Four Principles of Board Member Code of Conduct
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HOA board members are elected into a position of authority within their community. As with any position of power, the scope and limits of that authority should be clearly defined to avoid possible overreach and damage to the association, its membership (the owners) and the community as a whole. This is where a code of ethics, aka code of conduct, comes into play.
A board member code of conduct is more than just a simple set of suggested guidelines. It should be a formal document that outlines the core values of the association and the standard of conduct expected of all board members. By nature of the position, board members will often encounter ethical situations in which hard judgements and unpopular decisions must be made. It’s easy for board members to feel uncertain on how to proceed in these kinds of circumstances.
Having a written set of rules allows the association to set a baseline against which board member decisions, behavior and actions can be compared. This roadmap makes it much easier for board members to navigate difficult decisions. Let’s explore four main principles that should be included in every board member code of conduct.
1. ACT RESPONSIBLY
In the eyes of Texas state law, the homeowners or condominium association on which you serve is viewed as a non-profit business. This means that as an elected official of that business you can think of being a board member as taking on a new job. Any job requires commitment, time and energy spent working toward the mission and goals of the employer. In this case, your employer is the association, and the association represents the community as a whole.
If you accept a board position, you need to be prepared to devote some of your time working for the association. You’ll have to balance your own personal responsibilities with board member duties, attend all board meetings and essentially be “on-call” for emergencies.
In Texas there are several legal concepts surrounding the ‘duties’ of a board member.
FIDUCIARY DUTY - a duty to act for someone else’s benefit and act in the best interest of the association, with the highest degree of honesty and loyalty
DUTY OF CONFIDENTIALITY – board decisions must remain confidential during and after your term of service.
DUTY OF LOYALTY - prohibits board members from using their position to take unfair advantage of the association.
DUTY OF ORDINARY & REASONABLE CARE - perform duties in good faith with such care as an ordinary prudent person would in a similar situation. (also called the Business Judgement rule)
2. FOLLOW THE HIERARCHY OF LAW AND GOVERNING DOCUMENTS
As you might imagine, board members are expected to be experts on the governing documents of their association. Your residents will look to you for guidance and there will be a great deal of pressure on you to adhere to the rules because you’re setting the example for everyone else.
If that’s the case, it’s important that your board member code of conduct stipulate that your decisions and actions are subject to all federal and state statutes, platting documents, the Declaration (commonly known as CC&R’s), articles of incorporation, bylaws and other board-mandated resolutions. Operating within these restrictions will help protect you from overreaching your authority.
3. AVOID LIABILITY
The easiest way to avoid possible risk and liability is to make sure your code of conduct outlines how to disclose and avoid conflicts of interest. Keep in mind that you can also be held personally liable for your actions as board member.
A conflict of interest is defined as, "A board member’s personal interests (family, friends, finances, or social factors) could compromise his or her judgment, decisions, or actions."
Such conflicts may arise at any time when an association board is making decisions on behalf of the community. A responsible board member will disclose any conflicts of interest and recuse themselves from the related decision-making process. To 'recuse' is simply the legal definition for formally excusing yourself from a decision due to a conflict of interest.
The association is soliciting bids for a new contractor to service and repair the three pools in the community. The board vice president has a brother-in-law who owns a pool maintenance company and knows he has entered a bid for the contract.
The vice president should immediately disclose that he is related to a contractor in the bid process, recuse himself from that specific proceeding, and notate both the disclosure and recusal in minutes of the board meeting in which the bids were discussed.
4. MAINTAIN CONFIDENTIALITY
We live in a culture climate of information overload. It appears that people seem less and less concerned about the amount and kind of information they share in person and especially online. Realistically, there's some information that you simply cannot share due to its confidential nature once you’re a board member.
Why should your code of conduct require board members maintain confidentiality?
There are obvious privacy laws to consider, and your board should never disclose personally identifying information (PPI) unless it is a private communication with that individual or in the execution of business with your management company. However, there are also business details, like accounting information, that only board members are privy to. Some sensitive topics, like litigation proceedings, delinquencies and disciplinary hearings are also considered confidential and should never be discussed outside the executive session of board meetings.
As a board member, your visibility within the community is likely to increase. So you may end up in a situations where a resident wants to talk about association business on the sidewalk as you take out the trash or while your family is enjoying time at a community event. It’s important that you understand your code of conduct to make sure that both you and the association are protected. Whatever you share as a board member can be subject to future litigation, so be sure to guard your words. Keep in mind that your confidentiality clause should spell out how confidential matters are handled both in-person and in online communications.
Now that you have a good idea of the principles that your code of conduct should include, make sure that you consult your management team and legal counsel for their advice in preparing a final document and recording the signed copies from your entire board. Additional versions can be created for your important committee members, advisory members, or other association needs. Requiring a signature and recording the document ensures that the association has recourse to censure or remove a member should a board member act unethically.
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