Technology now offers businesses and boards many advantages, including the ability to meet via teleconference, video conference, or even conduct discussion and voting via electronic communications, such as email. But while email is commonplace among many organizations for its ease of use, especially for busy and geographically diverse volunteers sitting on nonprofit boards, there are several reasons to think twice before using email for your next important nonprofit board vote.
To begin with, there is no guarantee that the recipients of an email will open and address it in a timely manner, let alone receive it at all. And since one of the core reasons for bringing a matter to vote is to spark thoughtful and robust discussion, voting via email inherently squelches thorough discussion, and can even give rise to a potential breach of fiduciary duty. Board discussion may also be improperly influenced depending on the order in which members respond to a call for a vote; reading the votes of earlier respondents may inhibit some members from being honest with their opinions, who then give in to groupthink and vote with the rest of the crowd. Finally, while the risk is probably low in most circumstances, there is no guarantee that emails sent for an important vote are not the target of malicious cyberhacking schemes. In extreme cases, legal action against the directors and the non-profit could ensue if a previously ratified board action is discovered to have occurred as a result of a fraudulent vote.
While there are many drawbacks to voting by email, the advantages may outweigh the disadvantages and risks in some cases. Here are some important considerations to make sure your next discourse and/or vote via email stays above board.
What does the law say about conducting a nonprofit board vote by email?
While few states have specific rules governing voting by email, non-profits often look to the rules for conducting a vote in writing, i.e. unanimous written consent, for guidance. In Arizona, board action may be taken without a meeting so long as the vote is (1) unanimous, and (2) in writing (See A.R.S. 10-3821). The presumption is that the requirement of unanimity avoids the stifling of opposing arguments since a director who disapproves of or is uncertain about the desirability of the proposed action may compel a meeting simply by abstaining or withholding consent.
Things are a little more complicated as to the in writing requirement. Arizona law specifically states that unanimous consent may be obtained via electronic signature (See ARS 10-3821(E)). It also further defines what is considered a valid electronic signature:
“Electronic signature” means an electronic sound, symbol or process that is attached to or logically associated with a record and that is executed or adopted by an individual with the intent to sign the record (A.R.S. 44-7002 (8)).
A plain reading of this definition suggests a wide range of acceptable forms of signature, from a voice recording to a symbol, or even a typewritten name. However, whatever its form, the signature must be accompanied by assurances that the signature is actually executed or adopted with intent.
The danger with voting by email is that there are no clear assurances that the email vote has been actually executed by the specified board member; with hackers and imposters lurking around every corner of cyberspace, a vote could easily be fraudulent or improperly obtained. Moreover, a conditional or equivocal vote such as, I guess so, or Yes, but as long as we¦ may fall short of the intent requirement, since it may be interpreted to not communicate a clear intent to vote yes.
A simple solution is to have each board member print the proposed action, sign their consent manually, then fax, scan, or hard mail a copy to the board secretary. New electronic voting platforms, such as Eballot, Capterra, and Boardeffect, offer secure verification and authentication services as alternatives for boards that anticipate a frequent need to vote electronically or by email.
Other considerations if your nonprofit board chooses to vote by email.
If your board, after a careful calculation of the risks and rewards, does decide to use e-mail voting, you’ll want to take note of a few additional considerations:
- Make sure your bylaws don’t prohibit, or better yet, specifically permit board voting via email. Otherwise, you could create an ultra vires situation in which your board acts under apparent authority that it doesn’t actually have, which could create a potential for lawsuits and director liability.
- For an electronic signature to be valid, it must communicate the clear intent of the signer. That means you need to make sure that every yes means yes. For example, if your director’s vote states the likes of OK, I guess, or Yes, just as long as¦, you should request an additional email or documentation that indicates a clear Yes or No.
- If you conduct a vote by email, make sure that documentation of the vote is preserved and is included in your next board meeting minutes. For actions that require an attorney opinion letter, such as a loan or grant award, your attorney will want to see clear documentation in your meeting minutes that the action was actually ratified by your board.
Finally, although it’s easy to feel rushed or pressured to make an immediate decision in today’s fast-paced business environment, take time to consider your particular circumstance and whether a rush vote is even necessary. You might want to consider other alternatives, such as conducting a meeting via conference call or video-teleconference. Even a quick conference call with less than a quorum can provide effective feedback as to the feasibility of the proposed action and whether the issue requires further discussion in a formal meeting.
Ellis Carter is a nonprofit lawyer with Caritas Law Group, P.C. licensed to practice in Washington and Arizona. Ellis advises nonprofit and socially responsible businesses on corporate, tax, and fundraising regulations nationwide. Ellis also advises donors with regard to major gifts. To schedule a consultation with Ellis, call 602-456-0071 or email us through our contact form.