Consent and Board Mechanics

Roy T. Fielding
Wed, 13 Jun 2001 20:04:59 -0700

On Mon, Jun 04, 2001 at 06:14:51PM -0500, Jeff Bone wrote:
> So here's something interesting to ponder...  In my admittedly limited
> experience, but anecdotally supported by having observed the activities of
> other corporate boards, most actions undertaken by any board of directors
> are enacted via unanimous consent.  Bylaws, corporate law, and so forth
> determine what actions can be taken without unanimous consent, but AFAICT
> almost if not all actions undertaken by coporate boards are done so
> unanimously.  A dissenting vote is treated as a very serious matter, a
> kind of vote of no confidence.  The paper vehicle through which boards
> take such action is even called an "Action By Unanimous Consent of the
> Board."  In the case of every company I've ever been on the board of,
> every single action taken by the board was enacted in such a fashion. 
> In some cases, this consent is achieved by just beating down the
> dissenter's objections until they agree --- I'm frequently that
> dissenter ;-) --- but at the end of the day, it's consensual.  (You could
> call that smack-down coercion, but I call it persuasion. :-)

That is confusing separate things.  An "Action by Unanimous Consent"
is a document that is circulated and signed in order for a board to take
action without holding a meeting.  The reason people do that is either because
it wasn't possible to hold the meeting in person/phone, or because the
Secretary prefers to have written consent resolutions instead of meeting
minutes as the official record.  In any case, consent to the action does not
imply that there was unanimous agreement on the resolutions -- the only thing
it states is that the entire board agrees that it has decided by vote
on that course of action. The vote does not have to be unanimous, nor does
it have to be recorded within the consent document -- the signatures only
recognize that all of the board members participated in making the decision,
even if some board members voted against it.  It is a process verifier.

The second issue is that a board of directors that actively discourages
dissenting opinion within the discussion and vote on selected items is
not acting as a board, and therefore none of its decisions are protected
by corporate shield.  A chairman who allows that to happen is failing to
do the job, which makes the chairman additionally liable for any improper
decisions made as a result.  Some people don't understand that, which is
why a company must choose a chairman that understands the rules of fair

> There's a reason for this emphasis on unanimity of consent.  The board
> shares the fiduciary and legal liabilities and responsibility for the
> company.  This liability / responsibility is apportioned across the board; 
> taking action without unanimity is therefore obligating someone to
> liability / responsibility that they aren't agreeing to. 

What?  That's bogus.  The shareholders of a company have fiduciary and
legal liabilities, and have appointed the board with responsibility to oversee
the company's assets and activities accordingly.  The board members have
legal liability for maintaining oversight according to best practices.
Nobody gains or loses liability by agreeing or disagreeing with an action.
They only gain liability if they fail to adequately oversee operations or
knowingly do something illegal, and that is true whether or not the board
member has voted for the action or against it -- the only way to avoid
liability in such a case is to resign from the board rather than consent
to the action as being an action of the board, and inform the shareholders
accordingly (resigning in silence does not absolve responsibility).

In general, people working on a public committee (like a board) always prefer
that decisions are made unanimously.  However, that is for reasons of public
perception and not due to liability concerns.

....Roy    (past member of three corporate boards and chairman of the ASF)