Co-ops are governed by boards of directors. Ideally, these boards are full of well-meaning, experienced people who guide the business effectively. Unfortunately, this isn’t always the case.
Previously, we discussed the kinds of people you want on your board of directors. But conflict can happen between board members even if you have the best people. These conflicts can be small, indirect disagreements, large full-on arguments, or the result of poor performance, like free-riding, which can impact the entire group and the operations of the organization.
Most conflicts can be resolved, and small disagreements are normal. In fact, they should often be encouraged to some degree. Healthy disagreement – or passionate discussion – mean the board is diverse and has multiple perspectives contributing to it. New and interesting ideas can come out of these types of disagreements and having a diverse board is highly recommended.
Corrective action before termination
But sometimes a director’s does or says something that is outright inappropriate. We’re all familiar with the uncomfortable moments when someone has crossed a line. Good leadership and a plan for dealing with these situations can usually resolve them pretty quickly.
For example, the offending director might be asked do some professional development, like take a governance course. Other times a frank conversation with the president is the more appropriate response. Either way, don’t let the situation fester into something more serious – nip it in the bud.
As a general rule, corrective action is the preferred way to deal with a misbehaving director, and a director should only be terminated in extreme situations. Directors should not be removed from a board just because of personality conflict, for not pulling their weight, or taking an unpopular position. Being a nay-sayer or playing Candy Crush during meetings doesn’t warrant removal.
In extreme cases, though, the board may have to remove the director.
Here are a few examples:
- A director doesn’t disclose a conflict of interest, and then personally benefits from a board decision. This would be considered a significant breach of trust — it is both unethical and a violation of co-op legislation.
- A director carries out a task or attends a meeting while under the influence of drugs or alcohol. This is inappropriate and can lead to further behavioural issues.
- A director spends the co-op’s money on personal expenses. This is not only unethical, but probably illegal as well.
Termination is necessary. Now what?
Regardless of the issue, removing a member of the board won’t be easy. In fact, it can create more conflict amongst board members and the rest of the co-op.
In some cases, you can handle the removal of a director privately. For example, the president of the board can have a frank (but delicate) conversation with the director about the board’s concerns and ask for their resignation. In most cases, a reasonable director will understand and resign.
Sadly, not everyone is reasonable. For example, if the errant director feels they’ve been wrongly accused or attacked, they may refuse to resign. In this case, the board will need to follow the process for removing a director in their bylaws (hopefully) and province’s Co-op Act (or the federal Co-op Act if the co-op is registered federally).
In Alberta, for example, a board can call a special members’ meeting, vote the director out, and replace them with someone else.
Remember: Members control who sits on the board
To remove a director by force requires involvement from the co-op’s membership, which is why it’s best if the director quietly resigns on their own.
But if they don’t resign on their own, members need to be brought up to speed and vote on the decision. Unfortunately, sometimes this process can become quite a public spectacle.
Normally, a member vote like this happens at the co-op’s Annual General Meeting. But, if things can’t wait until the AGM, a special meeting can be called to remove and replace the director.
Obviously, this isn’t ideal. No one likes conflict, let alone a public argument, and the co-op’s membership might develop a poor impression of the board as a result. So, if your board goes the route of termination, you must be certain about your decision and commit fully to seeing it through.
In short, make sure your reasons for removing a board member are valid and justifiable.
How to avoid having to remove a board member
Removing a director is never easy. So, avoid it by preparing ahead.
For example, existing board members can make sure new directors understand their role, and the principles of good governance.
A board can plan for succession and have a guide to work through tough situations like this one. A key role of directors is making sure their co-op has strong policies, and a good set of bylaws will outline the process of dealing with different situations that might cause conflict.
You can’t predict every possibility but having good policies in place and directors that understand the co-op is essential to avoiding difficult situations, and handling problems when they do come up.
Need guidance about how to write good policies and bylaws? Contact us.