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Better Corporate Meetings

by Jim Slaughter

Originally published as "Better, More Legal Corporate Meetings" in Business Lawyer of the N.C. Bar Association

 

 

"Parliamentary procedure" is a term many believe limited to student government associations.  However, corporations and business associations, as well as the attorneys who advise them, cannot afford to be ignorant of parliamentary procedure basics.  Courts have held that all organizations, including business, professional, educational, and governmental, are subject to the principles and rules of common parliamentary law.  Profit and nonprofit corporations and associations must observe its rules.

In addition, many corporations and most associations adopt language in their bylaws that they will follow the procedures in a particular parliamentary procedure book, such as Robert’s Rules of Order.  Such language has the effect of law, because courts have ruled that organizations that do not obey the rules or act contrary to the rules they have themselves adopted may be liable for their actions.  As a result, ignoring or incorrectly applying parliamentary procedure can lead to embarrassment as well as lawsuits.

The benefits of a meeting run according to proper procedure extend beyond questions of liability.  A presiding officer who skillfully applies parliamentary procedure can turn long, confrontational meetings into short, painless ones.  Adherence to rules of order is especially important when there are disputes between majority and minority shareholders, contested elections, proxy fights, or particularly contentious issues.  The issues to be considered at one annual meeting where I served as parliamentarian were so controversial that several attorneys, a court reporter, and multiple video cameras were present to record any error in the proceedings.  By strictly adhering to parliamentary procedure, the meeting proceeded without a hitch and to the satisfaction of all sides.

What Is Parliamentary Procedure?

Parliamentary procedure is the means by which organizations make decisions.  Stated another way, parliamentary procedure is all of the laws and rules of organizations that govern the transaction of business.  Robert's Rules of Order Newly Revised (11th Edition) ("RONR"), a well-known parliamentary manual, defines parliamentary law as follows:

Parliamentary law is the best method yet devised to enable assemblies of any size, with due regard for every member's opinion, to arrive at the general will on the maximum number of questions of varying complexity in a minimum time and under all kinds of internal climate ranging from total harmony to hardened or impassioned division of opinion.

RONR, p. xliv.

Contrary to common perception, parliamentary procedure is not synonymous with the book Robert's Rules of Order.  Instead, there are several major parliamentary books, with RONR being the most popular (various versions are used by approximately 85% of all organizations in the U.S.).  Another well-known parliamentary authority is Sturgis Standard Code of Parliamentary Procedure, used by approximately 10% of organizations (particularly physicians and dentists).  A third popular parliamentary manual is Demeter's Manual of Parliamentary Law and Procedure (used by some unions).  Other well-known parliamentary texts include Riddick’s Rules of Procedure, Mason’s Manual of Legislative Procedure (used by many legislatures), and Bourinot’s Rules of Order (used in Canada).  While many excellent manuals of parliamentary procedure are available, the fact that RONR is by far the most widely used and the easiest to locate argues in its favor as a parliamentary authority.

RONR is an excellent resource for counsel to corporations and business associations. The book includes sections on presiding, the duties of officers, running elections (including proxy, cumulative, and mail ballot procedures), writing and amending bylaws, and holding board and committee meetings.  RONR is fairly easy to find--just be sure to buy the right book.  There are numerous RONR "clones" and earlier editions of the book that are easy to get by mistake.  Identify RONR by its publisher, Perseus, and by the number of pages (716).  It is available in both hardback and softcover.

What Procedures Must Businesses Follow?

North Carolina is not as clear as some states in legislating that businesses follow specific meeting procedures.  For instance, a California statute provides that certain business meetings "shall be conducted in accordance with a recognized system of parliamentary procedure or any parliamentary procedures the association may adopt."  Similarly, a North Carolina statute provides that a board of county commissioners "may adopt its own rules of procedure, in keeping with the size and nature of the board and in the spirit of generally accepted principles of parliamentary procedures." N.C. Gen. Stat. § 153A-41.  No such clear provision for adopting rules of procedure exists for corporations under the North Carolina Business Corporation Act.  As a result, there is no specific, unambiguous statute regarding the rules of procedure to be followed by corporations.

However, courts have held that businesses are bound by certain principles of parliamentary procedure even in the absence of specific rules. "In the absence of the adoption of rules of procedure and in the absence of statutory regulation, the generally accepted rules of parliamentary procedure control . . . ." 59 Am. Jur. 2d Parliamentary Law § 3 (1987)(citations omitted). "If there is no specific, unambiguous statute or charter provision, resort may be had to Robert's Rules of Order [Newly Revised] for light on relevant parliamentary usages of deliberative assemblies." 59 Am. Jur. 2d Parliamentary Law § 3 (1987)(citations omitted).

As "generally accepted rules of parliamentary procedure" are difficult to define, most groups formally adopt written rules of parliamentary procedure.  The usual method by which an organization provides itself with suitable rules of order is to adopt a parliamentary authority such as Robert's, Sturgis, or Demeter's.  A parliamentary authority can be adopted by a bylaws provision that the current edition of a specified manual of parliamentary law shall be the parliamentary authority.  The procedural rules in that book then govern in all cases in which the rules are not inconsistent with higher authority, such as federal or state law or the articles of incorporation. This parliamentary authority can also be supplemented with specific rules to cover specific situations.

The concept of a corporation adopting procedural rules is not new to North Carolina’s business statutes.  The N.C. Revised Code of 1854 and the N.C. Corporation Act of 1901 both contained the following language: "All corporations may, by their by-laws, where no other provision is specially made, determine the manner of calling and conducting all meetings."  Although the wording of the statute has changed, the present Act still gives authority to adopt rules governing the conduct of business: "The bylaws of a corporation may contain any provision for managing the business and regulating the affairs of the corporation that is not inconsistent with law or the articles of incorporation." N.C. Gen. Stat. 55-2-06

The conduct of business during a meeting often varies by size.  Shareholders meetings or annual meetings of large organizations are typically formal in procedure.  Similarly, business conducted in a board of more than a dozen members follows the same formal procedure. Some characteristics of formal parliamentary procedure are as follows:

arrow Members must be recognized by the presiding officer before speaking;
arrow A motion to take action must precede any discussion of an issue;
arrow Motions must be seconded by another to be discussed;
arrow Members may only speak to a specific issue twice;
arrow The presiding officer does not participate in discussion; and
arrow Formal votes are taken by voice or ballot.

In contrast, formal procedure in a meeting of fewer than a dozen may actually hinder business.  RONR recommends that the procedure in smaller boards or meetings be less formal, such that:

arrow Members are not required to obtain the floor and can make motions or speak while seated;
arrow Motions need not be seconded;
arrow There is no limit to the number of times a member can speak to a question, and motions to close or limit debate generally should not be entertained (unless the group has adopted a rule to the contrary);
arrow The presiding officer need not rise while putting questions to vote;
arrow The presiding officer can speak in discussion without rising or leaving the chair; and
arrow Subject to rule or custom, the presiding officer usually can make motions and usually votes on all questions.

While smaller boards can operate more informally, there are times that more formal procedure may be warranted.  If a particular issue is hotly contested or likely to result in publicity or a lawsuit, more formal procedure can ensure that procedural safeguards have been observed.

Can a Parliamentarian Help You?

A parliamentarian is a consultant who advises the president and legal counsel, as well as other officers, committees, and members, on matters of parliamentary procedure.  Business organizations frequently retain parliamentarians to advise on procedure during shareholders and board meetings.  However, most groups only utilize parliamentarians to ensure that meetings are conducted properly and efficiently.  A professional parliamentarian can provide many additional useful services outside of the actual meeting, including:

arrow Conduct board training and parliamentary workshops;
arrow Supervise elections;
arrow Preside over particularly contentious meetings;
arrow Provide formal parliamentary opinions;
arrow Serve as an expert witness regarding procedure;
arrow Create or revise bylaws; and
arrow Advise on parliamentary tactics and strategy.

Unfortunately, finding a skilled parliamentarian can be difficult.  Yellow pages and city directories seldom have a listing for "Parliamentarians."  The best means for finding a professional and objective parliamentarian is to contact the two non-profit organizations that examine and certify parliamentarians: the American Institute of Parliamentarians and the National Association of Parliamentarians.  Each organization has various classifications of membership, ranging from beginner to the highest levels of parliamentary proficiency.  In addition, each organization makes referrals of parliamentarians.

The American Institute of Parliamentarians (AIP) has two levels of parliamentary proficiency--the basic Certified Parliamentarian and AIP’s highest parliamentary classification, Certified Professional Parliamentarian (CPP).  A CPP designation denotes that the parliamentarian has extensive experience in parliamentary education and service, has passed a closed-book written examination, and has passed an oral examination before a panel of national parliamentarians.  The two examinations are based on numerous parliamentary authorities, including RONR and Sturgis. The American Institute of Parliamentarians can be contacted at PO Box 2173, Wilmington, DE 19899, phone number 302-762-1811.

The National Association of Parliamentarians (NAP) also has two levels of parliamentary proficiency--Registered Parliamentarian and NAP's highest parliamentary classification, Professional Registered Parliamentarian (PRP).  The PRP designation denotes that the parliamentarian has passed a written examination based on RONR and completed a course of lectures and hands-on training in the skills necessary for a professional parliamentarian.  The National Association of Parliamentarians can be contacted at 213 South Main Street, Independence, MO 64050-3850, phone number 816-833-3892.

The classifications from AIP and NAP can be used to find a parliamentarian appropriate for any meeting situation.  A parliamentarian with some basic certification might be adequate for a small meeting with uncomplicated business.  Large organizations almost always utilize a Certified Professional Parliamentarian or a Professional Registered Parliamentarian (or an individual with both designations).

Finding an appropriate parliamentarian should be approached logically and seriously.  A lengthy and badly run meeting will cast a pall on any other accomplishments during the year.  On the other hand, a successful and well-run annual meeting or board meeting will please and invigorate participants.  The cost of a qualified parliamentarian is well worth the expense.  Business executives can be confident that a meeting has been conducted properly and gain the benefit of an efficient and effective meeting.

Conclusion

Parliamentary procedure takes many forms and has many specific rules.  Even so, advisors to corporations and business associations must be aware of the basics of parliamentary practice.  Such knowledge can enhance credibility, result in better meetings, and make the difference between official actions and illegal ones.

Articles are intended to provide general information and are not legal advice or a legal opinion. Specific questions should be directed to an attorney at Black, Slaughter & Black, PA., or to another lawyer.