How Minnesota Nice Affects Board Decisions

In managing the business and affairs of a corporation, a Board of Directors has a great deal of power and authority and few restrictions. Each individual director must, however, comply with the legally required standard of conduct.

Minnesota law provides that a director “shall discharge the duties of the position of director in good faith, in a manner the director reasonably believes to be in the best interests of the corporation, and with the care an ordinarily prudent person in a like position would exercise under similar circumstances.” A person who so performs those duties is not liable by reason of being or having been a director of the corporation if the decisions made by a Board of Directors turn out to be disadvantageous to the corporation and its shareholders.

Minnesota law further provides that a director who is present at a meeting when an action is approved is presumed to have assented to the action unless the director expressly dissents or is exempted from voting. As a result, directors who silently acquiesce in corporate mismanagement may be held accountable for that mismanagement.

So, what does “Minnesota Nice” have to do with serving on a corporate Board of Directors?

Minnesota Nice is generally defined as the stereotypical behavior of long-time Minnesota residents to be courteous and act in a reserved and mild manner. According to Annette Atkins in Creating Minnesota, the cultural characteristics of Minnesota Nice include polite friendliness, an aversion to confrontation, a disinclination to make a fuss or stand out and emotional restraint.

Minnesota Nice sometimes means that an individual may decide not to speak up in a Board meeting simply because he or she may not want to confront or embarrass another Board member or appear negative. The individual director may have a desire to avoid a heated discussion or conflict of any kind. If a poor decision is ultimately made by the Board, however, the individual Board member will not be able to use Minnesota Nice as an excuse for avoiding his or her fiduciary responsibilities. Avoiding confrontation or refusing to make a fuss or stand out when an issue arises could result in the director being liable to the corporation and/or its shareholders for monetary damages for breach of fiduciary duty. Thus, each individual accepting the responsibility of serving as a director should be willing to become actively involved and express his or her opinion on all matters coming before the Board. The individual should actively participate in all Board decisions, whether he or she agrees with the end result or not.

It is important that all Board members speak up and make themselves heard on all issues to ensure that actions are taken which are in the best interest of the corporation. Directors should not be hesitant to ask for additional information or documentation regarding an issue, whether it inconveniences others or not. Individual Board members should also not be hesitant to bring “touchy” issues before the Board, such as issues regarding the performance and compensation of the corporation’s officers or other employees or issues regarding the use of corporate resources, if the individual has legitimate reason for believing such issues need to be discussed or action taken.

An individual should never silently acquiesce in decisions being made by the Board simply because he or she does not want to cause conflict. While it is always important for Board members to be courteous, it is also in the best interests of a corporation, its shareholders and the Board of Directors itself if all Board members willingly and actively participate in all matters and discussions which come before the Board.