All In Favor of Online Voting, Say "Aye"

Dear Doug:

- Jon B.

Dear Jon:

On the surface, voting in a club seems like it ought to be the easiest thing in the world. Members just raise their hands when a vote is called, the club president counts the hands for and against, and the motion either passes or it doesn't. What could be simpler? You needn't even worry about butterfly ballots or hanging chads.

But in practice, club voting procedures can be much more complicated. Should each member have one vote, or should members vote according to the number of units they own? Is a simple majority enough to pass a motion, or is it better to require a two-thirds majority or unanimous decisions? And should you handle voting for the purchase or sale of stock differently than you manage voting on the admission of a new member?

And now, as you've discovered, online club tools can add a new twist to voting procedures. For pure online clubs-those that don't meet in person and instead conduct all their business via the Internet-online voting is the only way to make decisions. But other clubs need to figure out how (or if) to integrate online voting with existing decision-making procedures. For instance, in your club, if not all members have Internet access, then you might wish to use online voting informally or not at all.

Before I go any further, it's probably useful to review how online voting works at NAIC Online Club Accounting (NOCA, at www.naic-club.com). Your question suggests to me that you're commenting on the older version of the site. In the most recent upgrade of ICLUBcentral's online improved, and allows much more flexibility than the prior version.

To conduct a vote on the site, you must enter the following information:

• The motion under discussion, with additional notes if desired.
• The number of days the vote should remain open.
• Whether the vote should be weighted by each member's assets in the club, or if each member should have one vote.
• At least two and no more than five choices for the ballot, such as Yes, No, and Abstain. Another way to use this feature is to enter two or more stocks when you only have enough cash to buy one lot-the stock that receives the majority of votes is then purchased.
• The percentage required to pass the motion, such as a simple majority (50%), a two-thirds majority (66%) or unanimous (100%).
• When to end the voting (either at the end of the period, or when a majority is reached).

These options offer quite a lot of functionality. In addition, designated administrators (usually the club's officers) can post online votes on behalf of offline members. In fact, just about the only voting function not currently supported at www.naic-club.com is the requirement that a motion be seconded before it's allowed on the ballot. (Many clubs require that motions be seconded before they're placed before the membership for a vote. Even though this is usually just a formality, it can save your club from discussing an action for which there is no support.)

For the most part, online voting is not really any different from voting in person. In the past, however, I've often received questions from clubs about voting between monthly meetings. I've tended to discourage clubs from trying to come up with mechanisms for holding votes in mid-month, since the desire for such votes often stems from a focus on short-term factors. If your club is properly invested in fundamentally strong companies, then you' ll be well positioned even if bad news emerges that causes a stock to lose value in the middle of the month. Even if you can muster a vote to sell a stock on the heels of bad news, chances are good that the damage will have already been done to the stock's price. It's better to study up on the company's newly discovered problems and discuss the stock in detail at the next month's meeting. If you decide to sell at that time, you probably won't be any worse off than if you had managed to sell at a moment's notice a week or two earlier.

In my online club, our ballot is posted with all motions at the end of the month. Members have five days to place their votes, and the secretary tallies and posts the official results of the ballots. In this way, all actions are taken only after members have had the opportunity to deliberate and consider each motion, not on the spur of the moment.

I do see another problem with your proposal. Holding non-binding votes in the middle of the month might make members think that meeting ballots are a foregone conclusion. This could have an adverse effect on participation. And members who are not online won't be able to participate in discussions (though club administrators can enter proxy votes for them). You'll probably be better off continuing to conduct votes during your club's monthly meetings as you've been doing in the past.

Just because www.naic-club.com offers a voting tool doesn't mean you must always use it, either in conjunction with or instead of voting at your meeting. Remember that you can create policies that describe how it is to be used in your club. For example, you might decide to use online voting for administrative items, but still conduct portfolio votes only during meetings. The bottom line when it comes to conducting votes in your club--online or off--is your club's operating agreements, typically a partnership agreement and/or bylaws. If you think that online voting will be useful for your club, then you should definitely put down in writing your procedures for conducting online votes.

- Doug