How to Make Good Governance Policies for Condo Boards
Policies may not seem like an exciting topic, but they are crucial to the success of any condo board. I divide policies into three areas: governance, financial, and communications. An earlier post described best practices in communication. In this post, I start with a brief overview of governance and then propose some governance policies that every condo board needs. The end product will be a condo board policy checklist that helps condo boards function more effectively.
What is governance?
Governance is too long to cover in detail in this blog, but some background is useful. The Institute on Governance (IOG) covers the topic thoroughly and even includes a short YouTube video. The IOG does not address condos specifically, but their work in Board and Organizational governance is relevant. The webinar that I gave for the Conference Board of Canada titled “Governance at Home; The Wild West of Condo Boards” specifically addressed governance for condos. Simply put, governance, for condos, is the process of steering and controlling the condo corporation. It gives the condo board tremendous power and authority that is constrained by fiduciary responsibility; the requirement that directors act in the best interest of the corporation and not their self-interest. Establishing good governance policies are the first step in guiding boards in the right direction. What governance policies does a board need?
Code of conduct
Every condo board needs a code of conduct that outlines how members of the board must act. This Code of Conduct is a good place to start and learn more about the need for one. For example, one required clause is that board members must not share privileged information outside of the board. Everything discussed during the meeting stays in the meeting and is not shared with a spouse, a neighbor or anyone else. Once a meeting is over, directors take off their board hat and put on their owner hat.
Conflict of Interest
Condo boards manage significant amounts of money. Avoiding conflicts of interest is harder than it seems even when the concept is well understood. A director who has a direct or indirect material interest in a contract or transaction must follow specific guidelines to disclose the conflict. In Ontario, the Condominium Act (Sections 40 and 41 of the Act, 1998 add link) describes a process for reporting conflicts in condominiums. Other jurisdictions likely have similar guidelines but check. Directors with a conflict must not be a part of the discussion or decision at the board meeting. Always err on the side of caution and disclose any possible conflict of interest.
But it is necessary if a director is going to prevent a conflict of interest from occurring. Making decisions in the best interest of the corporation is already challenging and making sure that no conflict of interest or appearance of one is present adds additional complexity. This article contains an excellent review on avoiding conflicts of interest.
Many condos install cameras in common areas like entrances and hallways before figuring out what to do with all the video that gets collected? Who can see it? How long is it kept? Imagine reviewing video that shows an owner doing something he might not want his wife to know about. Should directors see this video? Should future directors see this video? Who would be a better choice to review the video? Good policies are needed to protect residents’ privacy around their homes. I do not want the board to know who comes and goes from my home – it is not the board’s business to know this about me or any other owner. On the other hand, the police may be very interested in seeing a video that shows drugs being sold from a unit.
Likewise, sharing information by email is so normal that no one thinks about what to do with it in the long term? What happens to personal conversations between a director and an owner? What email address is used for the business of the board? What happens to the content of the emails in this account? What happens to an email containing the complaints about from one owner about another? What happens when the first owner becomes a director and gets access to these emails containing the complaints made against him or her? Are the decisions being made by email later recorded in the minutes? It is not an easy task to come up a policy that protects the privacy of owners while at the same time protecting the combined interest of the owners regarding security.
Condo boards need policies regarding rule enforcement. Some boards don’t enforce certain rules. If this is the case, the rule needs to be revised or eliminated. A good policy that establishes an annual review of the rules is ideal, but this frequency could be longer depending on the particular condo. Rules are easy to change, so update them rather than ignoring them.
Likewise, sharing information by email is so normal that no one thinks about what to do with it in the long term? What happens to personal conversations between a director and an owner? What email address is used for the business of the board? What happens to the content of the emails in this account? What happens to an email containing the complaints about from one owner about another? What happens when the first owner becomes a director and gets access to these emails containing the complaints made against him or her? Are the decisions being made by email later recorded in the minutes?
It is not an easy task to come up a policy that protects the privacy of owners while at the same time protecting the combined interest of the owners regarding security.
It would be great if boards used Robert’s Rules of Order for monthly meetings, but for most people, it is overly complicated and takes too much time to master. Robert’s rules are more applicable at an AGM when attendance is much larger, and the situation can get complicated quickly (as they often do at these meetings.) It is certainly helpful if some Robert’s Rules are used at monthly meetings as it gives Directors practice before their use becomes necessary at the AGM. I know that there are simpler rules of orders being used by various boards. Does anyone have experience with some of these?
These policies form the skeleton of any condo board’s governance policies. Coming soon is a post about how to create financial policies needed by condo board.
Do you have any suggestions for condo board governance policies or have a question about those listed here? Tweet us @BoardSpaceinc with #GovernancePolicies or leave a comment on our Facebook page.