conflict ofinterest

Our new board will soon decide contracts. Our MC and her husband recently bought a unit, and husband is now on the board. I understand they must disclose this conflict of interest, but our policies and procedures say only he must remove himself from discussion and vote, but can still remain in the room as a member to listen. How can we, the other board members speak freely what is on our mind , with him sitting there? Also, their daughter , who also works for the MC, takes our minutes , so she , too, would be present. I feel this is intimidating for two members of the family to be present during our discussion. Perhaps at some later date, we can change the procedure, or maybe I can request they leave the room. Any suggestions?

Say, Diana, although the site where the below quote was excerpted often is specific only to CA, it also has advice that's useful to all HOA leaders & members. Their opinion is that you have more to worry about than whether or not the PM's family leaves the room. But, I don't think there's any reason to permit them to stay when you discuss MC contracts.

"Problems. Even when a director recuses himself, associations should avoid contracting with companies where a director has a financial interest. Such arrangements are fraught with peril both politically and legally as follows:

1. Political Problems. At election time, owners may accuse the board member of reaping secret profits, taking advantage of his or her position on the board, doing shoddy work, etc. and demand his/her ouster.

2. Legal Problems. If the work by the interested director's company is defective, the board faces the unpleasant prospect of making legal demands on a fellow board member. At the same time, they face political problems with the membership for having given the fellow director the contract in the first place."

Read more: Conflicts of Interest http://www.davis-stirling.com/tabid/1299/Default.aspx#ixzz2QSip0FJj
from Davis-Stirling.com by Adams Kessler PLC.

I don't see an issue with them staying in the room but is it possible to get another employee of the MC to take minutes or take minutes yourself?

How did the husband get on the BOD?

Diana,

When you agreed to serve on the board you accepted all the responsibility that goes along with it, including having to make difficult decisions in uncomfortable circumstances. That is part of being in the driver's seat and part of being all grown up.

There is no reason on earth for you to have to meet in secret session to discuss this. Simply state that another board member has a conflict of interest in that he has one duty to the association and another duty to his family business. Ask him point blank to choose one or the other. If he chooses to remain on the board, immediately move to terminate the contract with his family's business.

BTW, I am not familiar at all with proxy voting as it is not permitted here, but my understanding is that the person who holds the proxy must be entitled to cast his own ballot. This leads me to conclude that the manager could not exercise the proxies as she had no right to vote in the election at that time.

And now I am stumped.If the director excuses himself from voting , then we could very well end up with a 2-2 vote, as we have 5 directors. Then would this issue go to the general membership for a vote?

There is a conflict of interest with the husband and the daughter being in the room when considering bids from management companies when a family member is one of the bidders. The Board should go into executive session to decide on which MC to award the bid without any family member allowed to be present.

Also, it is the job of the Board to award contracts. The Colorado Nonprofit Act does not allow proxies at a Board meeting so the MC has no vote at Board meetings. Your HOA should create a rule that no employee of the MC can be a proxy at member meetings.

Carol

In another discussion concerning elections, it was shown that a Proxy Holder does not need to be a member/owner. They are the Designated Proxy Holder and can vote as the proxy dictates. I believe it was also decided that they could "participate" as a member/owner can.

Hope this helps.

Diana

This is where things can get tricky like how was the motion made.

If one did not like the present MC but knows the BOD is split say 2-2 then one not wanting to keep the MC makes a motion to renew the MC contract. 2-2 vote. The motion fails and the MC's contract is not renewed.

Do you still beat your spouse, yes or no..........LOL

I am not nor do I play a lawyer but I am a liker of proxies.

In SC, proxies are allowed unless your Covenants/Bylaws say otherwise. If proxies are allowed then I say a BOD member could hold a general proxy (one saying the proxy holder can vote as they wish) from a fellow BOD member and act accordingly.

The proxy must also count toward having a quorum but an other subject.

If your Covenants/Bylaws say a BOD Member must be in attendance (personally, electronically, phone, etc.) then this must would override any proxy.

Hope this helps.

Oh, Roger, isn't it so that a tie defeats the motion? This seem to be so in cases where the president has a voice & vote like every other director, at least per Robert's Rules of Order Newly Revised in Brief, 11the ed., p. 69.

But perhaps CO laws say something other than that?

The way I understand it is that if there's tie vote for an officer, whom directors usually elect/appoint, then they'd keep voting until the tie is broken or they'd eventually flip a coin.