# board of directors shirking their responsibilities? **URL:** \ **Category:** Factual Questions\ **Created:** [April 24, 2005, 6:38pm UTC](https://boards.straightdope.com/t/board-of-directors-shirking-their-responsibilities/300888 "2005-04-24T18:38:08Z")\ **Posts on this page:** 13\ **Page:** 1
**Author:** ![filmyak](https://avatars.discourse-cdn.com/v4/letter/f/94ad74/32.png) [@filmyak](https://boards.straightdope.com/u/filmyak)\ **Post date:** [April 24, 2005, 6:38pm UTC](https://boards.straightdope.com/t/board-of-directors-shirking-their-responsibilities/300888/1 "2005-04-24T18:38:08Z")
I’m a member of a private club in Los Angeles. (Nothing sinister, just a club house and bar that only members can enter, though it’s very easy to become a member.) Anyway, we have a board of directors. Recently the board posted their minutes online with financial information as to what they are each getting as compensation for meals during meetings. Basically, the board is not paid, and they get a certain amt of money for food from our restaurant which is not run by the club. No problem so far. Except that in the minutes, the amts were shown as follows: board member 1: \_\_\_\_\_\_\_\_\_ board member 2: \_\_\_\_\_\_\_\_\_ etc. Yes, the dollar figures were blank. When a member asked what the amounts were, the minutes were changed and that entire section was removed, even the fact that they are getting meal compensations at all. Is this as illegal as I think it is? I don’t mind them getting compensation, but aren’t they obligated under California law to list the amounts in the official minutes? Also, they have this annoying habit of announcing whether or not an issue that was voted on passed or failed… but they absolutely refuse to list who voted yes and who voted no. Are there laws in place that I can show them to force them to list the financial amounts, and list who voted which way on every issue? I’m tired of their shenanigans and am willing to sue for the information if I have to (I don’t want any money, just want to force them to stop with the absurd secrecy), but I have a feeling that if I had access to the exact statues of corporate law – which I don’t have a clue how to research, having never done this before – I could force them into compliance without resorting to the court system. ---
**Author:** ![PastAllReason](https://avatars.discourse-cdn.com/v4/letter/p/f07891/32.png) [@PastAllReason](https://boards.straightdope.com/u/PastAllReason)\ **Post date:** [April 25, 2005, 1:51am UTC](https://boards.straightdope.com/t/board-of-directors-shirking-their-responsibilities/300888/2 "2005-04-25T01:51:07Z")
IAAL, but in Canada, so can’t help you, except to provide you this [link](http://www.leginfo.ca.gov/cgi-bin/calawquery?codesection=corp&codebody=&hits=20) which is to the California Corporations Code. Part 2 of the Code appears to cover Nonprofit Public Benefit Corporations, while Part 3 covers Nonprofit Mutual Benefit Corporations. There are chapters in each part speaking to Directors and Management. I hope this least provides you a place to start in answering your question. ---
**Author:** ![Freddy\_the\_Pig](https://avatars.discourse-cdn.com/v4/letter/f/a587f6/32.png) [@Freddy\_the\_Pig](https://boards.straightdope.com/u/Freddy_the_Pig)\ **Post date:** [April 25, 2005, 11:38pm UTC](https://boards.straightdope.com/t/board-of-directors-shirking-their-responsibilities/300888/3 "2005-04-25T23:38:33Z")
Perhaps you could tell us some things about your club: 1. Is it incorporated? (It seems unlikely.) 2. Is it a club where the dues-paying members elect the directors, or is it a “club” like Sam’s Club where you’re just a customer paying for a service? 3. Does the club have written by-laws? 4. Is it run on a for-profit basis, and if so who keeps the profits? ---
**Author:** ![filmyak](https://avatars.discourse-cdn.com/v4/letter/f/94ad74/32.png) [@filmyak](https://boards.straightdope.com/u/filmyak)\ **Post date:** [April 26, 2005, 1:54am UTC](https://boards.straightdope.com/t/board-of-directors-shirking-their-responsibilities/300888/4 "2005-04-26T01:54:49Z")
Thanks for the link, Reason. > [@Freddy the Pig](#): > > Perhaps you could tell us some things about your club: > > 1. Is it incorporated? (It seems unlikely.) > 2. Is it a club where the dues-paying members elect the directors, or is it a “club” like Sam’s Club where you’re just a customer paying for a service? > 3. Does the club have written by-laws? > 4. Is it run on a for-profit basis, and if so who keeps the profits? Freddy: 1. Yes it is incorporated 2. dues paying members elect the directors 3. yes there are written by-laws 4. it is a not-for profit organization ---
**Author:** ![Elysian](https://avatars.discourse-cdn.com/v4/letter/e/c77e96/32.png) [@Elysian](https://boards.straightdope.com/u/Elysian)\ **Post date:** [April 26, 2005, 2:22am UTC](https://boards.straightdope.com/t/board-of-directors-shirking-their-responsibilities/300888/5 "2005-04-26T02:22:48Z")
Boards of directors do have fiduciary duties, but they generally have them to the stockholders, not members of a club. Unless members of a club are stockholders, I don’t think they have a duty of disclosure to you. As far as I can tell, this is not a publicly traded company, so they don’t have to go along with SEC rules regarding disclosure rules. So, even if the members were stockholders, the members of the board may not have to disclose the amount paid for lunches. Granted, this is California, and I’ve only really studied Delaware codes and the SEC rules, but I can’t imagine they have a duty of disclosure required by law, to their club members, about their voting records or meal subsidies. The short of it is that I don’t think it’s illegal for the board of directors not to state exactly how must the restaurant is paying for their lunches to the members of the club, _unless it is specifically mentioned in the bylaws_. Read your bylaws for further details. IANAL, yet, but I’m studying business law and mergers. ---
**Author:** ![Freddy\_the\_Pig](https://avatars.discourse-cdn.com/v4/letter/f/a587f6/32.png) [@Freddy\_the\_Pig](https://boards.straightdope.com/u/Freddy_the_Pig)\ **Post date:** [April 26, 2005, 1:31pm UTC](https://boards.straightdope.com/t/board-of-directors-shirking-their-responsibilities/300888/6 "2005-04-26T13:31:05Z")
Not a lawyer, but my take on it, based on my experience working with small businesses, is the same as **Elysian** ’s. Even an incorporated enterprise, if it isn’t publicly traded, doesn’t face a lot of constraints in terms of how it conducts its internal business. Legal process, in any case, strikes me as the wrong tool for this situation. Instead, raise hell at your next annual meeting. Point out that redacting the comp amounts invites suspicion that the directors are skimming club dues for personal gain. Amend the by-laws to require disclosure and recorded votes. Run a new slate of directors. If none of the above work, quit the club. ---
**Author:** ![Gfactor](https://avatars.discourse-cdn.com/v4/letter/g/9de053/32.png) [@Gfactor](https://boards.straightdope.com/u/Gfactor)\ **Post date:** [April 26, 2005, 1:58pm UTC](https://boards.straightdope.com/t/board-of-directors-shirking-their-responsibilities/300888/7 "2005-04-26T13:58:19Z")
> [@filmyak](#): > > Thanks for the link, Reason. > > Freddy: > > 1. Yes it is incorporated > 2. dues paying members elect the directors > 3. yes there are written by-laws > 4. it is a not-for profit organization If it is a not-for profit recognized under section 501(c)(3), it must file an informational return with the IRS. Tou can view them at [http://www.guidestar.org](http://www.guidestar.org). Here is an example: [http://www.guidestar.org/Documents/2003/314/416/2003-314416407-1-9.pdf](http://www.guidestar.org/Documents/2003/314/416/2003-314416407-1-9.pdf) Non-profits are required to list Officers, Directors, Trustees, and Key Employees, and disclose their compensation. ---
**Author:** ![Gfactor](https://avatars.discourse-cdn.com/v4/letter/g/9de053/32.png) [@Gfactor](https://boards.straightdope.com/u/Gfactor)\ **Post date:** [April 26, 2005, 2:41pm UTC](https://boards.straightdope.com/t/board-of-directors-shirking-their-responsibilities/300888/8 "2005-04-26T14:41:31Z")
[This](http://caselaw.lp.findlaw.com/cacodes/corp/8330-8338.html) appears to be the part of the statute that covers required financial disclosures. It does not seem to require the company to report what you are seeking. Without more information I can’t be sure that this is indeed the correct statute, so take it with a grain of salt. OTOH, you can always ask to review the books: > [@](#): > > 1. The accounting books and records and minutes of proceedings > of the members and the board and committees of the board shall be > open to inspection upon the written demand on the corporation of any > member at any reasonable time, for a purpose reasonably related to > such person’s interests as a member. ---
**Author:** ![Elysian](https://avatars.discourse-cdn.com/v4/letter/e/c77e96/32.png) [@Elysian](https://boards.straightdope.com/u/Elysian)\ **Post date:** [April 26, 2005, 4:12pm UTC](https://boards.straightdope.com/t/board-of-directors-shirking-their-responsibilities/300888/9 "2005-04-26T16:12:05Z")
> [@Freddy the Pig](#): > > Amend the by-laws to require disclosure and recorded votes. Run a new slate of directors. If none of the above work, quit the club. I agree that these seem to be your options. You can try to gather together a voting block of your fellow club members in order to vote in the directors that you choose. Then those directors can amend the bylaws to specify disclosure rules. **Gfactor** , asking to view the books and minutes isn’t going to help him a whole lot if they aren’t writing the things he want to know down. It appears he’s already looking at the minutes anyway. Do you really want to elect your own directors? That can split the club into factions and may break the whole club up. You can always try to petition for changes in the bylaws and bring that up in the next meeting. ---
**Author:** ![Random](https://avatars.discourse-cdn.com/v4/letter/r/57b2e6/32.png) [@Random](https://boards.straightdope.com/u/Random)\ **Post date:** [April 26, 2005, 5:04pm UTC](https://boards.straightdope.com/t/board-of-directors-shirking-their-responsibilities/300888/10 "2005-04-26T17:04:17Z")
> [@Elysian](#): > > **Gfactor** , asking to view the books and minutes isn’t going to help him a whole lot if they aren’t writing the things he want to know down. It appears he’s already looking at the minutes anyway. Although I am not a California lawyer, if the accounting books are so deficient that they don’t show the expenses of the corporation in reasonable detail, I would interpret this statute as allowing access to the checking account statements. Presumably, these restaurant expenses are reimbursed (or perhaps paid directly) by check. If paid directly, it’s likely that the entire board’s expenses are aggregated in one check, though. ---
**Author:** ![Gfactor](https://avatars.discourse-cdn.com/v4/letter/g/9de053/32.png) [@Gfactor](https://boards.straightdope.com/u/Gfactor)\ **Post date:** [April 26, 2005, 5:36pm UTC](https://boards.straightdope.com/t/board-of-directors-shirking-their-responsibilities/300888/11 "2005-04-26T17:36:05Z")
> [@Random](#): > > Although I am not a California lawyer, if the accounting books are so deficient that they don’t show the expenses of the corporation in reasonable detail, I would interpret this statute as allowing access to the checking account statements. INACL either, but I agree. Indeed a member could argue that not producing accounting books kept according to accounting practices was a refusal to produce them. Which would then permit a court to order an audit. During the audit, the auditors would surely check out whatever financial records were necessary to justify expenditures made by the company. > [@](#): > > 1. (a) Upon refusal of a lawful demand for inspection under this > chapter, or a lawful demand pursuant to Section 8330 or Section > 8333, the superior court of the proper county, or the county where > the books or records in question are kept, may enforce the demand or > right of inspection with just and proper conditions or may, for good > cause shown, appoint one or more competent inspectors or independent > accountants to audit the financial statements kept in this state and > investigate the property, funds and affairs of any corporation and of > any subsidiary corporation thereof, domestic or foreign, keeping > records in this state and to report thereon in such manner as the > court may direct. > (b) All officers and agents of the corporation shall produce to > the inspectors or accountants so appointed all books and documents in > their custody or power, under penalty of punishment for contempt of > court. Moreover, non-profits are required to keep books and records that are accurate and correct. > [@](#): > > 1. (a) Each corporation shall keep: > (1) Adequate and correct books and records of account: > **[California Code, Corporations Code - CORP § 8320 | FindLaw](https://codes.findlaw.com/ca/corporations-code/corp-sect-8320.html)** > > California Corporations Code CORP CA CORP Section 8320. Read the code on FindLaw Failing to maintain required records might even be grounds for involuntary dissolution. > **[California Code | FindLaw](https://codes.findlaw.com/ca/)** > > Find California Codes in FindLaw's searchable database. ---
**Author:** ![Elysian](https://avatars.discourse-cdn.com/v4/letter/e/c77e96/32.png) [@Elysian](https://boards.straightdope.com/u/Elysian)\ **Post date:** [April 26, 2005, 6:29pm UTC](https://boards.straightdope.com/t/board-of-directors-shirking-their-responsibilities/300888/12 "2005-04-26T18:29:29Z")
I have a question then. Are club members treated the same way as shareholders, if they are given voting power? This is very interesting, thanks for replying. ---
**Author:** ![Gfactor](https://avatars.discourse-cdn.com/v4/letter/g/9de053/32.png) [@Gfactor](https://boards.straightdope.com/u/Gfactor)\ **Post date:** [April 26, 2005, 6:49pm UTC](https://boards.straightdope.com/t/board-of-directors-shirking-their-responsibilities/300888/13 "2005-04-26T18:49:39Z")
Here are two pretty good resources about non-profits > **[Jobs, Volunteering, Grad Schools, and More](https://www.idealist.org/en/)** [http://www.nolo.com/resource.cfm/catID/CE94A6B3-EFB6-4036-8498D5414328FD73/111/262/](http://www.nolo.com/resource.cfm/catID/CE94A6B3-EFB6-4036-8498D5414328FD73/111/262/) Are members like shareholders? Yes, except when they aren’t. > [@](#): > > 1. (a) A corporation may refer to persons associated with it as > “members” even though such persons are not members within the meaning > of Section 5056; but references to members in this part mean members > as defined in Section 5056. > **[California Code, Corporations Code - CORP § 7330 | FindLaw](https://codes.findlaw.com/ca/corporations-code/corp-sect-7330.html)** > > California Corporations Code CORP CA CORP Section 7330. Read the code on FindLaw That said, members have voting rights, just as shareholders do in a corporation. But just as corporations can issue non-voting shares, non-profits can create non-voting membership classes. Hope this helps.