Tell someone at a cocktail party that you are on a co-op board and the most likely response is “What a thankless task!” It seems every New Yorker has a co-op board horror story—and many of them probably contain more than a grain of truth, but it doesn’t have to be that way.
With vision, patience and common sense, a co-op board, like any organization, can transform itself. The effort pays off because a happy, effective board sets a positive tone for shareholders and staff and can ultimately lead to a positive impact on shareholders' investment value.
In 2007, after two years on the board, I became president of an Upper East Side co-op embroiled in both a controversial lobby renovation and a contentious board nominations process. The building had lots of things going for it: a solid financial picture, great location, an attractive, well-maintained structure and a superb staff. And with exceptional foresight, shareholders had some years before enacted a 5-year term limit for directors as part of the co-op’s bylaws, creating the opportunity for new leadership and fresh ideas to emerge regularly.
I took the helm at a challenging time, and with a core group of dedicated directors, the co-op board evolved into a model working group. The first order of business was to calm the waters and then to lay out a vision for the future. I adapted lessons learned from years of experience in the corporate world to develop the following set of seven principles which helped to guide our decision making and interactions.
Develop and articulate a vision statement for the future. Keep it simple—it’s a co-op, not the Fortune 500. A vision is a description of how the co-op sees itself now and in the near future, usually the next five years, and should reflect the views of the majority of shareholders. For example:
“Our co-op is a family-oriented, friendly place to live. We are a full-service building with an exceptional staff and expect excellence in maintenance, operations and management. We are conservatively managed, in excellent financial condition, and we make capital improvements according to our strategic plan in order to maximize shareholder value.”
One way to gather candid input from shareholders is through simple, confidential, periodic surveys. Our surveys have four questions and a space for comments. We ask shareholders to describe the most important short- and long-term issues for the co-op, as well as the things they would like to change—and not change. The responses are tallied, summarized, and fed back to shareholders at small group meetings and in the newsletter. This summary, edited and polished, becomes the vision statement and serves as a framework for planning and decision-making.
Communicate, communicate, communicate. The annual meeting should not be the only time for the board to communicate with shareholders. My building started distributing an online newsletter, and holding small group meetings of shareholders twice a year. The meetings, complete with wine and hors d’oeuvres, are held in shareholder apartments and provide the opportunity to meet neighbors, share information and hear what’s on shareholders’ minds. If the board does its job right, the annual meeting is a time to summarize the year’s events, to preview the coming year and to acknowledge the efforts and successes of staff, administrators, and residents—there should be few if any surprises. One caveat: open communication does not mean full disclosure, and so the board must set appropriate boundaries. For example, shareholders cannot expect to see contents of employees’ confidential personnel files.
Set the tone with humor and gratitude. The importance of humor and laughter cannot be underestimated. Board service requires a commitment of precious time, and the process of making decisions which affect shareholders’ lives can be stressful. Remember to step back from time to time and have some fun. Take time to recognize board member and staff contributions. A favorite feature in our newsletter is the regular column devoted to staff member profiles and photos.
Have a backbone. There is no other way to say it. In a building with many shareholders, not everyone will be satisfied all of the time. Directors will sometimes feel pressured by individual shareholders who don’t agree with decisions and they must be able to respectfully and firmly support board actions.
Listen. Then follow your instincts. There is no shortage of advice given by managing agents, attorneys and shareholders—and it is important to take it all in, but ultimately directors must follow their instincts about what is right for the building. Our building has a master lease for its commercial space, and when it looked as though we might lose the subtenant, the board was urged to accept what we collectively felt was an inappropriate replacement. We were advised to 'just take the deal' and told that we would be forced to take the replacement anyway if the case went to bankruptcy court. With trepidation and visions of a vacant storefront, we said no, insisting on the conditions of the lease. Ultimately, a more suitable solution emerged.
Manage the board process. The president must actively guide the board process. It is not a given that board meetings have to go on forever and devolve into tangents and discussion of minutiae. These days, most board business can take place outside of the monthly meeting, through conference calls and email. For day-to-day board business, email is convenient, and provides a helpful paper trail. On the other hand, confidential or private matters should never be handled via email for obvious reasons. Meetings should be devoted to items requiring board action and critical discussions—and as a rule, 'regular' board meetings should take about an hour. Keeping meetings on track requires active guidance and facilitation by the board president.
Develop future board members. It may sound counter-intuitive, but the people you want on your board are generally not the people who volunteer. Today’s co-op boards need service-oriented individuals who can handle the complex task of governance—and you have to identify and actively court the people who have those skills. Our board developed the following set of criteria for board service: judgment and balance; wisdom and intelligence; ability and willingness to adopt and support a position; forward thinking ability and results orientation; communications skills; specific experience in business or other organizations; and professional qualifications. When the board develops a reputation for being effective and professional, it is easier to persuade the best people to get involved.
Today’s co-op boards need to meet the expectations of 21st century shareholders who expect managerial and operational excellence, and more open, frequent communication. The myth and reputation of the imperious co-op board evolved in a bygone era when organizations were more formal, less transparent, and followed a top-down chain of command. To remain healthy and vibrant a co-op’s board must pay attention to the changing needs and expectations of today’s shareholders.
Kerry Rubinstein stepped down in June after four years as president of a co-op on Manhattan’s Upper East Side. She is a writer and former consultant with various companies.