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September 19, 2007
What Board Conduct is Acceptable?
I receive a lot of emails telling me of board conduct that is outrageous. I, of course, do not always hear the other side when these issues come to me as complaints so do not consider this advice on a given situation, but I can respond as to what I do understand, have seen, have experienced first hand, and have heard about, as inappropriate behaviors.
Board members are fiduciaries and the mystery of that word can be resolved. They are responsible for managing and administering the assets of others; they have some control over that, and they are therefore held to a higher standard than other owners. They have responsibilities, and they can be sued.
So long as they are acting within their capacity as board members and in good faith - and there are statutorily defined components to that which are not going to be reiterated here, because this blog is for simple truths - a board member should be fine. The wrinkle comes when a board member is in denial, in a state of unrealistic entitlement, is inebriated, sick, or is just basically full of himself or herself. In my own experience, the following behaviors are things that have been brought to my attention as conduct of board members, and I can say with conviction, are things that they should absolutely not do. Whether anyone reading this "has a case" is not to be decided here.
Board members do not have license to:
Spill confidential information learned in valid executive session meetings - to anyone outside of the circle of confidentiality, EVEN IF THEY DO NOT LIKE THE INFORMATION OR THE WAY THE BOARD IS GOING WITH IT. Enron aside, and "whistle-blowers" law aside, I find in actual real life HOA experience that most directors that do it, and although they would like to consider themselves "whistleblowers", they are really just trying to trip up the other board members by using the information improperly.
Confront homeowners in anything less than a business-like or professional manner. Some board members feel the position gives them rights that a regular person does not have. Certainly, some power is conferred, but not the power to "get in someone's face". If Board members shout, pound tables, threaten members including other board members with anything other than what the governing documents and law allows, harass them (within the simplified definition which basically means engaging in continued actions intended to offend or threaten them), promise to make their lives within the association miserable, pick on them or single them out (which rises to inconsistency of enforcement of the documents), tell them they are "being watched", etc., they are acting improperly.
Get physical. A board member is acting in bad faith AND outside their capacity of a board member if he or she gets physical with anyone else, and claims protection of the board member status in his or her defense, or is "addressing" board member business.
Visit homes or confront others in the dark of night or engage in other conduct that is likely to unreasonably and intentionally escalate a situation. Any board member that confronts others to do "association business" after dark, in their homes, in an inebriated state (that means either party), in any situation with the intent to embarass the person, in a demeaning manner, or that condemns or confronts an owner about a situation or purported violation without catching them in the act or having proof or evidence that would stand up in court that there is a violation occurring (in other words, treat them as guilty, and punish them, without any due process consideration) is acting improperly.
Paying themselves from Association funds without presentation and receipt of proof of item to be reimbursed. Most documents for HOAs prohibit paying compensation to board members, and if compensation is paid, (without a separate contract for specific services, approved by the Board and disclosed to members), not only is the responsible board member(s) violating the governing documents in those cases, but the recipient of the "token pay" or any other compensation is losing important protections that exist in the law for unpaid volunteers. But the worst case scenario are those board members that "help themselves" without any oversight, even in cases where payment would otherwise be justified. Of course, if they are the only "volunteer" willing to serve, I could listen to arguments to the contrary on the necessary limits of oversight.
An association board that allows any board members to engage in the above types of conduct AND the board member who does it are both liable to find themselves at the nasty end of a lawsuit, and furthermore, could conceivably find themselves without insurance coverage to protect them. Gross, intentional and malicious conduct, discrimination and harrassment charges are often excluded in coverages.
So, if the conduct is occurring, stop it immediately. Get help if you do not know how to do that. I meet with many boards and have many conversations about this. I know that there are actions that can be put into place to address these behaviors. There are some other blogs on components of this subject, and I will try to do a full article on this specific subject (oh, there are so many things that need to be addressed) sometime soon. And boards, lest you think that I am picking on board members, you can expect a blog soon on what can be considered "legally actionable conduct" exhibited by owners. Many times, these blogs are triggered by an experience I have, or an email that I receive with a valid question, and since I have helped owners and board members and associations and managers in many varied situations and various capacities (advocate, mediator, negotiator, counselor, etc.), I try very hard to keep a good perspective and address both sides of an issue.
Posted by Beth Grimm at September 19, 2007 10:37 AM