Board Recalls: Triggers and Challenges
When owners start talking about board recalls, managers need to pay attention — and also take care that they don’t cross any lines.
“Managers have to be absolutely neutral on recalls, but it’s a somewhat widely breached ethical requirement,” says Kelly Richardson, a partner in the law firm Richardson Ober De Nichilo in Pasadena, Calif. “Managers are the referees — their role is to make sure the process is fair and correctly conducted.”
That said, understanding the types of issues that can lead to a recall, the uphill battle involved, and the potential alternatives can equip you and your clients to better handle or preempt brewing recall campaigns.
“If the board isn’t following the law, the advice of its managers and other professionals, the business judgment rule, the open meeting act requirements — these are reasons why an association probably needs a new board if they won’t straighten up,” Richardson says.
The inability to play well with others also could spur a recall. “If a director tends to frustrate the rest of the board, antagonize the board, or drive off others, a recall might be appropriate,” says attorney Michael Kim, of counsel with Schoenberg Finkel Newman & Rosenberg, LLC, in Chicago.
Some recall movements spring up because there’s a schism between the owners’ wishes and the board’s actions — such as opening the clubhouse for only two hours a day to save money or prohibiting guests after 8 p.m. for safety reasons.
Perhaps the clearest case for recall occurs when a board member’s bad behavior reaches the level of dishonesty or fraud. “Misconduct cases are probably easier than those that are based just on disappointment in a board member,” Kim says. In Illinois, for example, owners can petition a court to remove a director for such conduct.
Let’s not kid ourselves, though — recalls aren’t always based on rational or justifiable reasons. But one thing is certain, regardless of the reason: Recalls are challenging to execute. “It’s very easy to start a recall but very hard to finish it,” Richardson says.
Learn more: Board Recalls: What Everyone Needs to Remember