Governance Document Amendments Bad Idea of the Day #1: the "Code of Conduct"

Perhaps the most egregious power grab in the package of amendments to the governing documents proposed by the Board is authorizing the Board to:

  • establish a "code of conduct" for Board members and
  • remove Board members for violating that code of conduct. 

Why should you care? Because the Owners elect Board members. Permitting the Board to remove Board members who refuse to kowtow to the majority of the Board usurps the power of the Owners to determine who should represent them on the Board.

The current situation:

  • South Carolina law requires that Board members act:
    • In good faith
    • With the care an ordinarily prudent person would exercise in similar circumstances.
    • In a manner that the Board member reasonably believes to be in the best interests of the corporation. 
  • South Carolina law and our By-Laws permit the Owners may remove a Board member at any time for any reason by a simple majority vote.
  • South Carolina law does not permit the Board to remove a Board member elected by the Owners except for reasons set forth in the By-Laws
    •  Our current By-Laws permit the Board to remove a Board member only if the Board member fails to attend meetings, is delinquent in payments to the Club, or has been suspended. By-Laws Section 3.5.
The Board's proposal:
  • The Board would have the right to establish a "code of conduct"
    • This "code of conduct" has not been published.
      • Either it's been drafted and is being hidden from the Owners.
      • Or the Board is simply seeking authority to have a majority of the Board draft "codes of conduct" from time-to-time that will limit the ability of an unpopular minority of the Board to take steps they believe necessary to fulfill their duty of care.
    • Based upon this Board's past performance, it seems likely to me that this "code of conduct" will: (a) purport to impose duties of confidentiality on Board members that will enable the Board to continue to operate "behind closed doors" and (b) limit the right of Board members to obtain information from and otherwise interact with management.
  • The Board would have the right to remove a Board member for a violation of the "code of conduct"
    • Under SC law, this right for the Board to terminate a sitting Board member would only apply to future Board members--not those currently serving.
I wonder why this proposal is being made? Could it be that two "politically incorrect" candidates received 30 and 43 percent of the votes in the last Board election and the Board wants the ability to impair the ability of any such future candidate to pursue their agenda?

Here's the bottom line. The Board is elected by the Owners. As is now (and has been) the case, the Owners--not the Board--should determine whether a Board member should be removed. Empowering the Board to remove a Board member who doesn't attend meetings or who fails to pay money owned to the Club is one thing. Empowering the Board to remove a Board member for a failure to comply with a yet-to-be-drafted "code of conduct" is another. Frankly, this to-be-determined "code of conduct" reminds me of Dean Wormer's "double secret probation." JUST SAY NO.

Comments

Post a Comment

Popular posts from this blog

Seawall Settlement: Promises made--promises kept?

As noted in two recent posts ( here  and  here ), there are a number of issues involved in the seawall settlement known only by the Board and the 12 Owners who have sued the Club. A video exists of Keith Wandell making an unequivocal promise to submit any settlement relating to the seawall to the Owners for a vote. Fortunately, the By-Laws empower the Board President to call a special meeting of the Owners--with or without the concurrence of the Board. Here are some things to ponder: -     No details on the settlement have been made available to the Owners. -     The Owners are already on the hook for the 1/3 of the J-Lot seawall owned by the Club. The settlement will deal with how much of the remaining 2/3 of the costs are paid by the Club. -       There are three types of costs involved: (1) past maintenance and repair costs; (2) the reserve for future maintenance and repair costs that should be established; and (3) future...
Read more

No excuses. A correction and an apology.

When I arrived at the United States Naval Academy on June 30, 1969, I was told that you can make it through life with five "basic responses": (1) yes, sir; (2) no, sir; (3) aye aye, sir; (4) I'll find out, sir; and (5) no excuse, sir. Fifty three years later I need to revert to my basic responses. On Saturday night, I published a post stating that the Board's statement at the annual meeting that the Third Quarter Financial Results had been published was a "lie." In fact, the Third Quarter Financial Results had been published, but were mis-labeled. In any event, an administrative error is not a "lie." I was wrong to refer to the administrative error in posting the Third Quarter Financials as a "lie" and wrong to use a sarcastic post to do so, and I have no excuse for making that post. I unreservedly apologize for the post. It was premature and unfair and I very much regret publishing it. I have deleted the post, but this post will remain o...
Read more

The Board Announces New Assessments

On Monday, November 29, the Colleton River Club Board announced increases in assessments and fees for both the Owners and Invitational Program ("IP") participants. For 2022, the annual assessments will be: Full Members:                  $23,565 Lifestyle Members:          $15,874 IP (Local):                        $18,000                   IP (National):                   $14,625 The assessments for Full and Lifestyle Members do not include the $20,000 assessment approved for the amenities in March 2021. Owners who elected to pay the special assessment under the five-year installment plan will pay an annual assessment of $28,015 (Full) or $20,324 (Lifestyle). Please recall that IP participants do not pay special assessments. Here are some fun facts: Full Dues (2017): ...
Read more