Voting by proxy not for directors

Question: I am a director on my Irvine homeowner association board. The president of the board has been requesting that absentee directors and officers submit signed proxies for voting purposes during upcoming board meetings. Inevitably, one of his board member friends makes a motion and the president or another board conspirator votes the absentee proxies to their advantage.

I objected to this conduct, but the president said he’s “obtained legal advice that this practice of absentee director proxy-voting is legal.” Then he said, “I don’t know about you, but when an attorney tells me it’s OK, I believe it.” Is the attorney right, or is my board breaking the law?

Answer: Whether incorporated or unincorporated, it is well settled that corporation directors generally cannot vote at directors’ board meetings by proxy but must be personally present and act themselves.

This requirement is for good reason. Directors are expected to stay informed to fulfill their fiduciary duty. To do that they must be present. A director’s personal judgment is necessary, and the duties cannot be delegated or the powers assigned. Because it is so obvious, no cases contradict this concept.

One leading case decided in 1893 and still good law today, Ohio National Valley Bank vs. Walton Architectural Iron Co., said a director of a corporation cannot vote by proxy at a meeting of the directors. That holding was confirmed 63 years later in Greenberg vs. Harrison (1956), which said a corporate director must be physically present at directors’ meetings and cannot vote by proxy.

The Davis-Stirling Act does not permit proxy voting by association directors and, by not allowing it, the Corporations Code rejects it as well. The reason director proxy voting is not permissible is because association directors do not hold proxies. A proxy is defined as a device for use by shareholders to enable another to vote his or her “shares.” Association directors don’t vote “shares.”

Therefore, homeowner association directors cannot vote a proxy at a board meeting or use a proxy to establish a quorum.

The only thing that will change the president’s mind about whether to accept an attorney’s advice is when a board action that relies on that advice subjects the homeowners and the board to liability. The board of directors may want to request a refund for advice that is wrong.

New board rep frets over privacy

Question: I am a new board member at our homeowner association. Our bylaws protect against giving out personal information, such as telephone numbers. However, I am told that homeowners must have access to board members such that my e-mail address and possibly my unlisted phone number could conceivably be given to anyone living here. I’m afraid I’ll be bothered incessantly.

Our association has a management company with a business office, so I maintain that all general issues be directed first to the business office, then the manager can weed out the situations and decide to call the appropriate board member, who can then choose whether to contact the owner. I don’t know how to draw the line between my own privacy and the need to be available as a board member. Do you have any advice?

Answer: Privacy in the manner you describe differs from privacy rights for titleholders with a vested interest in their property. A board member’s privacy does not mean they are entitled not to be bothered by homeowners.

Board members have a fiduciary duty not only to the association and the other board members, but also to every titleholder. No board member is in a position to abdicate or delegate that duty because doing so would be a breach that could expose the director to personal liability.

It is the board’s duty to weed out situations and make the calls, not the manager’s. Though it may seem enticing to place a manager between the board and homeowner to act as a buffer, entrusting a management company or third party such as a business office to stand in the board’s shoes as a fiduciary of trust may create director and association liability.

Part of the duty of a board member is to be available. Titleholders have every right to contact the board directly, just as every board member has an obligation to listen to homeowners and then try to resolve problems.

There are ways to protect privacy and still be available to homeowners. If those are not satisfactory, board members always have the option to resign.

Please send questions to P.O. Box 451278, L.A., 90045 or e-mail NoE[email protected].