Proxy voting may be an option for your nonprofit organization. Historically, non-profit organizations conducted business by boards of directors or members meeting regularly and voting for or against various measures. However, as board members increasingly travel for business, reside in other geographical locations, or are quarantined due to the COVID-19 pandemic, interest in voting by means other than by in-person board meetings has increased. Due to these situations, your non-profit organization may want to consider proxy voting. However, it would be best to explore both the advantages and disadvantages of proxy voting before deciding to implement it in your organization.
Defining Proxy Voting
Proxy voting allows a board member to cast a vote if they cannot physically attend a board meeting by appointing another person to vote on their behalf. The member usually authorizes the proxy vote through a written statement. A proxy appointment may be restricted in that it directs the proxy to vote in a specific manner. However, a proxy appointment also may be unrestricted in that it directs the proxy to vote however they choose. The scope of the proxy appointment document determines the latitude that the proxy has to vote on behalf of the board member.
Proxy Voting Under Arizona Law
Generally, under A.R.S. § 10-3724, a member may appoint a proxy to vote or otherwise act on their behalf by signing an appointment form unless the articles of incorporation or bylaws expressly prohibit proxy voting. A proxy appointment is valid for 11 months unless the appointment form states otherwise. The appointment is effective upon receipt by the secretary of the board or any other officer or agent who is authorized to count votes.
A person can revoke a proxy appointment by attending a board meeting and voting in person or signing and dating a written statement or subsequent appointment form that revokes the proxy appointment.
Proxy appointments always are revocable unless the appointment form states explicitly that the appointment is irrevocable and is coupled with an interest (which is defined by statute to include certain circumstances). However, if the interest is extinguished, then the irrevocable proxy appointment also is revoked.
Benefits of Proxy Voting
As mentioned above, proxy voting is beneficial when flexibility is necessary for members who otherwise cannot participate in some board meetings and votes. It also can be helpful when a quorum is necessary to vote on a critical issue and move it forward, and not all board members can attend the meeting. Proxy appointments also may be helpful when board members have conflicts of interest on particular issues and impartiality is a concern.
Disadvantages of Proxy Voting
The use of proxy appointments can lead to less discussion of critical issues among board members. This discussion can be crucial to helping some board members determine how to vote. Board members also may be less likely to attend board meetings if they can appoint proxies to attend and vote on their behalf. A lack of attendance by members can lead to fewer meaningful discussions and debates among members. When fewer members are present at board meetings, there is less oversight of the non-profit in general, which can lead to problems in the governance of the non-profit.
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The attorneys of Provident Law have over 250 years of combined legal experience, including regular representation of nonprofit organizations and board members. Our goal is to build a relationship with you and all our clients as we work with you through your most complex legal problems. Call us today at (480) 388-3343 or visit us online and see what we can do for you.