Ask the Legal Expert about ... removing a director

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John Durso, Esq.  Nixon Peabody LLP
John Durso, Esq. Nixon Peabody LLP

How do we tactfully, and legally, remove a director we no longer want around? This director sullied his reputation and could, therefore, hurt ours too. We think he's done something wrong, though he may never be charged with a crime. 

Your question does not indicate whether your company is a § 501(c)(3) tax-exempt entity or a for-profit entity. Assuming the director is not a shareholder of a for-profit corporation, the answer is the same for both types of organizations: A director owes a fiduciary duty and a director cannot breach such a fiduciary duty.

One must look to the bylaws of the organization. When we draft bylaws, we usually reserve the express right for those who appoint the board of directors to remove a director “with or without cause.” If there is no such “without cause” bylaw provision, then the next simplest approach would be to not reappoint the director when the director's term ends. 

If you have “cause” to show a breach of fiduciary duty or other wrongdoing that would negatively impact the corporation's public reputation, then you should approach the director and see if he or she will voluntarily resign.

If there is no voluntary resignation and the corporation can prove a breach of fiduciary duty or other wrongdoing by the director, then the corporation can remove the director for cause. This removal may be risky if the corporation cannot prove breach of fiduciary duty or other inappropriate conduct.

Your corporate lawyer also should advise if there is some special law that impacts on how or why you can remove a director. In any event, the corporation must carefully consider both the legal and practical public relations issues if it decides to remove a director for cause.