July 26 2010
That’s the latest requirement for being on the board in some buildings. I wouldn’t have believed it, but for the fact that’s essentially what my friend was told to do at the last board meeting at her Upper East Side co-op.
“You have to forget you’re a lawyer,” the lawyer and fellow director called to her across the table as she was about to give her comments on the building’s new alteration agreement they’d just gotten back from outside counsel.
“But I am a lawyer,” she said. And even though everyone complains that lawyers are assholes, they always want a few on the board to be sure things are done right, so the advice seemed counterintuitive.
“Doesn’t matter,” you have to wash that legal knowledge out of your hair – and head – because we can’t tinker with the contract the lawyer gave us,” she looked down at all the red linings she’d made.
“Cause if you change anything, we can’t sue for malpractice,” came back the response.
“But if our lawyer isn’t doing his job, shouldn’t we find out upfront and get rid of him, not wait till we’re sued by some shareholder and realize we’ve been told the wrong thing.”
“Talk about reverse logic,” I commiserated with her after the fact. “It’s like sitting back and letting a zit develop into a full-blown infection rather than just cleaning it out and moving on.
“They looked at me like I was from Mars,” my friend said.
“Very funny,” she sneered. I have to admit it’s one of the most novel theories I’ve heard for directors just rubberstamping what they’ve been given,” something we both agreed happens behind closed doors more often than you think.
It takes the rule that allows directors to diligently rely on an advice of counsel defense, and twists it to provide them with cover for doing nothing.
What’s the point of board members coming to meetings without their brains – especially in the case of condos and co-ops where one-size-fits all contracts sometimes are churned out, making it all the more imperative for boards to see that they’re modified to meet the specifics of their buildings. And plenty of times managing agents take contracts they get from one building and recycle them to the board of another to mark up at will, without directors knowing or asking the identity of the legal donor, just content to have gotten the specimen and saved the fees
It’s hard to know, till it’s too late, whether or not your board is acting with blinders on. But both you, and they, should remember – an ounce of prevention is worth a pound of cure.