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Iowa
Society
of
Association
Executives Email:
admin@iowasae.org
Common Myths in Association Law Association Law Myth #51 ©2009 Beving, Swanson & Forrest, P.C. Mark Truesdell Myth:
A
Director
of
an
Iowa
Nonprofit
Corporation
can
vote
on
Board
matters
by
Proxy. Fact:
No.
However,
there
are
two
ways
that
a
Director
of
an
Iowa
nonprofit
can
act
remotely
on
Board
matters: a)
By
telephonic
participation
in
a
Board
meeting;
and b)
By
participating
in
a
Written
Unanimous
Consent
by
all
Directors. This
is
one
of
the
questions
I
am
asked
most
frequently:
Can
my
Director
(of
my
Iowa
nonprofit
corporation)
cast
a
Board
vote
by
Proxy?
The
answer
is
no.
Iowa
law
calls
for
a
Director
to
cast
his/her
vote
after
full
participation
in
the
discussion
of
the
matter.
Why?
Because
of
a
Director’s
fiduciary
duty
of
exercising
Due
Care.
This
requires
a
Director’s
vote
on
a
Board
issue
to
be:
1)
Informed;
and
2)
Reasoned
and
deliberate. This
is
especially
true
with
respect
to
decisions
which
can
be
legally
challenged
if
undertaken
by
a
board
in
a
hasty,
unreasoned
manner.
As
a
rule,
a
nonprofit
Director
should
act
on
a
Board
decision
only
when:
-
The
Director
is
prepared,
having
read
all
materials
sent
in
advance
by
the
staff,
and
having
informed
himself/herself
on
all
aspects
of
the
issue
in
question; -
After
full
discussion
of
the
matter
among
the
full
Board, -
With
decisions
reached
deliberately;
without
undue
haste
or
pressure. -
If
a
legal
transaction
is
involved,
the
Board
should
review
the
legal
documents
involved
and
obtain
professional
counsel
and
assistance
where
required. -
If
other
professional
analysis,
evaluation
or
appraisal
is
indicated,
obtain
same
and
assure
that
it’s
clearly
understood. Iowa law does allow a nonprofit Director to participate in a Board meeting and cast his/her vote over the telephone, as long as all persons in attendance are able to hear one another. “A Director participating in a meeting by this means is deemed to be present in person at the meeting.” I.C. 504.821 (2007 Iowa Code). So use the conference telephone liberally. Today’s telephone technology, at least in the continental U.S., is entirely adequate to provide constructive participation by a Director even thousands of miles away. Don’t let the realities of busy modern lives frustrate the Board’s ability to meet. But this ability to act remotely does not extend to technologies which do not allow verbal discussion such as FAX, emails, or “meetings” over the internet w/o verbal discussion. Iowa law allows only one method of taking a Board action without verbal discussion by the Board: Written
Unanimous
Consent.
Unless
the
corporation’s
Articles
or
Bylaws
prohibit,
a
Board
action
may
be
taken
without
a
meeting
if
each
Director
signs
a
consent
describing
the
action
to
be
taken,
identical
to
each
other
consent
signed
by
the
other
Directors,
delivered
to
the
corporation.
I.C.
504.822
(2007
Iowa
Code).
This
method
will
allow
a
Board
to
act
quickly
when
there
is
a
true
need
to
do
so. And the
Written
Consents
can
be
submitted
in
counterpart,
i.e.
each
Director
can
submit
a
different
signed
piece
of
paper;
they
must
simply
all
be
identical.
One
must
realize
that
Unanimous
Action
by
Written
Consent
is
limited
to
truly
unanimous
actions.
Any
Director
who
objects
may
prevent
action
by
withholding
his
or
her
written
consent.
For
example,
it
would
be
impossible
to
remove
a
Director
by
Written
Consent
if
that
Director
did
not
consent
to
the
removal. The
Storal
of
this
Mory: Iowa nonprofit
corporation
law
calls
for
Directors
to
cast
their
vote
on
a
Board
matter
only
after
thoughtful,
deliberate
discussion
of
the
issue
at
a
Board
meeting.
Therefore
single
Proxy
votes
by
a
Director
on
a
Board
matter
are
not
valid.
But
telephonic
participation
in
a
good
conference
call
where
all
can
be
heard,
is
entirely
valid
and
should
be
freely
used.
Finally,
where
there
is
true
unanimous
consent
on
a
proposed
Board
action,
Unanimous
Written
Consents
can
comprise
a
valid
Board
action. |
