide by any appropriate restraints imposed upon them, there may be a need for more formal proceedings, possibly involving legal action.  In Illinois, the not-for-profit corporate statute provides that the association can bring an action against the director who ‘is engaged in fraudulent or dishonest conduct or has grossly abused his or her position to the detriment of the corporation.’ If proven to the satisfaction of the court, that director may be judicially removed from office ‘in the best interest of the corporation,’ and the court may even bar them from reelection for a prescribed period of time.  Such action may also be instituted by a small percentage of ownership interest (10 percent), and even by an individual association member as a derivative lawsuit.  Obviously, engaging in a lawsuit to address such bullying behavior it is a rather strong measure, but if the situation warrants such action, the board should consider that as a last resort.  

“A bullying director may not only have a negative effect on fellow directors’ morale, but may also negatively affect members of the association – and may even deter vendors from dealing with the association.  Bullying behavior may also even provoke potential litigation against the board and the association, especially where third parties perceive that director as having some authoritative role.  While a director may engage in bullying behavior due to some personal past negative experience, the board is not tasked with being an armchair mental health professional; it must conduct the business of the association in an orderly manner, and in accordance with its fiduciary responsibilities.” 

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