While some may believe that a “Code of Ethics” or “Code of Conduct” is nothing more than a policy advising fellow owners how to conduct themselves like adults – and, make no mistake, it serves that purpose quite well – every community association needs one.
As much as we may hope that common sense and civility will prevail in the operation of our communities, adopting a thorough code of conduct policy will ensure that every board member is appropriately educated as to their fiduciary responsibilities and every resident is well-informed on the basics of proper community association governance.
In New Jersey, and most other states as well, community associations are typically organized as non-profit entities. The members of the association elect a volunteer board of directors or trustees who are responsible for managing the activities of the association and bear the responsibility to act in a fiduciary capacity. For some, it may be their first time serving as a fiduciary.
A code of conduct sets forth minimum standards to be upheld by the governing board in performing their duties and responsibilities, while ensuring that appropriate levels of transparency and confidentiality are maintained. The policy can also detail the conduct of the membership when participating in meetings or otherwise communicating with the governing board or its managing agent.
The following are some areas the policy should address1:
- Establish a Procedure for Meetings of the Governing Board and Membership Meetings, including agendas, minute taking, chair of the meeting, procedure for making and voting on motions, discussions of motions, member participation, and the conduct of the membership at meetings.
- Adopt Financial Ethics addressing improper solicitation or acceptance of anything of monetary value from any person seeking to obtain contractual or other business or financial relations with the association, or from any person whose intent it is to influence any decision of action on any official matter. Board members should not use their position to enhance their financial or business positions and thus must also disclose any potential conflicts of interest.
- Establish Business Ethics stating that board members will not seek to have a contract implemented that has not been duly approved by the board or, as we sometimes see, will not promise anything not approved by the Board to any contractor, supplier, or contractor during negotiations. It is also important that board members refrain from interfering with the duties of the managing agent and any employees. Board members must not harass, threaten, or attempt through any means to control or instill fear in a representative of the managing agent or an employee.
- Explain and Define Requirements for Transparency and Confidentiality:
- Requiring the board to disclose all information about its actions through open meetings and by making readily accessible business and financial records required by state law including meeting agendas and minutes.
- The following matters discussed in executive or working sessions of the board will remain confidential:
- any matter the disclosure of which would constitute an unwarranted invasion of individual privacy;
- any pending or anticipated litigation or contract negotiations;
- any matters falling within the attorney-client privilege;
- any matter involving the employment, promotion, discipline or dismissal of a specific officer or employee of the association; or,
- any information to which the board member comes into possession prior to the board making a final, binding decision concerning the subject matter of the information. This includes discussions among board members at workshop or executive meetings or communications that take place through email or telephone conferences.
- No board member will make representations or communicate to the members on behalf of the board, without the approval of the board.
- Require Ethical Resolution of Differences. Differences of opinion on policy and procedure, whether between members of the board or with residents, should be addressed in a timely and courteous manner and discussed rationally on their merits with an emphasis on resolving differences. The governing board should treat all members even-handedly and without favoritism and ddopt due process and alternative dispute resolution policies to be implemented when differences cannot be resolved.
- Establish Disciplinary Action Procedures for violation of the policy. These may include asking members to leave a meeting in which a violation occurs, a probationary period, suspension, a public reprimand and fining.
Ultimately, a good code of conduct will provide members with transparency in governance, by setting forth guidelines for conducting meetings, addressing financial and business ethics, and dealing with disputes, all while ensuring the community that there are legitimate concerns and reasons for confidentiality.
If the policy is clear as to its need and purpose, residents are less likely to complain that the board is “keeping” information from the community or is otherwise not being transparent about their actions. A concise and clearly written code of conduct policy will typically disarm those residents who believe the board has an alternative agenda and may even go a long way towards fostering a sense of community.
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1. Community Association Institute’s pamphlet, “From Good to Great: Principles for Community Association Success” is the perfect resource to call upon in educating board members and residents alike, but it is also a great place to start when formulating a code of conduct policy.]↩