Why Ethics is So Important

  • Posted: September 27, 2014

trustIf there’s one common thread that ties all of these articles together, one explanation one might give for the many ills that seem to plague us here at 111 East Chestnut Condominium Association, it’s our not so subtle deficit in ethics. From board crony-ism to nepotism, from self-dealing to the preferential treatment of “friends of,” at the very least, we are mired in the perception of impropriety, and then enmeshed by an army of homeowner-sponsored yes-men that empower and defend it. Bottom line: That’s not just a plain-ole bad investment; it’s a 57-story hellhole of ill will and contorted priorities.

That said, here’s some perspective, and hope maybe! The following sheds light on what ethics means in the context of an association and why ethics is so very important. The following is a reprint of an article by Gabriella Comstock of Keough & Moody, P.C. The article first appeared in the July-August Issue of ACTHA News.

The EFG’s for Association Boards: Ethical & Fair Governance

We within the community association industry often say that members of a board of managers owe a fiduciary duty to the members of the association. This requires the board of managers to make decisions which are in the best interest of the association as a whole. Though we often forget to remind a board of the importance of doing that which is fair and ethical. It is not always illegal to act in an unethical manner. However, it is just as important for a board of directors to do that which is legal as it is to do that which is right and ethical.

Acting in a manner that is fair and equitable helps to build the credibility of the board of directors. Owners lose faith in the ability of the board when the board treats some members of the association differently than others. Of course this can also give rise to discriminatory issues, as well as a defense of “selective enforcement” by an owner alleged of violating the association’s documents. More importantly, it sends a message to the rest of the community that compliance with the governing documents is not a priority for the association. After all, if the board is not enforcing the restrictions against all owners, it must not be important to have uniformity within the community. This makes it more difficult for the board to enforce the governing documents.

Lack of consistency can also create division within the community. It is difficult for Owners to remember that the members of the board are also homeowners within the community. When the board of directors fails to act in a manner that is fair to all, this becomes even more difficult for the owners. An atmosphere of “the board” versus “the owners” becomes more apparent. Owners are always looking to find something that they can say that the Board has done wrong. In the end, it makes it more difficult for the board to do its job.

Members of the board are not perfect. Mistakes will be made. When a board is known to act in a manner that is fair, the members of the association are much more forgiving when a mistake occurs. The board which acts in disregard of the members encourages the members to highlight the mistakes of the board.

Acting in a manner that is fair and equitable also helps to build a sense of responsibility for the community and its goals. When owners see that the expectations for all owners is the same and for the good of the community, they tend to be a part of achieving this goal. They too work to better the community and promote uniformity.

As noted above, acting in an unfair manner can have adverse legal affects on the association. No judge wants to hear from an owner that there are three non-conforming fences and the member before the court is the only one being asked to remove his fence, because he lives next door to the board President. Further, failure to uniformly enforce the governing documents can give rise to the legal doctrine “waiver” which means a voluntary relinquishment of one’s right. In other words, if the Board has failed to enforce the restrictions of the association, the alleged violator may argue that the association has waived its right to enforce the restriction against him. It can also give rise to an allegation of discrimination.

We have said it many times—running an association is running a corporation. The members of the corporation have to believe that the persons running the corporation are acting and looking out for their best interest. Listening to the members, communicating with the members, and treating all members fairly promotes confidence in the board. Of course the board has to find a balance in being fair and still making difficult decisions that are in the best interest of the entire community. Yet, when a board has a reputation of being fair and doing that which is right, the members tend to be more supportive when difficult decisions are made.

Imagine what 111 would be like if, hands over their hearts, ethics was our Board’s first priority.

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END NOTE: For more information about ACTHA, you can visit their website at http://www.actha.org.

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