Wednesday, October 17, 2012

Missed Obligations

Boards frequently face the issue of directors who only attend meetings on a sporadic basis; fail to be prepared for the meetings; or who spread disagreements in the community about Board decisions. These items can create issues not only for the entire Board, but can also cause some serious concerns for the individual involved.

Missed Meetings & No Preparation
Missing multiple meetings, even if not consecutively, is unacceptable.  Due to the potential liability involved (missing meetings is a violation of duties), these individuals should resign to protect themselves (and the Association) from lawsuits by homeowners.

Sowing Dissension
At times, the Board deliberates in private, but must show a single front supporting decisions regardless of individual votes. Not doing so can potentially result in losing insurance protection and needlessly exposing the Association to lawsuits. 

Losing Protection
The Directors & Officers insurance coverage may not extend to Board members who show a pattern of missed meetings (typically three meetings missed in one year), as well as those who fail to fulfill their other obligations (such as preparing for the meetings in advance and voting on all matters, rather than abstaining).  This means that the individual director will need to find some other means to finance a legal defense.  This loss of coverage is happening more frequently in recent years and is obviously a big concern!

To Serve
In light of the above, each Board member should re-examine his or her past and current commitment to service - being mindful of the duties expected in the State of Georgia:

        Fiduciary Duty - act in good faith for the benefit of, or in the interests of, the Association.  This means that you are entrusted with the care, protection, and use of the property.  It also includes the sometimes painful and politically unfavorable obligation to increase the budget to address safety issues or items that would degrade the value of the property.  Examples of Fiduciary Duties:
o   Not taking advantage of your position to further your own needs
o   Acting honestly and industriously
o   Never using information gained through your privileged position to advantage a family member/friend/associate
o   Providing adequate information to authorized people or members when requested and not misleading them in any way
o   Never knowingly placing the Board Association in a potentially litigious position
        Duty of Loyalty - You are required to place loyalty to the Association above other interests.  You must minimize potential and actual conflicts of interest.  This area also covers the obligation to maintain confidentiality.
        Duty of Care - exercise powers and discharge duties with the diligence of a "reasonable person":
o   Educate yourself on a matter
o   Regularly attend meetings
o   Look for opportunities to advance the Board’s cause
o   Ensure good financial reporting practices are observed
        Duty of Obedience - This one is the least known, but was laid out in a Georgia Supreme Court ruling (Shorter College vs. Baptist Convention of Georgia).  It requires that directors of non-profits ensure that the mission of the corporation is carried out.  You must be faithful to the purposes, mission and goals of the Association.
As always, consult with the Association’s legal counsel and insurance agent to clarify the above information for your particular situation.

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