Directors: Your Day Job Is Different Than Your “Night Job”

Serving as a volunteer director is hard enough, but it often is made more difficult by directors themselves. The problem is not a lack of good will, good thinking, or hard work, but a misunderstanding about the basic nature of volunteer board service.

In one’s career, whether in business, government service, or elsewhere, one learns to deal with chain of command. In one’s job, one learns to exercise authority and to respond to authority above. In the normal corporate setting, the officer has authority to unilaterally make decisions. The president particularly is not only empowered, but expected, to make important decisions about almost all major management issues. The competent executive rarely, if ever, needs to meet with the corporate board of directors to make decisions.

Many competent, diligent, and honorable people find themselves continually frustrated with volunteer service on their common interest development (aka “HOA”) board, and often are surprised to find themselves in conflict with other homeowners regarding their work for the association. This is often not because of bad intent or mismanagement, but because the volunteer officer does not fully appreciate that the non-profit mutual benefit corporation is a very different organization from that person’s “day job” employer or business.

While a business corporate president has broad and sometimes comprehensive authority to run the business, the HOA president has very little authority. Where the business president controls the corporation and is ultimately held to answer for its success or failure, the HOA president controls very little and (if in the proper role) normally cannot be held personally responsible for anything. The business president runs things, while the HOA president is a coalition builder working to obtain consensus of the board.

The HOA president normally serves at the pleasure of the board. Just as any officer position, the president can be replaced any time the majority of the board determines some other director would better serve the corporation. The HOA president has only one vote, and has to obtain the votes of other directors before a decision is made. In fact, the typical president mainly has the power to set the agendas, call meetings, and chair them. Everything else is normally a decision made by at least a majority of the directors.

There is no doubt that having to wait for your board colleagues is less efficient than the management of a business. However, in the business the officer is paid and in return is also held accountable for the officer’s decisions and actions. In the HOA, the director is not compensated and, if following proper board process (as opposed to individual actions), is not held personally accountable (i.e. liable) for board decisions.

The association president who “takes things into their own hands” may find that such decisions are much quicker and more efficient. However, that president may be exposed to avoidable liability since the non-profit corporation acts through its board of directors, not one officer.

If a board in open session grants authority to an officer on a subject, that should be documented in the minutes. When circumstances do not permit the board to convene before the officer makes a decision, that officer should make sure the decision is ratified in a board meeting as soon as possible, to document the decision was a corporate action. Understand how your “night job” is different, and it might just become easier.

Written by Kelly G. Richardson

Kelly G. Richardson Esq., CCAL, is a Fellow of the College of Community Association Lawyers and a Partner of Richardson | Ober | DeNichilo LLP, a California law firm known for community association advice. Submit questions to [email protected]. Past columns at www.hoahomefront.com. All rights reserved®.