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Should we be able to remove appointed directors?

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Should we be able to remove appointed directors?

Our small regional conservation nonprofit serves seven counties. Our directors are appointed by two entities in each county, giving each county three votes. One member is appointed by the county’s conservation district, one is appointed by the county commissioners office and one is appointed by agreement of both entities. Our bylaws currently permit removal of a director who attends less than half of the year’s meetings. Our board development committee would like to add a provision to permit removing a member “for other causes” after notice and a two-thirds vote of the board.  Do we have any legal issues we should consider?

My favorite question about nonprofit organizations is “whose organization is it?” Normally when a person has the right to appoint a member of the board and the organization is intended to act as a coalition of the appointing authorities, only the person that has the right to appoint the director has the right to remove the appointee or appoint a successor.  Otherwise the representation could be destroyed by others on the board who may simply disagree with the appointing authority. In my experience, where a director is not participating or is acting improperly, a talk with the appointing authority usually leads to a constructive solution. At the least, it usually means that the person will not be reappointed to the board for another term.

If your organization sets its own agenda and activities and the appointment procedure is more of a convenience to assure regional diversity rather than an expression of the substantive interests of the appointing authorities, it may not make much difference who has the power to remove the appointees, particularly if only for “cause” and by a two-thirds vote. Presumably an amendment to the bylaws will have to be approved by a majority of the currently appointed directors, so if the appointing authorities have a substantive objection they can suggest – or direct — that their representatives vote No.

I generally believe that the right to remove a director is a valuable backstop to talking with a director about shaping up or getting off the board. But in more than 40 years of practice, I have had a client actually use the removal power only once. It is a very important talking point, but very seldom actually used.

Monday, September 18, 2017

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