Waht is conflict of interest?

Started by LindaA11 • 8 replies • 1243 views

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LindaA11 (Washington)
Posts: 1

Posted:

My husband is on our board. He signed a members resolution to change bylaws....24 signatures were needed for the resolution to get on the ballot, there were 47 signatures. It came before the entire board for a vote for the res to proceed to the membership to vote and my husband was told he had to abstaine from the vote due to conflict of interest....his signature on the initial petition..is this analyis correct?

JanetB2 (Colorado)
Posts: 4,219

Posted:

Hi Linda:

There is a fine line here because he is a director. Due to the following statute I would recommend that he does abstain at this time. If the measure does not pass, an option would be for the members to again resubmit with all the signatures and not include your husband. It appears from the vote that potentially most members want in place, so if the board does not approve without your husband’s vote it would possibly only delay until resubmitted. To not abstain opens the option of the upcoming board vote being invalid.

This information could potentially vary also depending on what your governing documents state in regards to items considered to be conflict of interest.

RCW 23B.08.300
General standards for directors

(2) In discharging the duties of a director, a director is entitled to rely on information, opinions, reports, or statements, including financial statements and other financial data, if prepared or presented by:

(a) One or more officers or employees of the corporation whom the director reasonably believes to be reliable and competent in the matters presented;

(b) Legal counsel, public accountants, or other persons as to matters the director reasonably believes are within the person's professional or expert competence; or

(c) A committee of the board of directors of which the director is not a member if the director reasonably believes the committee merits confidence.

(3) A director is not acting in good faith if the director has knowledge concerning the matter in question that makes reliance otherwise permitted by subsection (2) of this section unwarranted.

(4) A director is not liable for any action taken as a director, or any failure to take any action, if the director performed the duties of the director's office in compliance with this section.

I am not an attorney, but hope this helps.

SusanW1 (Michigan)
Posts: 5,202

Posted:

I disagree. Two different hats . . .

Your husband signed the petition as a Member. The petition is a step to bring the matter to the board.

As a board member, he can cast his board vote to bring in to the Membership.

Then, as a Member, he will cast his vote again for the motion to pass.

There is no conflict of interest. Your husband is always a Member of the HOA and has full rights of any member.

DonnaS (Tennessee)
Posts: 5,671

Posted:

I agree with Susan on this. Every member of the association may sign a petition or a member resolution (I think resolution is the wrong word to use)

He would not have any personal gain from his vote as well. Therefore, he should be entitled to vote for the petition to procede to the membership. I do not see a conflict.

JanetB2 (Colorado)
Posts: 4,219

Posted:

Hi Linda:

I have to admit that my first thoughts were the same as Susan and Donna. What gave me pause was the word “unwarranted”. As I stated above we are not attorneys; however, whether he votes or not will ultimately be his choice.

Either way if not passed due to fight over whether should have abstained or lack of votes, the membership potentially can resubmit if needed. Unless there is anything in the governing documents or statutes where same item cannot be resubmitted for X amount of time. Have seen this once, but now cannot remember where.

RogerB (Colorado)
Posts: 5,067

Posted:

Quote:

Posted By LindaA11 on 05/26/2011 11:29 AM
My husband is on our board. He signed a members resolution to change bylaws....24 signatures were needed for the resolution to get on the ballot, there were 47 signatures. It came before the entire board for a vote for the res to proceed to the membership to vote and my husband was told he had to abstaine from the vote due to conflict of interest....his signature on the initial petition..is this analyis correct?

No, he does not have to abstain. This is not a conflict of interest. As an association member he had the right to sign the petitiion and a right to vote.

JanetB2 (Colorado)
Posts: 4,219

Posted:

A thought is your husband should ask the rest of the board for information on what rule or statute is their reason based upon in stating he should not vote. If they feel that way they should be able to validate as to what rule or law would be violated.

Also, be sure to check that there is nothing in your association governing documents which might state something to the effect … if a board member signs a member resolution or petition that they must abstain from voting on said resolution when presented to the board.

FredS7 (Arizona)
Posts: 927

Posted:

1. I don't see why the quoted section supports a "conflict of interest" question.

2. Seems to me that what is usually meant by a "conflict of interest" is an unusual benefit to a particular director as a consequence of the vote. Say a director voting to approve his own submission to the architectural control board. Or to direct a contract for lawn maintenance to his own company. If a rules change affects a number of other homeowners in an equal way to the director, the director should have an equal voice in bringing it up.

DonnaS (Tennessee)
Posts: 5,671

Posted:

Good post Fred,

Your reasons that this is not a conflict of interest by a Board member are included in the Not For Profit Corp Statutes in Florida.

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