The Mission Statement: Review It Frequently

In New Year, Great Time to Get Your Nonprofit House in Order (January 29, 2020), Debra Raney of Independent Sector reminds us that from time to time, nonprofits should get their “house in order” and review policies and procedures. 

“Fortunately,” she points out, “Independent Sector’s Principles for Good Governance and Ethical Practice provide a roadmap of 33 sound practices your organization can follow to strengthen your commitment to ethics and accountability.” Among the four specific topics that Ms. Raney selected to highlight in her article is Principle 19: “Review of Mission and Goals.”  She asks: “How about your mission and goals? Do they need the once over?”

That struck a chord because of our recent post: Mission Creep Faced by Detroit Nonprofit (February 13, 2020). Detroit’s Focus: Hope finally confronted many decades of well-intentioned but out-of-control expansion. Its efforts were praised as an example of how to deal with this all-too-common problem of nonprofit organizations. 

[Note: This post was written just before the COVID-19 pandemic swept the nation.]

  Principle 19: Review of Mission and Goals  

In New Resource for “Keeping It Ethical” (May 17, 2019) we told you about these Principles. “The goal is to facilitate knowledge and application of these concepts as well as to highlight excellent examples.” The 33 Principles are grouped into four categories: Legal Compliance and Public Disclosure, Effective Governance, Strong Financial Oversight, and Responsible Fundraising. 

Along with important topics like Board Responsibilities, and Review of Governing Documents, Principle 19, Review of Mission and Goals is in the “Effective Governance” category. “The board should establish and review regularly the organization’s mission and goals,” Principle 19 begins, “and should evaluate, no less frequently than every five years, the organization’s programs, goals, and activities to be sure they advance its mission and make prudent use of its resources.”

The purpose of a periodic mission reevaluation is “to make sure your programs, goals, and activities continue to advance your mission and make wise use of your resources.” It’s a matter of the “obligation” imposed on a nonprofit as a steward “of the public’s trust.” 

Mareeja Niaz echoes this sentiment in Mission Critical (February 15, 2019) the official IS blog post accompanying Principle 19: “Nonprofit organizations are unique: ….we’re accountable to the public thus it’s vital our mission and goals remain relevant.” 

  Mission-Review Timing 

Notwithstanding the “no less frequently than every five years” reference in Principle 19, elsewhere in that document, there is an indication that this time frame is too infrequent. See, for instance – later in Principle 19:  “Every organization should review its formal Mission Statement and other informal references to its vision and strategy as part of an annual review.” And in Mission Critical, Ms. Niaz writes: “Your board is responsible for reviewing the organization’s mission and goals frequently and should evaluate the progress of the organization against these components consistently.” (emphases added) 

This mission reevaluation, performed regularly, is not the same as the “run of the mill board meetings and discussions of activities and updates.” While … “ discussions of individual program activities and accomplishments are typical of most board meetings, these are not a substitute for a more rigorous periodic evaluation of the organization’s overall impact and effectiveness in light of the goals and objectives the board has approved.”

An annual review is optimal, but “because of the time and cost involved” certain organizations – including those “whose work is not properly measured in one-year increments, such as scientific research or youth-development programs” – may have to rely on other time frames. In those cases, though, “interim benchmarks can be identified to assess whether the work is moving in the right direction.” 

  Not One-Size-Fits-All

The purpose of a periodic mission reevaluation is “to make sure your programs, goals, and activities continue to advance your mission and make wise use of your resources.” It’s not a one-size-fits-all matter because of the vast spectrum of organizations and their purposes. 

Generally, the items to review are:

  • current needs 
  • anticipated community and program area changes 
  • changing financial and human resource needs and 
  • an evaluation of your organization’s overall impact and effectiveness.

In particular, there should be special and timely scrutiny of the mission whenever an organization “considers taking on a new business or earned income opportunity.”  The board and staff “should examine whether and how that activity will further the organization’s mission and how it will fit in with the organization’s overall revenue mix and staffing allocations.” 

A critical part of this analysis should also be whether this new opportunity will result in “an unrelated business income tax and, if sufficiently substantive, could have ramifications for the organization’s tax-exempt status.”

  Conclusion

A “nonprofit organization encapsulates its purpose and direction,” Mareeja Niaz reminds us, “with one golden nugget, its mission statement.” This is “… the north star in guiding purpose, dictating goals, and ultimately impacting where your organization is allocating resources. Clear articulation and evaluation of this north star allows your organization to assess which activities remain mission critical.”

The Importance of Executive Sessions for Nonprofit Boards

Nonprofit Executive Meetings

BoardSource is a leader in inspiring and supporting “excellence in nonprofit governance and board and staff leadership.” Among its “best practices” advice for 501(c)(3) boards is holding “regularly scheduled executive sessions.” See Executive Sessions: Why, Who, What, & How.   

    What, Exactly, Are Executive Sessions?

“Executive sessions are a special meeting-within-a-meeting.”  Attendees are generally the key leadership of the organization but, in any event, a much smaller group than the entire board. “Most often,” according to the BoardSource experts, “executive sessions are private meetings for certain board members only with no staff present.”

When appropriate and helpful, the group may invite and include a few other individuals; for instance, the executive director with or without other top executive staff. Counsel may and should be included in certain circumstances.  These non-board invitees may be asked to join all of only part of a session; the “purpose of the meeting determines who should be present or excluded.”  

There are three important purposes and benefits: 

  1. The chair and top leaders can meet privately to handle sensitive information and issues with an assurance of confidentiality. 
  2. Key individuals can conduct oversight through “robust discourse.”
  3. Board members can establish good working relationships and trust. 

  Issues for Executive Sessions

Some topics and situations in the nonprofit-organization setting are “best handled in executive sessions” with no non-board invitees because of the need for “more candid, confidential conversations.”  Examples include: 

  • Meeting with an auditor on sensitive financial issues
  • Handling top-level personnel matters including the CEO’s compensation and performance review
  • Planning for an important transaction like a real estate deal or a merger
  • Considering matters where “personal or organizational confidentiality is requested or prudent”
  • Dealing in a preliminary way (including investigation) with crisis situations or with allegations of improper conduct by the CEO or a board member – before disclosure to staff or others who ordinarily attend full board meetings.

Sometimes, though, the presence of the chief executive is particularly helpful; for instance: litigation, crisis-management planning, and off-the-record discussions about what ‘keeps the president awake at night.”

  Executive-Session Guidelines

“BoardSource recommends that every board should have regularly scheduled executive sessions before, during, or at the end of regular board meetings.” In that way, there is no need for extra logistical planning or inconvenience or cost to attendees. 

In any event, the board should draft and adopt a formal policy explaining how to call executive sessions. It should include guidelines for when executive sessions can or should be routinely held and which issues are acceptable and appropriate only for these closed meetings. The document should also detail how the executive sessions should proceed; each should be limited to its “determined purpose” only. “After that purpose has been met, the session should end.”

There should be a written record of the session. “While detailed minutes are often not necessary, the record should include the date, time, and place of the meeting, names of those people present, any actions taken, and any abstentions from voting if voting took place.” Of course, these minutes are confidential, limited to viewing only by those present at the session. 

If the chief executive is not invited, the board chair should inform him or her “soon after of any specific conclusions or recommendations….” 

   Conclusion

Under California nonprofit corporation law and in many other states, executive sessions are permitted except in the case of certain organizations that are subject to “sunshine” – that is, open meeting – laws. 

These smaller, closed sessions are particularly helpful and important for organizations with large (and unwieldy) boards, some members of which are there mostly for the prestige and are what we in the field refer to – (behind their backs, of course) – as “potted plants” or “bobble-heads.”  That’s another issue entirely; one which we’ve discussed before and will likely revisit again. 

Board Meetings and Minutes and More

As we edge up past the 200-blog-post milestone, we’re proud of the variety of topics covered.
Some areas of interest to nonprofits have been covered a bit more extensively than others.
For example, just last summer, we posted 8 times on the all-important politics ban in section 501(c)(3). After November 8th, though, the landscape changed dramatically; hence, our update in December 2016: “Maybe ‘Never Mind’ About The Politics Ban in 501(c)(3).”
The issue of “naming rights” has also captured our attention, producing copy for many posts including a favorite: “Naming Rights: It’s a Philanthropic Jungle Out There.” It’s so competitive in major markets like Manhattan that donors are happy to shell out big bucks for recognition in even the tiniest spaces in major cultural landmarks; hence, the Jerome and Ellen Stern Restrooms at the New Museum of Contemporary Art (Mr. Stern reportedly enjoyed the joke; “saying he “wanted to see his name ‘in a place I’m going to spend a lot of time.’”  And, of course, there’s the mess that’s created when a revered donor goes from hero to goat because of a scandal. Recently, for example, many buildings around the nation were subjected to emergency sandblasting to remove the name “Bill Cosby.”
Faithful readers may have also noticed our fascination with board meetings and procedures, minutes and resolutions. Some would say we’ve beaten this dry-as-toast topic into the ground.  “Some,” we humbly respond, “would be wrong.”  At ten posts and counting, it’s a good time for a roundup and hints about future posts.

   Corporate Board Formalities: It’s a Big Deal

This series started with “Breach of Duty by Ogling the Doughnuts”: “Admit it. You’ve done it,” is the opening sentence. What is “it”?

The corporate secretary is asking for approval of the corporate minutes from the last meeting. But you’re busy deciding between the maple-glazed doughnuts and the chocolate-topped ones. So is everyone else around the conference table.
That’s the problem. Most charity board members think of the vote to approve the minutes of the last board meeting as a quaint formality, an inconsequential appetizer before the real deal – the meaty portions of the board meeting where business is discussed and debated.
That’s the rub, though. The corporate minutes are not a side dish; they are the official record of the proceedings of the board of directors.  They will likely be reviewed by government regulators, third parties – friends and foes alike – disgruntled employees, and current and future boards whenever a conflict arises.  

So, you must take care to get it right. That’s why we spread out more tasty morsels in a buffet of information and tips:

And –  

Finally – a reader favorite:

Professional parliamentarians love Robert’s Rules of Order, but many nonprofit experts are wary: ‘We have said it before and we will say it again: Most organizations should avoid Robert’s Rules of Order like the plague. . .’  

Why?

In 1863, U.S. Army Colonel Henry Martyn Robert was asked to preside over a public meeting.  But he didn’t know the first thing about how to run one, and it was a disaster. Then and there, he decided never to face another meeting until he learned about parliamentary procedure. There were few books on the subject, so he taught himself rudimentary principles.
Over the next several years, Robert was assigned to military installations around the U.S. where he saw “virtual parliamentary anarchy.” He was more determined than ever to fill this void.
In 1876, then Brigadier General Robert published his Pocket Manual of Rules of Order for Deliberative Assemblies.  Back in the 1860s, he had studied the rules of procedure used by the U.S. House of Representatives, and used it as a guide for his book —  with certain changes that he decided were appropriate for “ordinary societies.”
Of course, the 1860s House of Representatives was the deliberative assembly that couldn’t avert the Civil War, so — perhaps — this was a dubious model for conducting harmonious and successful meetings….

That’s why.

    Conclusion

We haven’t yet fully exhausted this sleepy subject. Stay tuned for more like –

  • How Minutes are Used as Evidence For and Against the Organization in Court
  • How to Handle Minutes for Confidential, Sensitive, or Privileged Proceedings
  • Try Flipping the Agenda

 

Just One More Thing About Meetings and Minutes

You probably thought we’ve told you all you need to know about charity board meeting minutes in “Breach of Duty by Ogling the Doughnuts,”  “Fun Facts About Corporate Minutes,” and “Nonprofit Corporate Minutes: What Not To Do.”

There’s just a bit more.

It’s about motions and resolutions. They aren’t the same.  All resolutions start out as motions, but not all motions end up as resolutions. The distinction is important.

Motions

Generally, corporate board meetings – for-profit or nonprofit – are run according to some system of parliamentary procedure. We’ve already suggested avoiding Robert’s Rules of Order like the plague.

But there has to be some kind of order. The opposite of order is chaos. Even when boards follow some kind of rules or order, the proceedings often  disintegrate into mind-numbingly boring, unproductive repetition of what the board already discussed at earlier meetings.

When new agenda items are raised for discussion, there should be some action taken – or an affirmative decision not to take a particular suggested action. So motions are key.

Motions are how action is proposed at a meeting run under parliamentary procedure, . . .”

A motion doesn’t have to be in writing. Any director may propose a motion. As long as another director seconds the motion, the board can proceed to discuss and debate the proposed action. Discussion and debate on a significant issue may include several motions.

But – and here’s the key point – “motions are generally considered actions by the board of directors and not necessarily the corporation.”

Resolutions

While a resolution starts out as a motion, it is a much formal and consequential matter.

“Corporate resolutions are written records of all formal decisions made by a company’s board of directors… The resolutions are binding.”  They are official acts of the corporation.

At the initial meeting, certain, standard, key resolutions are made, including, for example:

  • adopting proposed bylaws
  • electing officers
  • authorizing officers to take actions including opening bank account
  • selecting corporate tax year
  • designating  annual meeting date
  • authorizing payment of incorporation expenses
  • filing documents with government, including applying for tax exemption

and later:

  • approving real property transactions (purchase, lease)
  • entering into major contracts
  • hiring and terminating key employees
  • amending bylaws
  • making any important decisions

There is no required format for a resolution, but it should clearly state its purpose, and be signed by the corporate secretary, with a declaration proving that the board members took that act on behalf of the corporation.

"It Seemed like a Good Idea at the Time."

In “Next Time, Let’s Just Text in our Votes,” the fictional charity board members were looking for a way to avoid the time, expense, and inconvenience of monthly board meetings. “Why don’t we just put a few issues on an agenda,” one of them suggested, “email it out, circulate it online for comments and questions, and then vote by text message?”

Although a shortcut like this may be a widespread practice, it’s not legal (yet) in California and in many other jurisdictions.  Here’s why: The California Corporations Code requires that there be in-person meetings or the electronic equivalent of them — e.g., conference calls or videoteleconferences.

We explained that there may be a legal alternative to a full-blown meeting: a “unanimous written consent.”  And because the definition of “written” can sometimes include email messages and signatures, emailing the necessary written consent may do the trick. What about a written consent or vote by text message?  So far, this is beyond California’s foray into the electronic age.

But is this a good idea — even if technically allowable? Should you conduct some of your business via the unanimous written consent method?

Your organization should use this method sparingly, and you should develop policies and safeguards ahead of time.

Just because that gallon of Rocky Road ice cream is on sale, doesn’t mean you should take it home and eat it all of it.

Key Objection: No Chance to Effectively Deliberate

There are two very good reasons to have regularly scheduled, in-person, meetings.

First, there’s the democracy angle. This practice may prevent one faction on the board from holding secret meetings or otherwise stifling dissent. The “written consent” option is allowable in states including California precisely because it includes the dual requirement of a writing and unanimity. At ordinary meetings, the board can pass a measure with just majority approval.

But a second objection to bypassing in-person meetings is just as compelling: a written consent in lieu of an in-person vote prevents “deliberation” by the entire board.

The American legal system already recognizes the importance of group discussion and consideration of important matters; deliberation is the key feature of jury proceedings. It’s widely recognized — and long experience validates — that when people meet together and freely discuss an important topic, the group decision at the end of the proceedings is ordinarily better than if is there is simply a vote. “The point of meeting and discussing something in a room together is that better ideas emerge in the course of such discussions and pitfalls are more likely to be identified.”
This model has been adopted as the best method for corporate boards to carry out their duties and to act in the best interests of the corporation.

Governing any corporation — for-profit or nonprofit — is a complicated matter.  There are many routine – even trivial – decisions to make as well as key, critical choices that will determine the future and viability of the organization.

Whether by intent or by accident, conducting a great deal of the corporation’s business via written consents may effectively restrict or eliminate the rigorous discussion necessary for critical matters.  And while it may be clear that certain items are important enough to require in-person, comprehensive discussion, sometimes it may not be obvious.

Here’s an example:

Nonprofit X learned that another organization in town had decided to opt out of a government-funded program. That opened up a slot for Nonprofit X to take its place. But timing was crucial: the papers had to be signed right away for Nonprofit X to secure its place.
Government money in an era of funding scarcities? Here and now; no hoops to jump through? This was a no-brainer, right?  The Executive Director contacted the Board Chair, who emailed the board members, requesting an email vote, to be followed by written consents. The directors agreed, without discussion or further investigation. It turned out that the program was a bad fit, and Nonprofit X didn’t have the resources or expertise to complete the program competently.

Sometimes, corporations restrict the “unanimous written consent” method to matters where there’s no opposition. But it’s not always apparent ahead of time that a matter has no opposition. All of the board members may, in good faith, believe there is full agreement. But, through discussion, reasonable objections emerge.  Experience in the board room and in the jury room proves this over and over again.

This Option could Lead to Liability

While foregoing a formal meeting on certain matters may be perfectly legal if the proper consents are obtained, there could be a problem with regulators later second-guessing this method and the resulting decision.

Directors of California nonprofit public benefit corporations have explicit duties.

Failing to adequately investigate and discuss a major corporate action may be considered inadequate board oversight and could, in some cases, be determined to be a breach of the directors’ duties of care “to ask questions, raise serious issues, and consider alternatives.”

This is especially true in the case of transactions between the organization and one or more directors.

What about Other Alternatives to In-Person Meetings?

Under California law, certain alternatives are explicitly allowed, when the board members can hear each other. This type of option – including conference calls – is considered to be the equivalent of a face-to-face board meeting, requiring only majority approval for agenda items.

So is this a better idea than the written-consent method of getting board approval when an in-person meeting is not convenient?

The answer may be yes, but with certain reservations. According to some observers, the ability to hear the other participants’ discussion is valuable, but still lacks a key element: visual cues.  “…There is no way to see body language, interpret silence or get a sense of the group.”  This is particularly true if the participants have never met before.  And face-to-face meetings facilitate creating friendliness and trust that helps a board succeed.

Of course, if an organization has a widely dispersed board, then face-to-face meetings on a regular basis may be impractical, so conference- calling may be useful. But taking the extra step of using videoconference technology or sites (instead of conference calls) may be worth the extra effort because the participants can see – as well as hear – each other.

Establish Safeguards and Policies

Use alternatives to in-person board meetings only occasionally. They may be appropriate for routine, noncontroversial matters, but not for key decisions.

In any event, create and follow procedures – in advance – like these minimal precautions:

  • Write a cover letter for the email asking for written consent, explaining it fully, and making clear that replies should be unambiguous, and that the measure will not be approved unless the vote is unanimous;
  • Print out all responses and file them with the board’s minutes; and
  • Send a follow-up email informing directors if the measure was approved unanimously.

Who is Robert and Should Nonprofits Follow His Rules Of Order?

There’s a quick answer to the second question: Sometimes yes and sometimes no. There are pros and cons.

How’s that for a lawyerly response?

Professional parliamentarians love Robert’s Rules of Order, but many nonprofit experts are wary: “We have said it before and we will say it again: Most organizations should avoid Robert’s Rules of Order like the plague. . .”

Back to the Beginning: Who is Robert?

In 1863, U.S. Army Colonel Henry Martyn Robert was asked to preside over a public meeting.  But he didn’t know the first thing about how to run one, and it was a disaster. Then and there, he decided never to face another meeting until he learned about parliamentary procedure. There were few books on the subject, so he taught himself rudimentary principles.

Over the next several years, Robert was assigned to military installations around the U.S. where he saw “virtual parliamentary anarchy.” He was more determined than ever to fill this void.

In 1876, then Brigadier General Robert published his Pocket Manual of Rules of Order for Deliberative Assemblies.  Back in the 1860s, he had studied the rules of procedure used by the U.S. House of Representatives, and used it as a guide for his book —  with certain changes that he decided were appropriate for “ordinary societies.”

Of course, the 1860s House of Representatives was the deliberative assembly that couldn’t avert the Civil War, so — perhaps — this was a dubious model for conducting harmonious and successful meetings.

But his new book with the short title Robert’s Rules of Order caught on like wildfire.

He issued several new editions before his 1923 death. Family members continued his work, producing additional revisions. Now, recognized parliamentary experts supervise changes; the 11th edition was issued in 2011, and gives a nod to technological advances like videoconferencing and email.

But it was, and remains, a one-size-fits-all tome of extremely formal, rigid procedures. It’s over 600 pages long. We wrote in an earlier post that for bylaws, one size definitely does not, and should not, fit all. As one nonprofit commentator recently observed: “There is no law mandating that nonprofits must make decisions using Robert’s Rules. After all, you’re not a parliament. You’re an animal shelter, . . . or a theater, or an advocacy organization.”

There’s another problem. The Robert copyright expired long ago, so there are copycat parliamentary guides that now use parts of the title, and some of the original ideas. So when there is a reference to following Robert’s Rules – as in “(l)et’s follow Robert’s Rules of Order” or “(o)ur bylaws require us to abide by Robert’s Rules” – there is legitimate ambiguity.

There’s No Legal Requirement to Use Robert’s Rules of Order

Robert’s Rules of Order is still popular and pervasive almost 150 years later  — especially for voluntary organizations.  But most people know little more about it than the title and that it may describe how to make and second a motion.

Many nonprofit leaders just assume that its use is somehow mandatory — it’s not — and that applying it makes board of director votes legitimate — it doesn’t. In some cases, using Robert’s Rules conflicts with state law.

Each state has the power and authority to designate how its corporations are formed and operate. In California, for instance, the Corporations Code includes certain mandatory rules for how nonprofit corporations conduct meetings, but there is nothing at all about using or adopting Robert’s Rules of Order or any other specific manual.

Critics Warn against Adopting Robert’s Rules in the Bylaws

The only reason a nonprofit would be required to follow Robert’s Rules is if a current or former board inserted a requirement in the bylaws.  Many leading experts advise against this, though, because it may be a poor fit with many organizations. “There is nothing wrong with Robert’s Rules of Order when adopted by the right organization for the right reasons. The right organization is a parliamentary or legislative body, not your typical nonprofit charity.”

A related concern is that Robert’s Rules is out of sync with today’s norms about how people relate to each other and get things done. The modern model is consensus and collaboration instead of more formal patterns of decision-making from past centuries.

Conclusion

Whether to follow Robert’s Rules of Order, officially or unofficially, should not be a “knee-jerk” or casual decision.   Read and understand the book.  Review applicable — and possibly — conflicting law. Finally, consider your organization operates: how it meets and resolves conflict, whether the board members truly share the organization’s values and visions, and other factors including your size, purposes, and decision-making style.

Next Time, Let’s Text in our Votes!

As the foundation board members wrapped up their meeting, one of them wondered out loud why they had to meet in person every month.  “We text all day for business. Why don’t we just put a few issues on an agenda, email it out, circulate online comments and questions, and then vote by text message?”

Sounds reasonable, right?

If nonprofits routinely conduct business by email and text — like all other sectors of the population — why can’t they create customized board-meeting procedures including voting by however is most convenient?

They can’t, because it’s not legal.  Not in California. Not yet — at least for nonprofits organized as nonprofit corporations. In this way, at least, California hasn’t yet fully embraced the digital revolution.

(But there may be a [legal] way around this!)

What’s the Problem?

The simple answer is in the California Corporations Code, itself. Nonprofits that are corporations — that’s the majority of them — have to follow these rules. The nonprofit chapters of the Corporations Code include specific, detailed procedures for board meetings, including who may call meetings, how and when to schedule them, and what constitutes a quorum — to name just a few.

For some of these rules, nonprofits are allowed to tweak them a bit in their articles of incorporation or bylaws. But not for the requirement that there be formal, face-to-face meetings or the electronic equivalent of them.

More Specifically, Here’s Why Not

For California nonprofits that are tax-exempt 501(c)(3) organizations, the rules are in Section 5211(b). (Mutual benefit corporations and religious corporations have separate governing statutes with similar rules.

Simply put, directors have to be able to hear one another at board meetings and to debate and deliberate together. A hundred years ago, this was a no-brainer. Meetings could only be in-person events.

As technology developed, the Legislature has made some accommodations.

But where are we in 2014?

“Meetings of the board may be held at a place within or without the state . . .”  In-person gatherings are still the presumptive rule.

The exceptions are participation “through use of conference telephone, electronic video screen communication or electronic transmission by and to the corporation . . .”

A conference-call meeting or one held via electronic video screen communication “constitutes presence in person at that meeting so long as all directors participating in the meeting are able to hear one another.”

For the electronic transmission exception, there are some added requirements. Using that technology constitutes “presence in person at that meeting” — but only if two more requirements are met:

(1)      “Each director participating in the meeting can communicate with all of the other directors concurrently” and
(2)      Each director is provided the means of participating in all matters before the board, “including, without limitation, the capacity to propose, or to interpose an objection to, a specific action to be taken by the corporation.”

So, That’s It? There’s No Wiggle Room?

Under these rules, a text-in-the-vote “meeting” would be out. So would email voting.

But there is a round-about — and perfectly legal — way to get to this result.

Let’s go back to the “everyone-in-the-same-room” kind of meeting. There’s one exception to this called “unanimous written consent.” If all the directors — 100% of them — consent afterwards in writing to the actions taken, or that would have been taken if a meeting had been held, the matters on which the directors signed this consent are validly adopted.

What’s the reasoning behind the 100% requirement for this later written consent? After all, a measure can pass at a regular board meeting by a simple majority vote. It’s to protect “principles of democracy and due process” – and really, it prevents board leaders from holding secret meetings and excluding dissenters from voting.

There’s a tiny exception to this unanimity requirement, but only when there’s a potential conflict of interest and one or more directors have to recuse themselves. Generally, though, it’s 100%.

So How, Exactly, does this Alternative Help with Voting?  

Here’s how.

The words “writing” and “written” are defined in the Corporations Code to include email, provided that the general electronic transmission requirements of the Code are met.

So, it looks like email “voting” might be ok. But it may be a good idea to add some safeguards.

There’s nothing yet specifically about texting a written consent. Who knows – maybe next year.What About In Other Jurisdictions?

Each state has its own set of corporate governing laws. Since — except for Louisiana — all of the U.S. jurisdictions follow the English common law, there are many similarities.  Some may permit this kind of voting; others don’t.

So Now That There’s a Way to Do It, Is It a Good Idea?

There are mixed reviews and opinions. We’ll discuss that soon — including ways to make it work well.