ETHICS

As defined by Oxford Languages, ethics are moral principles that govern a person's behavior or the conducting of an activity. Every organization requires activity, so the subject of ethics is always relevant and especially related to governance.

Myriad courtrooms, board rooms, congressional settings, online forums and more provide examples of what seems like a never-ending string of ethical quandaries. Non-profit common interest communities governed by volunteers are certainly not immune. It's important to remember that requirements established by law (federal, state or local) and/or by an organization's governing documents do not identify strict ethical boundaries and often lack specific consequences for ethical blunders.

Ethical compliance requires accountability. Accountability often requires human beings to confront one another about their actions and/or lack of action and execution. Regardless of what language you adopt, a code of ethics is usually only as good as the people running the show.

Many volunteer board members seem content to conduct business according to their own flexible ideas of what's right and wrong instead of abiding by statutes, governing documents and ethical codes. That kind of "situational rationalization" often creates serious challenges whereby attempts to to perform due diligence, adhere to statutes, governing documents and ethical standards is gets labeled as "difficult," "meddling" and/or "micro-managing" and flagged as its own behavior to avoid. Doing the right thing is incredibly challenging when an organization fails to acknowledge, confront and correct unethical behavior. Doing what's right is not always popular and doing what's popular is not always right.

In many states, nonprofit board members are bound, at minimum, by a duty of care. Some state statues go further to require a fiduciary duty. Ken Harer's Condo Law Handbook provides an thorough introduction with multiple legal references:

Board Members and officers of Common Interest Communities owe a duty of care to their Associations and to individual Owners. They owe a lesser duty of care to members of the public. An Association can be held liable if its Board Members breach their duty, but courts avoid holding a Board Member personally liable unless the member engages in intentional Misconduct, self-dealing, or otherwise operates in bad faith. ...Board members and officers owe a duty to discharge their duties:

A) in good faith;

B) with the care an ordinarily prudent person in a like position would exercise under similar circumstances; and

C) in a manner the Board member or officer reasonably believes to be in the best interests of the corporation.


While the governing statutes and at least one Washington Supreme Court case imply that Board members are protected from liability from innocent mistakes and errors of judgment, the duty imposed by statute still requires that decisions and the exercise of discretion be “reasonable.” Board member actions are likely to be considered unreasonable and in breach of the duty of care if Board members fail to adequately investigate before acting or make decisions based on inaccurate or unreliable information.

If you'd like to know more about duty of care, you might enjoy reading the landmark court case Riss v. Angel which was ultimately decided by the Washington State Supreme Court.

"Follow your North Star" is a great read recently published in CAI's Common Ground as part of the Guiding Light series. While the author, Steve Spanier, discusses some requirements from CA's Davis-Sterling Act, the content of his piece is a wonderful lens when considering ethical conduct. Here's an excerpt:

...a board member's North Star is found in the answer to a simple question: "What is best for the community?"

If board members focus on that, their jobs become relatively straightforward. They don't make decisions based on their own personal interests or the interests of their friends or neighbors. They don't make decisions based on what's least likely to create conflict or controversy. They don't make decisions based on what's expedient or easy...

Board members are expected to conduct their actions in an ethical manner, making decisions based on reasonable discretion observing applicable statues, governing documents, and established processes. Eschewing a principled approach for a 'make-it-up-as-we-go’ and/or ‘what’s most popular?’ line of reasoning is unlikely to promote the best interests of your community.

EXAMPLE CODE OF ETHICS

For another example, please review CAI's model code of ethics.


Board Members Should:

  • Strive at all times to serve the best interests of the Association as a whole regardless of their personal interests.

  • Use sound judgment to make the best possible business decisions for the Association, taking into consideration all available information, circumstances and resources.

  • Act within the boundaries of their authority as defined by law and the governing documents of the Association.

  • Provide opportunities for residents to comment on decisions facing the Association.

  • Perform their duties without bias for or against any individual or group of Owners or non-Owner residents.

  • Disclose personal or professional relationships with any company or individual who has or is seeking to have a business relationship with the Association.

  • Conduct open, fair and well-publicized elections.

  • Always speak with one voice, supporting all duly-adopted board decisions-even if the board Member was in the minority regarding actions that may not have obtained unanimous consent.

Board Members Should Not:

  • Reveal confidential information provided by contractors or share information with those bidding or Association contracts unless specifically authorized by the board.

  • Make unauthorized promises to a contractor or bidder.

  • Advocate or support any action or activity that violates a law or regulatory requirement.

  • Use their positions or decision-making authority for personal gain or to seek advantage over another Owner or non-Owner resident.

  • Spend unauthorized Association funds for their own personal use or benefit.

  • Accept any gifts-directly or indirectly-from Owners, residents, contractors or suppliers. Gifts of nominal value between neighbors for birthdays, holidays, or other occasions are not prohibited.

  • Misrepresent known facts in any issue involving Association business.

  • Divulge personal information about any Association Owner, resident or employee that was obtained in the performance of board duties.

  • Make personal attacks on colleagues, staff or residents.

  • Harass, threaten or attempt through any means to control or instill fear in any Board Member, Owner, resident, employee or contractor.

  • Reveal to any Owner, resident or other third party the discussions, decisions and comments made at any meeting of the board held in executive session.