The Power of the Unspoken Word in Business Conversations

In the story, “Twas the Night Before Christmas”, despite not speaking a word between them, the father understood St Nicholas’ non-verbal communications:

“He was chubby and plump, a right jolly old elf,
And I laughed when I saw him, in spite of myself!
A wink of his eye and a twist of his head,
Soon gave me to know I had nothing to dread.

He spoke not a word, but went straight to his work,
And filled all the stockings; then turned with a jerk.
And laying his finger aside of his nose,
And giving a nod, up the chimney he rose!”

It is said that the interpretation of communications between persons is comprised of the spoken word (7%), the tone of voice (38%) and non-verbal cues (55%).  In other words, when communicating by telephone alone, more than one-half of what is being said cannot be interpreted by those participating at the other end of the call.

This certainly poses challenges for businesses and the way they make decisions. In B.C., and most other jurisdictions, directors of a company are generally allowed to participate in a meeting of directors “by telephone or other communications medium if all directors participating in the meeting, whether by telephone or other communications medium or in person, are able to communicate with each other”[i]. However, this can become an issue when non-verbal cues play an important role in business communications.

A recent case from the U.S. exposed this very problem of non-verbal communication in the context of a meeting of directors held by telephone.

In Oracle Partners, LP v. Biolase, Inc.[ii], the question was whether a director participating in a telephone meeting had resigned.  In this case, it had been pre-arranged that two of the directors would resign at the meeting of the directors (which was to be held by telephone) and others would be appointed to fill such vacancies.  However, during the telephone meeting, only one of the directors verbally signified his resignation, the other remained silent during the entire meeting. His silence subsequently led to a dispute as to the composition of the board of directors. The Court held that there had been no “objective manifestation of words or actions” indicating the director’s resignation. This meant the silent director had not actually resigned, therefore the appointment of the new director to fill the casual vacancy resulting from the purported resignation of the silent director was invalid.

A simple nod or other gesture by the silent director seen by all of those participating in the meeting might have been sufficient to establish an objective manifestation of action to indicate that director’s resignation.

While telephone meetings may be a convenient means of handling a company’s business affairs, as the Court stated, “one cannot help but wonder whether there would have been a dispute had the directors simply met in person.”

[i] BC Business Corporations Act, S.B.C. 2002, c.57, section 140

[ii] Doc. 9438-VCN (Del. Ch. 2014), appeal dismissed (Del. Supr. Doc. 270, June, 2014)