John: Good questions. I’ve experienced both as have many long-time board members. If a member of management (CEO) is also a board member, after making the case for a benefit to self, s/he should be excused from the meeting while the others discuss and vote. The same would be true for any self-serving request for a vote made by any board member. These are straight forward. The problem comes when the remaining board members do not constitute a quorum of the board and therefore cannot complete a legal vote without the conflicted member(s). When this has happened in the past, either the vote was delayed until a missing member could be brought up to speed at a later time, or the board went about carefully documenting the case in the minutes and permitted the person to vote, since there would have been no way to obtain a quorum without the vote, now or later. This is rare, and a possible opening for a later shareholder action; so it is done very infrequently and only with the best advice and documentation.

Second question about excessive demands: A good board would point out the obvious and vote against such a proposal, knowingly at the risk of alienating members of the very management they look to for the successof the company. It is my experience that an uncompromising management member of a board that disagrees damages his or her relationship with the board in such cases, and upon reflection would probably not have been so intransigent.

How do outside board members behave in the face of pressure from managment on financial demands that some board members view as excessive?