board paid director's business, conflict of interest

Tim

You might find your docs say paying directors to be directors is what is not allowed. Paying directors for specific tasks could be done without a conflict of interest especially if all BOD Members were aware of agreed to such.

All that said, paying anything to a director can get sticky and appear to be irregular thus best avoided.

Tim

Your questions may have merit. You should approach the situation from the perspective that nothing inappropriate has taken place but that you are asking for clarification.

For example: my wife and I own a small property management company which manages several homeowners associations. At the same time, I am the president of the sub-association where we live (not one of the managed associations, not in our master association--and I fully disclosed the nature of our business before, during the nomination process, and at the annual meeting at which I was elected). My wife is on the welcome committee of our sub-association. The committee incurs minor expenses: reproduction, etc.

From time to time, I or we incur expenses on behalf of the sub-association in which we reside: out of pocket expenses for something at Home Depot, Office Max, mileage, occasionally a meeting more than a few miles away.

It is entirely appropriate that we file expense vouchers (a holdover term from our corporate lives) for reimbursement. Other members of the board, and property owners, do the same: holiday decorations, expenses associated with association events, etc. All reviewed and approved by the board.

We ask that reimbursement for expenses incurred on behalf of the association in which we reside be made in our personal names. Expenses incurred on behalf of the associations we manage are billed by our business entity. There is no crossover between the two.

In your case, for whatever reason, the person may have asked the reimbursement to be made to the business name. We would not do so as we firmly believe in arms-length relationships and we have no desire to have anyone, from a neighbor, to a client, to the IRS, to ask us to justify what we have done.

However, in your situation, what has taken place may be entirely above board. Not how you may have taken care of business, nor how we would have, but, it still may be entirely above board. So, please keep that in mind.

The man who know what everyone is thinking.

Actually rather simple the OP is fishing for a problem they can hang their hat on.

More than likely willing to make accusations without bothering to collect the facts.

Do the documents prohibit any and all payments to board members for ANY reason. My guess they do not.

What was the payment for? Why bother when you can call someone's behavior into question without collecting or providing the facts.

Not hard to see the pattern if you bother to look or are capable of reading between the lines.

The OP should collect and provide facts not open ended unsubstantiated accusations.

Subject: board paid director's business, conflict of interest

If you don't know why, how or under what circumstances this occurred how do you connect this to a conflict of interest?

Not all that difficult.

If the Board member is the owner of the business then I would think that he may have profited from the HOA paying his business. I can't speak for every state's statutes, but in my state, our statute prohibits compensation as follows:

12) COMPENSATION PROHIBITED.—A director, officer, or committee member of the association may not directly receive any salary or compensation from the association for the performance of duties as a director, officer, or committee member and may not in any other way benefit financially from service to the association. This subsection does not preclude:

(a) Participation by such person in a financial benefit accruing to all or a significant number of members as a result of actions lawfully taken by the board or a committee of which he or she is a member, including, but not limited to, routine maintenance, repair, or replacement of community assets.

(b) Reimbursement for out-of-pocket expenses incurred by such person on behalf of the association, subject to approval in accordance with procedures established by the association’s governing documents or, in the absence of such procedures, in accordance with an approval process established by the board.

(c) Any recovery of insurance proceeds derived from a policy of insurance maintained by the association for the benefit of its members.

(d) Any fee or compensation authorized in the governing documents.

(e) Any fee or compensation authorized in advance by a vote of a majority of the voting interests voting in person or by proxy at a meeting of the members.

(f) A developer or its representative from serving as a director, officer, or committee member of the association and benefiting financially from service to the association.

Personally, I think that such situations can be troublesome and open too much opportunity for accusations of unethical behavior. My thought is that in such situations, the Board member may need to think about whether he wants to be a Board member or be a business owner who is eligible to contract with the HOA for services.

NO, Jon, I don't think my way is the only way. I follow the set of rules or guidelines applicable to our state, as we ask our homeowners to do when they buy into our communities. But, If I don't like the rules, I won't cry, I will work with others to change them.

Something to be said for this thinking. At its best, DS is overkill.

I'll have to look that up in DS and see under California code what my options for a response are.

Not sure Dick if you are permitted to use such language in your state.

Don't want the HOA police coming in the middle of the night for a DS violation.

Guess the truth struck a nerve huh Dick..........

Look in your book all the answers are there...........

How did this get to be about the CA Davis-Stirling legislation? I don't think it deals at all with conflicts of interest, which is the OP's topic!

In CA, I believe that conflicts of interest are dealt with in our Corporations Codes.

Tim,

Most of us realize you are not accusing anyone. Jon tends to get overexcited about any reference to even the remotest possibility of a board member committing a wrongdoing.

There has been good advice offered - check the facts, ask the questions, and obtain a consensus to change the situation if needed.

Good luck!