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What is a proxy vote? A guide to voting by proxy
Every board member plans to attend board meetings and vote in person. But that’s not always possible. When it isn’t, a proxy provides a process that works much like an absentee ballot.
Proxy votes allow board directors to have a say when they are not in attendance while ensuring the integrity of the vote. Our guide provides everything boards need to know about voting by proxy.
What is a proxy?
Proxy voting is a legal mechanism for a member of a voting body to delegate his or her voting right to another member of the voting body. In the context of nonprofit corporations, voting bodies include the board of directors as well as voting members.
Proxies come in three voting formats.
- A general proxy gives the proxy holder the leverage to vote their own conscience.
- A specific proxy must vote the wishes of the proxy.
- The third or hybrid format is a general proxy, but it allows the proxy to give special directions to the proxy holder.
When is a proxy vote applicable?
Boards must ensure that they have a quorum to conduct official business during annual and special board meetings. The terms of the quorum will be stated in the bylaws, but it’s usually a 2/3 or a majority vote of the outstanding shares or common interests. Voters can vote in person or ask a proxy to vote for them.
When boards suspect attendance will be low, encouraging proxy votes may help to meet the quorum so that directors can render decisions on critical issues. BoardEffect provides a secure and accessible mobile solution where leaders can communicate with directors encouraging them to attend or vote by proxy. It is helpful to ask members to submit the proxy form even if they plan to attend.
Sometimes, directors do not want to take a stand on a contested issue, so they may choose not to supply a proxy in order to avoid the situation. While this can make it more difficult to get a quorum, the proxy can record their vote for the purpose of the quorum and then not vote for either side of the issue.
Another concern is that some board members may have trepidation about being proxy holders. To avoid any appearance of improper voting, it is best practice to not afford the proxy holder any discretionary authority but instead require them to only use the official proxy form.
Meeting facilitators and chairs may find it helpful to keep a cheat sheet on Robert’s Rules parliamentary procedure at their fingertips during a meeting. Download our free printable cheat sheet now and make your nonprofit board meetings run even more smoothly and effectively.
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Pay attention to special rules for issuing proxies
The proxy process must be conducted fairly and transparently whenever it is used to protect the rights of stakeholders and owners. During annual elections of board members for example, sometimes boards or oppositional groups may arrange proxy solicitations with the intent of electing certain candidates.
It’s acceptable for them to mobilize a vote, and they can even center a campaign around their candidates. However, they must follow all the rules for issuing, drafting and soliciting proxies. Those who don’t follow the proxy rules can set up a situation in which votes get disqualified and thereby defeat their original purpose in the process.
Other important proxy rules include:
- Proxy forms must be in writing, and they must be signed and dated by the record owners and their attorneys; otherwise, the vote is invalid.
- The term of the proxy is 10 months from the date of issuance. Stakeholders or unit owners may use multiple proxies, but the latest one is the only valid one.
- If a record owner dies or is found incompetent after issuing a proxy, the proxy is valid unless the organization’s secretary has been notified in writing prior to the meeting.
- In the case of joint owners where one owner issues a proxy, the proxy acts on behalf of all owners. If one or more owners dissent, they must provide written notice to the association secretary before the meeting.
- In the case that the owners are evenly split, the board prorates their votes. If the majority of the owners favor a certain position, their vote counts over the dissenting vote.
As Ellis Carter, nonprofit lawyer points out, “Proxy voting can benefit organizations by allowing absent members to vote and help nonprofits to reach quorum. However, it can also lead to problems, including limiting discussion of topics and negatively impacting attendance.”
“Proxy voting can benefit organizations by allowing absent members to vote and help nonprofits to reach quorum. However, it can also lead to problems, including limiting discussion of topics and negatively impacting attendance.” – Ellis Carter, nonprofit lawyer, Caritas Law Group. P.C.
Understand the rules for revoking proxies
Boards must be very careful about following the rules for revoking proxies. Voters can revoke a proxy by issuing a new one or by providing written notice to the association secretary. The owner can also revoke a proxy by attending a meeting in person and casting their own ballot.
Proxies may designate more than one proxy holder and choose which one votes. Proxies that designate two proxy holders simultaneously require the proxy holders to act jointly, or their votes aren’t valid. This is especially important to remember when it’s known that joint proxy holders represent different sides of the issue.
As a rule, proxies have a specific time limit for a specific meeting or meetings. They expire after that and are revoked.
Finally, stakeholders and unit owners must make their vote choices and proxies clear before the day of the meeting because they can’t revoke their vote on the day of the meeting.
BoardEffect is here to help
The best scenario for ensuring legitimate voting is for all voters to make it a point to be present at meetings to exchange views properly and vote their true intent. A second-best alternative is the proxy form.
BoardEffect not only can help ensure that all proxy forms are properly completed and signed, but it also provides secure, confidential board management support.
At Diligent, we understand what board effectiveness brings to a nonprofit, and we’ve designed BoardEffect to be a flexible solution to support your board’s efforts. Whatever shape your organization’s board voting takes, BoardEffect can be a valuable tool to help streamline the process.
