Pursuant to our discussions at last week’s meetings of the Board of Directors (“Directors’) the following is a description of the responsibilities of the Directors and the matters which are reserved for the Board of Delegates (“Delegates”). By-Law Article VI Section 1 provides:
“Except as otherwise provided in the Articles of Incorporation or the By-Laws, the business of LES International shall be managed by or under the direction of the Board of Directors in consultation with the Board of Delegates as provided herein. Actions taken by the Board of Directors shall be reported to the Board of Delegates at its next meeting. In addition to actions that require a vote of the Board of delegates as provided in the Articles of Incorporation or the By-Laws, the Board of Directors may, in its discretion, submit any action taken by the Board of Directors to the Board of Delegates for its approval.”
Similar language is found in the Seventh Article of Incorporation. The effect of this language is to give the Directors broad powers of governance, except in those matters explicitly reserved to the Delegates.
The matters reserved for the Delegates are as follows: Amendment of By-Laws (Article XX); Admission of new societies (Article VIII); Expulsion of societies (Article VIII, Section 2); Election of officers and directors (Article V, Section 1); Dissolution or termination of LESI (Article XVI); Amendment of Articles of Incorporation (Eleventh Article of Incorporation). In other words, the Board of Directors cannot: amend By-Laws; admit new societies; expel societies; elect officers and directors; amend articles of incorporation, dissolve or terminate LESI; and overrule the Board of Delegates on matters reserved to that Board.
The governance of LESI and the relationship between the officers, directors and delegates are essentially the same as found in most corporations. The role of the delegates is similar in many respects if not identical, to that of shareholders.
Throughout the By-Laws it is stated the Board of Directors act “in consultation” with the Board of Delegates. This relationship has two facets. The Board of Directors, for purposes of guidance, may present a matter for discussion at a delegates meeting. Subsequently, the Directors at a duly convened meeting of the Board of Directors may take action on that matter. The Directors are not legally bound by any position or consensus of the Delegates during that discussion but are legally bound only to act with reasonable judgment and in good faith.
After the Directors have taken action, with or without prior discussion by the Board of Delegates, such action must be reported at the next meeting of the Board of Delegates. The Board of Directors may, in its discretion, submit any action taken by it to the Board of Delegates for the latter’s approval. However, it is the opinion of both inside and outside Counsel that such a submission should be rarely used. If the matter is not submitted by the Directors, the Delegates cannot overrule the Board of Directors on the Delegates own motion.
On matters relegated to the Delegates, the Directors are free to provide guidance to the Delegates on the handling of the matter. Obviously, such guidance is not binding on the Delegates but rather is a recommendation.
While the Board of Delegates cannot overrule the Board of Directors on actions taken by the latter, the Delegates may have recourse if they disagree. Article VI, Section 4 provides that “any one or more directors may be removed, with or without cause, at any time by vote of the Board of Delegates. Such removal of Directors shall automatically constitute removal of that individual as an officer.” Obviously, such action could be taken only at a duly convened meeting of the Board of Delegates at which a quorum was present.
Finally, it should be noted that Article VII, Section 5 as originally passed reserved the changing of Committees and their responsibilities to the Delegates. That by-law in 2001 was amended so that such changes would be made by the Directors.
