Conflict of interest

Started by DebraL5 • 18 replies • 696 views

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DebraL5 (Texas)
Posts: 15

Posted:

Our office manager is also an owner. I think it’s a conflict of interests. She works 30 hrs a week and makes $4,725 per month. She is not a property manager, just an office manager. Who gets paid almost $60,000 per year to be a part time office manager? Also the Treasurer on our board is suing the HOA. Is that not a conflict of interests?

KerryL1 (California)
Posts: 14,550

Posted:

Welcome, Debra, Please look up "conflict of interest."

While I and many other don't think it's a good idea at all to hire an Owner as an employee of the HOA, this per se, is not a conflict of interest. But it does give rise to suspicions of favortism towards her. On the other hand, it can be nice to have an office manager who undeersantds residents' concerns. The decision to hire an Owner or an Onwer's company is up to the Board.

What is the treasurer suing the board for?? Anyway, if TX law and your own documents do not prevent the treasurer from serving while suing your HOA, it's OK.

The board can form an executive committee and keep her/him out whenever the lawsuit or issues related to his lawsuit are discussed.

JohnC46 (South Carolina)
Posts: 14,265

Posted:

Our docs prohibit someone from being on the BOD if they are involved in any legal action against the HOA.

CathyA3 (Ohio)
Posts: 6,299

Posted:

Quote:

Posted By DebraL5 on 09/04/2019 8:23 AM
Our office manager is also an owner. I think it’s a conflict of interests. She works 30 hrs a week and makes $4,725 per month. She is not a property manager, just an office manager. Who gets paid almost $60,000 per year to be a part time office manager? Also the Treasurer on our board is suing the HOA. Is that not a conflict of interests?

A conflict of interest exists when a person in a position of authority (eg. a board member) makes a decision that will benefit him- or herself financially. An office manager has no authority - she is an employee who works at the direction of the board.

I agree with Kerry that it's probably not a good idea to hire a homeowner, but mostly because there are more potential sources of problems than you'd have with an employee who has no relationship with the community other than his employment. For instance, it can lead to charges of favoritism.

On the other hand, board members who sue the HOA are unable to fulfill their duty to act in the best interest of the association. Usually with a conflict of interest, the board member can simply recuse himself from any discussions and decision-making involving the particular topic causing the conflict. This does not stop him from fulfilling his fiduciary duties when dealing with all other items that come before the board. In the case of a lawsuit, the person has placed himself in an adversarial position with the HOA, and you can make a good argument that the person can no longer fulfill his duties at all while his case is still being litigated. I believe that the Treasurer should resign - if he does not resign the community should hold a recall election and remove him.

JohnC46 (South Carolina)
Posts: 14,265

Posted:

Debra

I agree with Cathy when she says: A conflict of interest exists when a person in a position of authority (eg. a board member) makes a decision that will benefit him- or herself financially. An office manager has no authority - she is an employee who works at the direction of the board.

What I do have problems with is her rate of pay. According to your figures her pay rate is over $36 per hour. I say she is not worth it. Plenty of people would jump on that job for $20 an hour.

RichardP13 (California)
Posts: 3,868

Posted:

Quote:

How many homes in your community?

SheliaH (Indiana)
Posts: 6,964

Posted:

I responded to your question about the treasurer in your other post, but in case you didn't read it, I don't think it's appropriate to serve on the board of directors of an organization you're also suing. As an officer, no less (and a treasurer????)

If your documents state the board selects officers from among themselves, this one might want to consider removing him from that stop. They probably can't kick him off the board itself, so I would hope he knows he'll have to leave the room when the lawsuit is discussed (and that includes executive sessions held to discuss it).

As for the office manager, it's not necessarily a conflict of interest because she works at the board's direction and as long as she can't manipulate anything in her favor, this might be ok, although I agree with the others that owners who also work as paid employees for the association isn't a good look. And at $4725 for 120 hours a month is likely overpriced - the board may want to rethink that or at least give her a lot more to do to justify that expense

If it is not right do not do it; if it is not true do not say it. Marcus Aurelius

CathyA3 (Ohio)
Posts: 6,299

Posted:

Another thought about the office manager: one of the tasks that a board often delegates to a manager is record keeping, and this can involve confidential information such as delinquencies/accounts receivable and actions taken to correct violations. It's not appropriate for another homeowner to see this information. So in my mind this is a deal-breaker.

RichardP13 (California)
Posts: 3,868

Posted:

I asked the question, which hasn't been answered, on how many homes. Let's say there are 2,000 homes, and going price is $10.00 a door. Pay a PM $5,000.00 and an office manager to do bookkeeping and such at $5,000.00. You just saved $10,000.00 per month.

SteveM9 (Massachusetts)
Posts: 3,699

Posted:

yep. probably the best way to get rid of a position is to get quotes from another outside source like mgmt company, to do the same thing. then pick them for less. let her go. if you need that position in house again, hire it at an hourly rate for less.

DebraL5 (Texas)
Posts: 15

Posted:

I did lookup conflict of interest. Most of it concerned hiring relatives or friends for a contract job. But it also said even an “appearance” of a conflict is not good. He is suing the owners because he has mold in his unit. He claims a leak from the drop down ceiling caused it. He says the area above the drop down is common area and is suing us for neglect. My biggest problem is he was allowed to run for the board without disclosing that he is suing the 80 owners. This is an 80 unit, 9 story high rise on the beach. Who knows where the mold came from. We ALL have issues with the humidity here in TX and in this building.

DebraL5 (Texas)
Posts: 15

Posted:

I totally agree we could get someone to do that job for much less. But I was told by a board member “the board can do whatever they want.”

DebraL5 (Texas)
Posts: 15

Posted:

There are 80 units in this 9 story high rise on the beach

DebraL5 (Texas)
Posts: 15

Posted:

One of the reasons I think it is a conflict is because she had 27 proxy votes at our last meeting. As far as giving her more hours/responsibilities she was actually given a reduction in her hours by the board. I was told by a board member at the last meeting that “ the board can do anything they want.”

DebraL5 (Texas)
Posts: 15

Posted:

At our last board meeting this office manager had 27 proxy votes. She was actually full time but the board cut her hours. I totally agree we could hire someone for way less.

DebraL5 (Texas)
Posts: 15

Posted:

There are 80 units in this 9 story high rise on the beach.

CathyA3 (Ohio)
Posts: 6,299

Posted:

Quote:

Posted By DebraL5 on 09/05/2019 8:56 AM
One of the reasons I think it is a conflict is because she had 27 proxy votes at our last meeting. As far as giving her more hours/responsibilities she was actually given a reduction in her hours by the board. I was told by a board member at the last meeting that “ the board can do anything they want.”

There is nothing wrong with collecting proxies, although it can look funny. Sounds like this person knows a lot of folks and is an effective campaigner. And yes, the board can hire whomever they want, consistent with applicable laws and fiduciary duty. As some of us mentioned above, there are some good reasons that they shouldn't hire a homeowner, but if it's not prohibited by the governing docs, then it's OK even if not smart.

JohnC46 (South Carolina)
Posts: 14,265

Posted:

Quote:

Posted By CathyA3 on 09/05/2019 9:55 AM

I agree.

KerryL1 (California)
Posts: 14,550

Posted:

I agree with Cathy & JohnC.

Look up conflict of interest again. Since the off. mgr. is not on the board and cannot vote for or against her contract, she does not have a conflict of interest.

Also, the conflict does need to be about financial benefits only. Here, for instance, a director who smokes cigarette voted again a rule change to forbid smoking on balconies/patios, decks. We have VERY few smokers here, so if smoking were continued, he and a handful of others would have benefitted at the heath cost to a huge majority. He should have recused himself.

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