Courts have recognized that board members owe a fiduciary duty to their members, demonstrating the seriousness of these volunteer positions. Fiduciary relationships are governed by the statutory standards that require directors to exercise due care and undivided loyalty for the interests of the community.

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In layman’s terms, board members, who make decisions on behalf of residents, are legally obliged to use good judgment and make decisions for the community, not just themselves. 

While the specific duties can be debated, most familiar with them agree that board members must:

• Act in the association’s best interest
• Make informed decisions using all available resources
• Keep confidential matters confidential
• Use the highest degree of honesty and loyalty
• Perform within the scope of their authority

The word “ethics” is not generally seen when discussing fiduciary duties, but that doesn’t mean acting ethically is not part of a board member’s obligations.

Table of contents

• What does it mean to act ethically?
• Why ethics matter in community association leadership
• Do we need an ethics policy? Will it really make a difference?
• Key principles of ethical conduct for board members
• Encouraging ethical behavior in your community

What does it mean to act ethically?

Ethical behavior is making the conscious choice to “do the right thing,” even if you’d rather do something else.

Acting in the association’s best interest, or being honest at all times, are both examples of ethical behavior.

Ethics are part of good board conduct, even if it’s not explicitly written anywhere.   

Why ethics matter in community association leadership

Ethics play a fundamental role in building and maintaining a well-functioning community. When board members act ethically, they are more likely to gain the trust of residents, and in return, members are more likely to support their boards.

Trust is especially important in a condo or HOA since residents rely on the board to make the best decisions on their behalf. If members don’t trust the board, the community is far more likely to experience conflict and subpar productivity.  

Residents may even sue the condo or HOA if they feel that board members have not upheld their obligations. By prioritizing ethics, an HOA can avoid these pitfalls and create a community where everyone feels valued and respected.

Do we need an ethics policy? Will it really make a difference?

Adhering to a set of ethical standards can help board members, especially new board members, successfully fulfill their duties.

Communities do not need an ethics policy, but it can help to have one in writing. Some condos and HOAs may prefer to use the term “code of conduct” instead to make it more palatable.

A standard policy may assist with the following:

• Helps to maintain accountability
• Reduces conflict of interest
• Builds trust and respect between board members and the community

A code of conduct/ethics policy outlines the core principles that board members must honor, and helps them determine if they are doing anything that might bring their conduct into question. A policy will not make a difference for a board member who has no interest in doing what is best for the community, but it will offer some guidance to members who want to ensure they are making good decisions.

Key principles of ethical conduct for board members

To promote ethical conduct, policies or codes of conduct should touch on these key principles. You will notice that many of these principles overlap with fiduciary duties of the board.

Transparency 

Transparency involves openly sharing information about activities, finances, and decisions. This includes providing regular updates to other board members and residents, disclosing potential conflicts of interest, and ensuring that meeting minutes are accessible.

Posting records on a password-protected website or resident portal is an easy and effective way to share information with your community.

When it comes to conflicts of interest, board members must disclose any potential conflicts as soon as they become aware of them. When other board members become aware of the potential conflict, the situation becomes far less problematic.

Just because there is a potential conflict does not mean the board has to automatically abandon a project, budget, contract, etc. But the individual with the potential conflict has to disclose it before any decision is made, and abstain from voting on the matter, in order for the board to move forward without issue.

Accountability 

Board members should take responsibility for their actions and decisions. This means acknowledging mistakes, applying constructive feedback without responding negatively, and ensuring all board members adhere to processes and policies.

Fairness 

All residents should be treated equally. This means applying rules consistently, respecting different opinions, and ensuring that decisions are made without bias. This can be easier said than done if you have a lot of friends within the community. 

Confidentiality 

Board members are privy to sensitive information, such as financial records or health issues. It’s crucial that this information remains confidential and is only shared with authorized individuals when necessary. This requires board members to handle certain records with care.

Encouraging ethical behavior in your community

Promoting ethical behavior within a condominium or HOA requires a strong commitment from board members to uphold ethical standards. Through leading by example, residents feel more compelled to “do what is right” as well.  

As mentioned earlier, establishing a formal code of conduct or ethics policy can assist with this objective. A formal written document serves as a reference point for all board members, ensuring they are aligned with the community’s values and expectations.

The CAI has developed a model Code of Ethics for board members, which can be used and customized by condominiums and HOAs. The example cannot cover every potential ethical dilemma, but is offered as a basic framework that can be modified and adopted by any community.

Finally, regular training and workshops on ethics can be beneficial. By participating in training sessions for ethical decision-making, board members can navigate through real-world situations and better understand how to respond when faced with tough choices.  

Conclusion

Acting ethically is absolutely a part of a board member’s responsibilities. Though it may not be explicitly written anywhere, acting honestly, in good faith, and in the best interest of the community are all examples of ethical behavior.

It seems like a common-sense issue, but when you’ve got so many other things to think about, ethics can get pushed aside. Doing what is right may conflict with doing what is easiest. Remaining neutral towards an owner who has been criticizing your work all year is hard.

Conversely, taking a gift from an owner for a job well done may seem innocent enough, but if the gift is significant enough that it influences your judgment, that can be a problem. 

 It is during these tough times that having a code of conduct or policy can be most helpful.