Guidelines and Standards for Service on the Board of Directors
Q: I am just beginning my second year as a condo association board member. I served on an HOA board several years ago when I lived in a large planned development. I now see that people run for the board for varying reasons...some of them not the correct ones. I believe a lot of people really think you should run for the board in order to achieve your own personal agenda. Others want to serve their community, but don't have any idea what they are doing or how a board functions. Some of these people are "take charge" type people who end up getting elected president. That can really be a problem. Can you give some guidelines and standards for service on the board of directors?
A: This is a good observation on your part and we can affirm that you have identified a couple of reasons some boards have trouble functioning most effectively.
Board members who act inappropriately alienate other board members and other association members which leads to a negative attitude on the part of the homeowners toward the board. So it is important to take steps to encourage constructive behavior. Of course, education is the key for most people who are new to service on the board of an organization. There are many ways to obtain this education and it is not expensive. Hopefully, your community is a member of the Community Associations Institute. This is an organization established primarily to educate and be a resource for those involved in community association governance. The organization has a local chapter that sponsors numerous educational events throughout the year. The local chapter's executive director can be contacted at 558-8128 and the chapter's website is www.sevacai.org.
The first place to look for standards is state law. Most community associations are nonstock corporations under Virginia law. The statutes governing such corporations impose certain standards of conduct on board members including: (1) "a director shall discharge his duties as a director in accordance with his good faith judgment of the best interests of the corporation", and (2) he shall rely on reports, opinions and data supplied by third party experts, unless he has a good reason not to do so, and (3) a director is not liable for action taken if he performs his duties in compliance with the state law.
But let us give you some practical guidelines and highlight the five largest problem areas:
1. Maintain confidentiality. In our environment in Virginia of openness as to all community association meetings, it is sometimes difficult for the uninitiated board member to understand that everything discussed at a board meeting is not appropriate for publication to anyone in the community or elsewhere. Your guidelines should require confidentiality of all legal, contractual, personnel, and management matters involving the association. Information about the personal lives of the staff, residents and other board members is not information needed outside the board. Despite the fact that members can be present at board meetings except for executive sessions as allowed by the statutes, divulging of these types of matters with those who were not present for the discussion and/or knowledgeable about the background is rarely productive and sometimes harmful...folks operating with half the facts generally can't contribute much to a solution to any issue.
2. Comply with the governing documents and relevant law. Of course the starting point for adhering to this standard is to educate yourself about your documents. This can be achieved by reading them and consulting with your association attorney. There are laws affecting the operation of your association contained in state statutes and federal statutes such as the Fair Housing Act and the Telecommunications Act. If you are in doubt concerning a potential action of the board, you are obligated to find out the right answer and use experts to do so. This leads us to the next significant standard...carrying out your fiduciary duty.
3. Learn the meaning of fiduciary duty. Broadly speaking this is achieved by acting in the best interests of the community as a whole. If you do so, you will be unlikely to breach your fiduciary duty to your fellow homeowners. Here are some examples of what you should not do: accept favors from someone seeking a contract relationship with the association; seek preferential treatment because of your service on the board, present only some of the facts in order to advance a personal cause, fail to get the best advice about an issue beyond the expertise of anyone on the board before making a decision on how to proceed (e.g. construction defects, insurance), fail to disclose a conflict of interest.
4. Behave professionally at meetings and follow meeting protocol. Meetings should have written agendas which should be followed. This is a requirement of Roberts' Rules of Order, an age old set of guidelines for running meetings and generally adopted by most sets of association bylaws. One state law requirement that we find to be misunderstood by many boards is the owner's forum requirement. In Virginia association members are allowed to speak for a limited time at some point at the beginning, middle or end of the board meetings. Most boards choose to do this at the beginning so that a member who has an issue can state his concern and be on his way. There is no obligation on the part of the board to respond to the issue raised by the member at that time...it is appropriate to make a note of the concern and discuss it later or at another meeting or ask the manager or a particular officer to get an answer for the member and give them a call. Members who choose to stay for the all or part of the board meeting are not permitted to participate (speak and debate) in the meeting....only board members may do so. This does not foreclose a non-board member who is a committee chair from being called upon by the board chairman to give a report and be questioned by the board members.
5. Refrain from acting without approval of the board. Sometimes officers of the board, especially presidents, and committee chairpersons, in their zeal for getting a project going or taking a corrective action, take a significant step or make a significant promise to a contractor or other third party without board approval, thinking they will have the support of the other board members. Sometimes, upon discussion at the next board meeting, it becomes apparent that the action taken was inappropriate or undesirable. Obviously this creates a "sticky situation" that could have been avoided by doing business in the normal way and following the rules of decision making in organizations.
These are only five of what could be a much longer list of guidelines. You should also consider having a stated policy on the consequences of repeated failure by a board member to adhere to the guidelines and standards established by the law and the organization. We hope this will give you a good start at establishing some standards for your board.