Siren Management: Accountability

THE BIG PICTURE

We manage a 125-unit building in Manhattan where two people recently were elected to the board for one reason and one reason only: to change the sublet policy. They were investors. The sublet policy had recently been changed so that there was a sublet fee of 25 percent a month, plus a limit of five years on sublets.

What these individuals didn’t understand – and it’s taken us quite some time to get through to them – is that you certainly can be on a board for your own reasons, but you have a fiduciary duty to all shareholders. What they have since learned is there are a lot of other things that need to be dealt with in a building. Whether they want to or not, they have to put in the time. The big issue that everyone has to understand when they join the board is that board service is not just about them. Board members can’t be myopic; they have a fiduciary duty to everybody.

This building is still very fluid. We have not changed the sublet policy. They are trying to do it, but it’s not an easy thing to do. It’s very much a split board. This is a building that has sponsor involvement, investors, and resident shareholders. These people are realizing there are major issues they have to face.

BE SMART

We’ve sat at some board meetings where we’ve brought things up: problems with the staff, and problems with the physical plant that they hadn’t thought about. They now understand that when you’re sitting there at the meeting, decisions must be made. More importantly, time must be put in. When they finally sat on the board, I showed them, “Look, we’re about to start an elevator renovation, and it’s going to cost us $180,000 and we only have $90,000 budgeted. We have to figure out the different ways to do it.” As they’ve sat on the board, they’ve begun to realize how much it takes to run a building. People are constantly amazed, no matter how often we send them a financial statement, how expensive it is on a day-to-day basis to run a building.