Have you heard the story of the community association members who knew one of their board candidates was convicted of a felony related to fraud or embezzlement yet elected that person anyway? Did you hear the part about how that board member later ran off with a substantial amount of the association’s funds? Maybe it’s just an urban legend among community association professionals. Or maybe it’s true. Either way, how does your association help to ensure the election of board members who will represent the association’s best interests?
As community association lawyers, we often get questions about how to place limitations on who can serve on an association’s board of directors. Sometimes boards do not want to allow owners with delinquent accounts to serve on the board. Other times, board members know that a person with a criminal record intends to run for the board. In other situations, current board members want to prevent people with different viewpoints from getting elected to the board.
The membership of an association may or may not agree with the reasons that current board members want to restrict membership on the board. Recognizing this, the Colorado Common Interest Ownership Act requires membership approval for changes to board member qualifications stated in an association’s governing documents for those communities formed after July 1, 1992. The bylaws of some older communities may permit the board members to change the board member qualifications without member approval.
Regardless of who can change the board member qualifications, boards and members alike should give consideration to the following ideas for recruitment and election of directors and policies that guide director behaviors once they’re elected.
Elect board members who are qualified. Many associations request written candidate profiles from any person interested in serving on the board. Candidate questionnaires can provide helpful information to owners. Questionnaires or profile forms may ask why the member wants to serve on the board and what special qualifications he or she would bring to the position. Boards with a mix of experience can help to ensure perspective on the issues and good business decisions for the community. Members should also have an opportunity to ask candidates questions about their qualifications prior to the election.
Protect your association’s assets from board members and managers. No association should grant bank account access solely to one board member or the manager. Boards can protect their associations’ assets by implementing check signing policies that require at least two signatures for all checks. Boards may also limit who is authorized to sign checks. Proper D&O coverage provides additional security for association assets. Some boards ask whether they can conduct background checks of candidates. In these times of quick online access to background information, such an action seems appealing. However, before implementing any background check policy, a board should consider whether this approach provides relevant, meaningful information on the candidate, creates a false sense of security, or could lead to slanderous or libelous comments about candidates.
Establish a code of conduct for board members. A board member’s failure to follow a code of conduct, in itself, will not typically disqualify the director, but it could provide compelling grounds for initiating the board member’s removal. If a director knows that removal proceedings will result from a breach of the code of conduct, the director may have added incentive to act within the bounds of the code—or not seek the board position from the start.
Offer board member education resources. Board member volunteers do not always know all of the laws and requirements that control their actions. Fortunately, professionals, such as community managers and attorneys, can direct and advise board members to help them fulfill their duties. In addition, helpful resources exist to give board members an overview of their responsibilities and how to govern the associations they serve. Early attention to educating the board can go a long way to protect the association and help ensure good governance and informed decision-making.
Community association board members come from different backgrounds and professions. Each director chooses to run for election and sit on the board for his or her own reasons, which may range from a desire to give back to the community to pursuing a personal agenda. By establishing policies that give owners information about candidates up front, seek to protect association assets, and guide board action, your community can minimize – and, hopefully, avoid – the problems associated with poor leadership. If a board member falls short of his or her duties to the association, the members ultimately hold the keys to corrective action in the form of their power to remove a director.