Board Member Basics - Lesson 1

Five Principles of Loyalty & Good Faith

Welcome to the Board. The pay is not so great but this adventure can be a great opportunity to help promote and preserve your community property values and to build new and lasting friendships. Many newly elected Board members may assume that since they are volunteers, there is no accountability or required level of performance. But the truth is Board members and Officers do have statutory duties set forth in state laws and the community governing documents.  The following requirements of loyalty and good faith are generally recognized as obligations for Board Members (Directors):

  1. The Duty to Act in the Best Interest of the Association. A Board Member must put the best interest of the Association ahead of their personal interest. They are expected to exercise ordinary and reasonable care in handling the business of the Association.
  2. The Duty to Act in Good Faith.  When dealing on behalf of the Association, a Board member must treat all parties honestly, fairly and reasonably.  Regardless of the issue, a Board Member representing the Association should always be honorable, truthful, and sincere.
  3. The Duty to avoid or disclose any Conflicts of Interest or any Personal Interests (monetary or otherwise) in Transactions involving the Association. Technically, a Board member could do business with or provide services to the association. For example, if a board member was a CPA and was hired to provide tax services to the association, it is not a conflict of interest if the Board Member discloses his or her interest and plays no role in approving the contract. The non-interested Directors, after the full disclosure, will approve any purchase of goods or services.
  4. The Duty to Recognize and Maintain Confidential Information. Board members have a specific obligation to protect certain information. In addition to private or sensitive information that an individual would normally expect to be kept in confidence, Attorney-Client privilege should be preserved and other information like contract bids/negotiations, hiring-firing discussions or investigations of wrong doing should nearly always be kept confidential. Board policy should be to guard confidences while providing for member access where required.
  5. The Duty not to appropriate a Corporate Opportunity or to use your position for personal gain. Much like insider trading in stocks, a Board Member must not use information obtained as a Board member to then compete with, or assist another in competing with the Association for an opportunity or transaction.

Volunteer Service to your association can be an extremely rewarding undertaking, but it comes with serious responsibility. Taking these duties to heart is an important first step to assuring success in serving your friends and neighbors as a member of the Board.

 

This article is provided for general information and educational purposes only. The material provided in this publication is not intended to provide legal advice and is not to be considered a substitute for legal advice. We cannot and do not render or publish legal advice.