Can We Have a Nonvoting Director?



No. All directors have a right to vote on each matter presented to the board of directors for action.*

     * applicable to California nonprofit corporations. See Cal. Corp. Code Secs. 5211(c), 7211(c), 9211(c).


Q:  What about directors who have a conflict of interest in a transaction being voted upon?

A:  All directors (even the ones with a conflict of interest) have a right to vote on each matter presented to the board for action. Even a conflict of interest policy requiring a director to abstain from such votes cannot prevent a director from exercising his or her statutory right. BUT (and this is a big but*) any director of a nonprofit public benefit or religious corporation with a material financial interest in a transaction being voted upon should voluntarily recuse himself or herself from the meeting and not be present during debate and voting on the transaction if it involves a compensation arrangement or property transfer.

     * cue immature laughter

The recusal is necessary in order to meet the requirements for a rebuttable presumption that the transaction is not an excess benefit transaction subject to penalties.

It should be noted that an interested director need not abstain from a vote to avoid a self-dealing transaction under state law. However, the interested director's vote will not count in meeting the safe harbor under Cal. Corp. Code Sec. 5233(d)(2) or 9243(d)(3).

Q:  So what about an ex officio director?

A:  An ex officio director, like any director, has a right to vote on each matter presented to the board for action. Ex officio in this context simply means that the person is a director by virtue of holding another office. For example, the CEO of an affiliated organization might be an ex officio director of a particular nonprofit corporation. If the CEO resigns from the CEO position, he or she would no longer be a director because it's only the person in that office that is the ex officio director. It is a common mistake to interpret ex officio to mean nonvoting.