Proxy voting is rising in popularity due to the pandemic. Now more than ever, there are times when directors and/or members can’t attend a meeting in person to engage in debate and cast important votes.
In the past, nonprofit board members often had to be present at meetings to cast their votes. But as technology advances, many organizations now allow other options, especially if members are geographically dispersed. For these reasons, interest in voting by proxy has also piqued in response to the lockdown policies.
While relying on a proxy can sometimes be a useful tool to help a nonprofit carry forward with important business, it also has its share of faults. Here’s what your organization needs to know when considering whether to permit proxy voting.
What Is Proxy Voting?
When a voting member can’t attend a meeting, they may be able to appoint someone else to cast their vote through on their behalf. Typically, the member creates a written statement authorizing a particular person (i.e. their agent or “proxy”) to cast the member’s vote at the meeting. The proxy’s authority is often restricted to a set period as determined by state law or conditions within the written proxy.
Other conditions can also be assigned around the proxy. For example, a limited proxy may give the proxy voter a specific directive on how to vote on a particular matter. Conversely, a general proxy would allow the proxy voter to vote however they see fit.
Pros and Cons
Proxy voting allows more flexibility for members who otherwise may not be able to participate in some votes. It can also ensure there is a quorum in the event it is critical to move forward with an important vote but not all members can attend a meeting. Proxies can also be used when a board member has a conflict or duality of interest on a particular vote due to personal, professional, or volunteer positions and can’t ensure impartiality on the issue.
Yet, relying on a proxy also has potential negatives. This system can result in less participation by voting members when discussing the issue. This is particularly of concern for issues when hearing each perspective during the meeting can be critical for members who are still deciding how to vote. It can also impact attendance if members get too used to voting by proxy. Your organization may find that certain members or all members tend to be less motivated to show up to meetings, which can impact the quality of board meetings, discussion of critical issues, and board oversight.
What to Consider
Proxy voting may or may not be the right solution for your nonprofit organization. Here are a few considerations in determining whether permitting proxies is the right choice for your organization.
Does your state law permit it?
How proxy voting is regulated varies across states. Some states place limits or conditions around proxy voting, such as only allowing it at certain types of meetings, placing a time frame around the proxy, or restricting who can use proxy voting. For instance, the Washington state legislature states that a proxy is no longer valid after eleven months unless otherwise indicated in the proxy written statement. Many states also don’t let individuals who have a fiduciary duty (such as directors) delegate their vote to someone else, but allow it for members with no fiduciary duty. However, other states, like Arizona, may allow both the board and voting members to use proxy voting. You should check with your state’s laws before permitting proxy voting.
Do your bylaws allow for it?
Your organization’s bylaws may or may not allow for proxy voting even if your state laws permit it. It’s critical to review the section of your bylaws that establish voting procedures for your nonprofit.
When reviewing your bylaws, also look for any rules or restrictions around proxy voting and attendance requirements. For instance, some nonprofits have limits on the number of consecutive meetings a member can miss before being dropped. So even if the member rightly votes but proxy, their failure to attend meetings in person can impact their membership status.
Will allowing vote by proxy diminish healthy debate and discussion?
Allowing votes by proxy can help organizations to continue moving forward despite members’ schedule conflicts. However, their regular and unscrupulous use can negatively impact member participation and the robust debate and discussion that is critical to thoughtful deliberation and decision. It can also run counter to the tenet that membership is individual, personal, and nontransferable.
In addition, proxy voting is specifically discouraged in Robert’s Rules of Order. If your nonprofit follows Robert’s Rules (although this may be inadvisable for other reasons, as discussed here) and also wants to allow proxy voting, you will likely need to include a specific exception to Robert’s Rules in your bylaws.
Understand Your State Laws and Nonprofit’s Bylaws Before Permitting It
Proxy voting can benefit organizations by allowing absent members to vote and helping nonprofits reach quorum. However, it can also lead to problems, including limiting discussion of topics and negatively impacting attendance. Nonprofit organizations also need to review state law and their bylaws to ensure proxy voting is permissible. If proxy voting is used, it’s critical for members to use it appropriately.
If you need help determining whether voting by proxy is allowed and beneficial to your nonprofit, please contact us at Caritas Law.
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 about significant gifts. To schedule a consultation with Ellis, call 602-456-0071 or email us through our contact form.