Q&A: Presidential Conflict

Q I am the vice president of our board. Just recently we found out through a real estate agent that the president of the board is selling his unit. Does this pose a conflict of interest? In effect, should the president remain the president while he is selling his unit? He’s postponed several meetings where we are supposed to address a maintenance increase. My guess is that he is obligated to tell his prospective buyers about the maintenance increase, but one would wonder why these meetings have been continuously postponed.

—Derelict in Duty

A “This is a situation which is not uncommon and arises from time to time when member of a governing board sell their unit,” says Somerville-based attorney Mark D. Imbriani. “In my experience, the board member selling his or her unit will remain on the board until such time as they close on the sale of their unit. Occasionally, the board member will tender his or her resignation in advance of the actual sale date. In my opinion, the mere fact that the board member is selling their unit does not give rise to a per se conflict of interest that requires them to resign from the board. However, your question implicates other issues relating to the board president’s ability to fulfill his fiduciary duty to the association and its members that requires further discussion.

“Generally, the members of the board of directors have a fiduciary responsibility or duty to the association members to exercise due care in performing their duties, and to act reasonably and in good faith in accordance with the best interests of the association. The "business judgment rule" insulates an officer or director of a corporation from liability for a business decision made in good faith if he or she is not personally interested in the subject of the business judgment, is informed with respect to the matter to the extent he or she reasonably believes same to be appropriate under the circumstances, and rationally believes that the business judgment is in the best interests of the corporation. Making decisions regarding association matters based upon personal interests is clearly inconsistent with these principals. Under the circumstances as you describe them it would be appropriate to confront the president with your concerns. Obviously, if as you suggest, the board president has postponed board meetings in order to further his own self-interests he is not fulfilling his fiduciary duty to the association members and should resign from the board. Whether or not his conduct may also be in breach of disclosure requirements in connection with the sale of his unit is beyond the scope of this response.

“Finally, regarding the scheduling of the meeting, you should review your bylaws. The bylaws usually permit meetings of the board to be called by the president or by a majority of the board. Therefore, if the board president continues to postpone this important meeting, a majority of the remaining board members can schedule a meeting without need for any approval by the board president.”

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Fiduciary Duty

What Boards & Owners Should Know

Staying Away from Impropriety

Avoiding Conflict of Interest