Whether it is regarding finances discussed in a board meeting, an unethical board member or the specifics behind a majority vote, a board member does not have a legal or fiduciary responsibility to speak out or express their opinion on matters pertaining to the association, according to David Byrne, an attorney with Ansell, Grimm & Aaron, PC in Princeton, New Jersey, and Chairperson of the firm’s Community Association Law Group.
At the end of the day, “There is no fiduciary duty to tell people something; there is a fiduciary duty to follow the bylaws and statutes and act in the best interest of the corporation,” he noted.
While he acknowledged that “one man’s breach of fiduciary responsibility is another man’s proper governance,” and that “the definition of what it means to fulfill a fiduciary reasonability is almost never cut and dry,” Byrne argued that there is no way to legally regulate a board member’s speech to determine if a failure to speak out could result in a failure to maintain fiduciary reasonability.
For example, if the board president makes an inaccurate statement about the financial status of a construction project at a resident meeting, and a fellow board member feels such status to be inaccurate, the board member does not have a legal responsibility to correct the record. “The other board member has no fiduciary responsibility to stand up and say ‘that’s wrong,’” Byrne explained. “There is no such legal obligation, and even if there was, there is no way to enforce that.”
He added, “I’m sure it’s debatable, because there is never total agreement on what is wrong and what isn’t wrong. Most things are subjective.”
Because it’s not easily defined, fiduciary duty is harder to breach than one may expect. “If you are a board member and your association is following the bylaws and the relevant statues with respect to your financial management, record keeping, and decision making, you can almost never be in violation of fiduciary duty,” according to Byrne.
However, if a board member consistently fails to speak up or express his or her opinion, it could still prove problematic. “Whether you’re re-elected is another question,” joked Byrne. “I suppose the board member may not be re-elected. That would be something pretty easy to put on a campaign poster.”
If a board member discovers the failure of a fellow board member to fulfill their fiduciary duty on a past issue that resulted in current financial harm to the association, a board member still does not necessarily have an obligation to report those circumstances to owners. “A board member only has an obligation to take action in the context of the organization,” said Byrne, who also noted that if owners participate in the meetings, they should learn of important issues naturally.
According to Byrne, while there is no law that a board member must inform owners if a fellow board member behaved unethically, they may be obligated to take actions — such as investigating how much money was stolen or determining if other people were involved. “Owners can certainly know about these things, but they will likely know about them because they came to a meeting. There is no fiduciary duty [for a board member] to report these circumstances to owners,” he said.
On the flip side, Byrne also discussed the fact that board members may choose to express their opinions to homeowners without fear of repercussions. Board members can almost never breach fiduciary duty by expressing their opinion, according to Byrne.
“Board members should resist the temptation to listen to people who claim that there are certain parts of board proceedings that are secret, that are so sensitive that they have to be confidential. That is rarely, rarely the case in an association context,” he said.
It is customary for a board to have a private meeting, then have a meeting with owners and residents. Yet, “Somehow, the belief was developed that whatever was said in the first meeting could not be shared with anyone,” Byrne explained. “There is not a requirement like that.”
“Even if there were to be a bylaw provision that mandated that anything said in a board meeting should be kept secret, state statutes might make that irrelevant anyway,” added Byrne, who noted that statutes vary from state to state. “I generally tell boards that any policy limiting a board member’s ability to share ‘confidential information’ is unenforceable.”