I asked the moderator of WVW to create a page entitled, “Wag the Dog” to foster a discussion about governance at WVH Dev Corp. In the 6+ months that I have served on the coop board, I have observed two competing belief systems across our community. One holds that directors are elected to do what they think is right using essentially their own experience and moral compass as their guide. The other believes that directors are elected to give voice to the interests of those who elected them. Most people ascribe to some mix of the two.
By temperament and conviction I tend toward the “voice of the people” side of the debate. Knowing my own limits and fallibility, I go for the “government of, by, and for the people” in a big way. I think the people, or in this case the shareholders are the dog and the co-op board and staff are the tail. For me, it is the nature of things that the dog wags the tail and not the other way around. But that is not how things typically work at West Village Houses. So in this column I will explore the “wag the dog” phenomenon and I hope that you will join me in this conversation.
Wag the Dog, March 22, 2011
It’s as if co-op law was a barren desert surrounded by the beautiful oasis of American political philosophy and history. We shareholders keep expecting the co-op to act like a representative democracy. Instead it acts like an elected oligarchy. Talk about clash of world views! Most of us grew up with the bedrock belief that in America, governing bodies derive their just powers from the consent of the governed. Welcome to New York State corporation law and West Village Houses where, at least as presented by our managing agent and attorney, bedrock principles of democracy don’t necessarily apply. What does seem to apply is “the board decides and the shareholders abide.”
It never occurred to me when WVH evolved from a tenants association to a co-op that we were empowering a tiny group of people to call all of the shots. In fact, I thought that that was exactly what we were trying to get away from by taking control from the investors. I was wrong–a small elite and only that small elite decides everything. Was that what we wanted? From a governance perspective, the only difference between the bad old days and now is that once a year shareholders have a say in who that tiny group of people is. So who’s in charge–the tail or the dog?
Wag the Dog, March 23, 2011
So who exactly is the board of WVH? For a long time I was sure it was 7 people–5 elected and 2 appointed by the investor at the June shareholder meeting. I felt even surer of this after I had been elected as one of the 7 in June 2010. Imagine my surprise one autumn morning when I saw a letter on the bulletin board in the lobby purporting to be from the board of WVH.The letter was in response to a lawsuit that had recently been filed against the board for election fraud and it was signed, “The Board of WVH.” How could a letter be signed like that if I was a board member and I had never seen it before?
It turns out that there was at least one other board member who had never seen the letter prior to the posting in the lobbies. How was this possible? How was this legal? Since no answers were forthcoming, I referred to the by-laws and couldn’t believe my eyes. You’ll remember that in a previous post I referred to the board (myself included) as an oligarchical elite. Well, it turns out that there is an elite within the elite. It turns out that the officers of the board (4 people) have the full power of the board (7 people) and total say over the entire corporation (roughly 315 households). This is all completely legal and was completely spelled out in the black book, which I read when we converted without understanding the full weight until last fall.
In the social sciences they talk about, “unintended consequences”–the unanticipated and unanticipatable side-effects of certain policies and decisions. Is that what we have here? A cohort of former tenants’ rights folks got together and created a WVH co-op governance structure that concentrates power in the fewest possible hands. Was that an unintended consequence, just a by-product of the limitations of NYS co-op law? Were there other possible governance structures and if so, how was this one chosen? Let me know if you find out the answer, ok?
At least when we had a tenants association we had a counterweight to the investors. What is the counterweight to this tiny tip of a tail that is legally empowered to wag the entire dog?
Wag the Dog, March 25, 2011
There is a fundamental construct that is anathema to all advocates of democracy–the concentration of power in the hands of a few people coupled with the injunction to “just trust us.”
While the “just trust us” proponents would like to make the debate about personalities and who is or is not a good person, the real issue is about structure. Structural power imbalances inevitably lead to power abuses, if not today then tomorrow or the day after. This is why the Founders set up a system of checks and balances in the US government so that power would not be concentrated in one or a few people however sterling of character (George Washington, anyone?).
The question before us is why co-op governance–especially a tenant sponsored co-op–functions so undemocratically? NYS corporation law may allow a co-op to be undemocratic, but does it require it to be? In other words, does co-op law require that 2 people defy the will of 20 people when scheduling a meeting, as happened Wednesday night at the Energy Committee meeting? Does the law insist that for each and every decision a few hairs on the tail get to wag the rest of the dog into the ground? Or does the law merely give those few hairs the naked power to impose their will if they so chose? And if the law does not require that they impose their will at every turn, then what is going on at WVH?
Wag the Dog, April 2, 2011
Oligarchy (from Greek ὀλιγαρχία, oligarkhía) is a form of power structure in which power effectively rests with a small number of people…Throughout history, some oligarchies have been tyrannical, relying on public servitude to exist, although others have been relatively benign…Corporate oligarchy is a form of power, governmental or operational, where such power effectively rests with a small, elite group of inside individuals…Wikipedia
I think that a lot of the anger at and frustration with the board comes from a fundamental misunderstanding of what the board is and how it functions. As I’ve repeatedly said, WVH is an oligarchy, but many shareholders keep expecting a small town democracy like some sort of urban Mayberry RFD,with a well-meaning and kindly mayor, city council, magistrate and sheriff and a fishing hole somewhere out back. In that dreamworld, one group legislates, another administers and a third interprets and enforces the law. Checks and balances. America. Instead we have the WVH Development Corp where the rules are written and enforced by one small group, the budget is made and spent by the same small group, “taxes” (ie maintenance fees) are assessed and everything is administered by this tiny group in meetings that are closed to shareholders. It’s all by the book but Dorothy, we’re definitely not in Mayberry anymore.
So is there a way to make the co-op board responsive to the community and more like a small town government? I’ve thought a lot about this and I’m sorry to say that my conclusion is, “not really.” Shareholders really have only one mechanism for holding the board accountable–annual elections. But the power of incumbency makes elections tenuous, at best. Term limits would wire in more responsiveness and probably should have been written into our by-laws. A larger board might have allowed for more diversity of thinking and less concentration of power, but nobody asked for our input on the by-laws. With a 90+% threshold for amending our by-laws, we’ll never live to see either a larger board or statutory term limits.
But all is not lost. Shareholders could ask board candidates to commit to voluntary term limits and to sign a pledge that they won’t run for more than 3 consecutive terms. There are other pledges shareholders could demand, like for frequent and informal Q&A sessions with the board and more frequent formal shareholders meetings. While not legally binding, these pledges would at least be moral commitments toward more transparency and information sharing. I would sign pledges like these, but would shareholders vote against an incumbent who refused to sign or who violated a pledge?
Shareholder power is very limited, but it is still very real if people are willing to exercise it. Can we make the tail responsive to the dog? I heard a fellow board member once say that the only way to make shareholders take the board seriously is with credible threats of eviction against people who don’t comply with the rules. The same is true for shareholders–the only way to make the board take the shareholders seriously is with a credible threat to “throw the bums out.” Do a majority of shareholders have an appetite for docking the tail when elections come around?