Board Members and Privacy An Issue of Confidence

As the leaders of their community and guardians of their residents' investment and quality of life, HOA board members have a lot of responsibility, and access to a great deal of personal—sometimes sensitive—information about their neighbors. Along with this responsibility and access comes questions about what kind of information can and cannot (as well as what should and should not) be openly discussed among board members, management, and non-board shareholders.

Certain processes and decisions are more appropriately made behind closed doors, while others benefit from total transparency and the light of day. What's okay to discuss? What's not? What can association directors or trustees do to foster open communication and trust? These are issues that conscientious administrators must consider and take seriously.

Doing Business

On its face, one of Hoboken's handful of cooperative apartment buildings might seem like it has little in common with an investment bank headquartered

across the river in Manhattan's Financial District. The latter’s objective is to make as much money as possible and to enrich the coffers of the shareholders; the former’s concerns are to run a residence as efficiently as possible and to enrich the quality of life of the shareholders. Plus, you can buy stock in an investment bank; you can only buy the shares in a co-op—and and only then with board approval. In the eyes of the law however, they are both more or less the same animal: business corporations, with shareholders, and a detailed set of operating procedures.

“The Business Corporation Law (or BCL) governs the management of cooperative affairs in general,” explains Bruce Cholst, a partner attorney with Rosen, Livingston & Cholst in Manhattan. Said law “does not mandate that board meetings be open to shareholders. Actually, the standard operating procedure of any cooperative corporation is that board meetings are not open to shareholders.”

If Joe Smith logs onto to Ameritrade and buys a single share of stock in

Exxon, for example, this allows him a voice (however miniscule) in elections, and the opportunity to attend the annual meeting—plus a small share in profits and losses. If Joe Smith attempted to crash a meeting of Exxon’s board of directors however, explaining that his stock share permitted his attendance, he wouldn’t get very far—and he certainly wouldn’t be privy to the decision-making process of the board.

It may be helpful to imagine a co-op or condo board in the same way. Yes, the board president is Dave from 2B and he's not necessarily a well-heeled suit with a yacht and a Swiss bank account. But the same principles apply. If Dave refuses to give you the inside scoop on why the board didn’t let Madonna buy into your building, he isn’t being a jerk—he’s doing his job.

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