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Q&A: Proxy Abuse?

Q&A: Proxy Abuse?

Q. We have a president of our co-op board that has been president for almost 30 years because he collects proxies from the shareholders who will not attend the yearly meeting and uses them to either reelect himself or others that side with his thinking on the operation of the building. Our building is now going down the tubes. How can we stop this process? 

                      —Frustrated Shareholder

A. “The simple answer to the question is ‘organize,’” says Phyllis Weisberg, an attorney with Armstrong Teasdale in New York City. “Meet with other shareholders to see if they agree with your viewpoint; offer to run for the board;  and collect proxies for your preferred candidates. Note that nothing prevents any shareholder from collecting proxies, nor must a shareholder use the same form of proxy as the board.”

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2 Comments

  • I can understand the question concerning "Proxy Abuse" submitted by a frustrated shareholder. Although the reply by Phyllis Weisberg, ESQ. is clear I think it puts a burden on a shareholder who may want to be a candidate for a board position - especially when all the incumbents seek reelection and form a slate. The management agency in my Midtown Co-op mails an annual notice to shareholders announcing the meeting and election for a 7-member board position with a proxy stating shareholders may select the Board President (listing his name) to appoint to vote for candidates as their proxy or if they wish to cross out the President's name (listing it again) and print the name of a person who they wish to appoint. First, shareholders aren't notified to request the mailing address for all shareholders (Note: there are shareholders who have homes elsewhere and their apartment is a pied-à-terre whose owner uses it only on weekends or for short periods, as a vacation home). Also, there are sponsors who rent their apartment. So, it's difficult for a candidate to communicate with every shareholder to announce his/her candidacy and request they don't select the Board President but to consider designating their name as a proxy. This opportunity if provided to all candidates upon their announcement as a candidate to the management agency may help. Then, there appears to be a potential problem for the safety of a shareholders proxy in my Co-op because the management agency with the approval of the incumbent 7 board members allow all shareholders to hand their proxy to any of the 5 doormen (24/7 doorman service). I've suggested to the Board President and the other 6-members on the board to place a locked drop off box at the doorman's reception desk in lieu of handing it to them. This way the proxy is safeguarded and not left on the doorman's reception desk exposed to anyone and subjected to - shall I say - get deep-sixed? The reply from the Board President was "your suggestion is noted".
  • Your articles are very informative however in my cooperative for the last fifteen years the process is daunting because shareholders don't care to participate. Our board is made up or mostly investors who are renting out their units and those who bought the unsold shares. New shareholders purchase here with the intention of becoming landlords in a few years. Our attorney never advised our board to update our operating documents. We are even losing money by allowing an assistant super to live rent free while owning his own apartment which he rents out. Our Super owns several units and lives rent free also. How can we turn this around to become a legitimate business without ending up broke or in a mental institution?