03.06.17

Blog, Publication,

No, Board Members Cannot Vote By Proxy

PRACTICE GROUPS

The question often arises, particularly with the Boards of employee-owned businesses, non-profits, and associations: “I need to miss the next Board Meeting, can I give another Board Member a proxy?” Voting by proxy is a common practice for shareholders and members of businesses, non-profits, and associations who cannot attend a meeting. In those cases, the right to vote may be delegated pursuant to applicable state law and the organization’s Bylaws. Board Members, however, cannot delegate their votes on Board matters.

Why? It comes down to Right vs. Duty.
Shareholders have a right to vote.
Directors have a duty.

Board Members are elected to serve as fiduciaries of the organization. They are not voting in their individual capacity when they vote on Board matters.

  • Board Members owe a Duty of Loyalty – They may not act out of self-interest or on behalf of the interests of one shareholder or member. Shareholders, however, are entitled to act in their own self-interest.

 

  • Board Members owe a Duty of Care – They must actively participate and make informed judgments. Shareholders may choose to be informed before they vote, or not.

 

  • Board Members may be liable if they fail to fulfill their duties. Shareholders generally can choose not to participate in governance at all, without liability.

 

A Shareholder proxy grants authority to exercise the right to vote. Board voting is the exercise of fiduciary duties, and Board Members do not have the authority to delegate those duties.

The Solution? Board Members can
participate in meetings by phone or video,
or they may approve an action via
Unanimous Written Consent.

Note: For employee-owned businesses and associations, Board Members often are Shareholders or Members as well. These Board Members must remember to switch hats when voting on Board matters.


About Riddell Williams
Riddell Williams is a Seattle firm with over fifty attorneys representing regional and national clients.  For more information visit, www.riddellwilliams.com.

The opinions expressed in this article are those of the author and do not necessarily reflect the views of Riddell Williams or its clients.  This material is for general informational purposes and is not intended to be, and should not be taken as, legal advice.