Removal of Directors

Both the Associations Incorporation Act and the Corporations Act provide for means by which directors or members of the management committee can be removed from their positions by the members.

In the case of Mr Hamish McLennan, his resignation was requested by a majority of voting members and as a consequence of that, the board of Rugby Australia determined to remove him as the chairman, and he subsequently resigned as a director.

A board has no ability to remove a director, only the members have that right. In some cases, the chairman is elected by the members however the chairman is often elected by the board. In those cases, the board can change the chairman.

When a director is elected by the members, it is not a merit-based vote. It is a vote by the members hoping that a person will do a job to their satisfaction. In the situation of a contested election, members vote for a person believing they will do a better job than the person they did not vote for.

It is hard then to understand why it is controversial when the members seek to remove a director whose performance in their eyes is not satisfactory when the election is not merit-based.

If the majority of members make clear to that person that they no longer want them to hold that position, in my view, it is appropriate that the director resigns his position. That is ultimately what has occurred here but not with any initial willingness or preparedness to accept the view of the members. Moreover, the members were criticised for exercising their rights under the constitution.

In my view, it is incumbent upon the members of member-based organisations to hold the board accountable. The option of removing a director is not only available to the members, but it is incumbent upon the members to exercise their rights and hold the board accountable to the high standards expected by the members.

We have seen members exercising their rights far more regularly in recent times and I can only envisage that we will see this even more in the future. Directors need to understand that in member-based organisations, that they are accountable to the members and not superior to the members. They should not be dismissive of the views of members.

Members who take such action do not do so lightly and are fully aware of the ramifications of such actions and only take such action because they believe it is in the best interest of the organisation.

“The content of this publication is for reference purposes only. It is current at the date of publication. This content does not constitute legal advice and should not be relied upon as such. Legal advice about your specific circumstances should always be obtained before taking any action based on this publication.”
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