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Should we remove director?

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Should we remove director?

Is it reasonable, perhaps even prudent, to ask for the resignation of a director of our 501(c)(3) volunteer fire department who has operated a personal business for several years and only recently discovered she is liable for several years back income (federal and state) taxes?  She claims to somehow have been ignorant of her obligation to file or pay taxes on the business. Our bylaws grant us the right to remove any director "without cause," but knowing that we have a pretty good cause, would make the process more palatable, especially to the public.

You should do what you think is in the best interest of the organization.  You don’t suggest that your director has done anything improper with respect to the organization itself.  I assume that her tax issues will be resolved as civil matters, in which she pays the taxes, interest and penalties, and not through criminal prosecutions.  They shouldn’t involve the fire company at all.

Nevertheless, a charity that depends on contributions for a significant part of its program needs to keep the public trust.  If you are among those who rely on contributions, it could be detrimental to you if it is widely known that you have a director who doesn’t pay proper attention to her own business or might be considered a “tax cheat.”  Your other directors might not want her to continue for the same reasons. 

On the other hand, if she is otherwise a valuable and participating member of your board, you might want to excuse her mistake (if you think it really was a mistake) and be prepared to defend your decision if the issue becomes public.  

To answer your specific question, as a lawyer used to dealing with double negatives, it would not be unreasonable to ask for her resignation, but I would want to know a lot more before opining on whether it would be necessary or prudent.

Tuesday, January 26, 2016

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