The Basics of Recusal in a Corporate Board Setting

Dallan Dirkmaat leads Summit Consulting and offers a host of coordinated strategic business services focused on corporate turnarounds. One of Dallan Dirkmaat’s areas of extensive knowledge centers on recusing companies from internal litigation. 

Recusal is defined as the act of removing oneself from taking part in a decision, as a way of avoiding conflicts of interest. It typically occurs when a member of the board of directors has a direct financial or personal interest in the matter being voted on, which is not shared by other members of the organization. These interests distort or unduly influence the director’s judgement. 

A common situation of recusal is one where a proposal is at hand for the organization to enter into a contractual agreement with a commercial entity that the director is an officer with, and which would provide him or her with pecuniary profit. Another situation centers on a disciplinary action being voted on against the director for violating the Covenants, Conditions & Restrictions of his or her position. 

In such situations, the recused director may be asked to leave the room so that the other directors can freely discuss and vote on the matter at hand, without any undue influence or interference.