What We Talk About When We Talk About Transparency

I spend many evenings every year attending annual co-op and condo meetings, and during the election phase of those meetings, I usually hear demands for better communication from boards to their shareholders and unit-owners.

This year, for example, I witnessed contested board elections in two separate buildings – call them Building A and Building B – in which the insurgent board candidates in both buildings ran on a platform attacking the incumbent board’s efforts at communication. The insurgents promised that if they were elected, there would be greater openness and transparency of the building’s operations.

From my experience, the board in Building A had actually done a good job of keeping residents apprised of building affairs, while the board in Building B was rather secretive and opaque. Since “communication” was the key issue in both elections, surely the incumbent board members in Building A were safe, and the board in Building B would get voted out, right?

Wrong! Several incumbent board members in Building A lost re-election, while the board members in Building B were all comfortably re-elected. It turns out that when board candidates and residents talk about “communication,” there may be more involved than meets the eye. In Building A, the issue lurking beneath the residents’ complaints was that a capital project was taking longer and costing a lot more than originally promised. It didn’t matter how often the board provided updates, because those updates kept bringing bad news. In Building B, everything was running smoothly, so the well-founded complaints about the board’s lack of transparency didn’t gain traction.

These results are not as strange as they may seem. Co-ops and condos are composed of people from all walks of life, but few of them have special training in building management. Those who may understand the prosaic and complex tasks that determine the success or failure of a board – such as hiring the right vendors or planning a facade project – may not be able to communicate those concepts to their neighbors in a formal setting. So it’s natural that board elections often revert to a simpler shared vocabulary, and “more and better communication” is a theme that is both easy to explain and hard to disagree with. The discontent in a building can be real and justified, but you may have to look beyond electoral rhetoric to fully understand it.

My advice for boards in light of this dynamic is twofold. First, get the fundamentals right. If you run your building in a safe and efficient manner, complaints about inadequate board communication are less likely to resonate, and more importantly, you will have fulfilled your primary fiduciary duty. Second, effective communication is still an important factor in selecting board members, even if it doesn’t always tell the whole story. Shareholders and unit-owners really do want to be kept well informed about the condition of their homes (and primary investments). Boards should take these concerns seriously and do such things as establishing a dedicated communications committee charged with providing regular updates to the residents, having board members actively engage with the building residents beyond their existing social circle and establishing adjunct committees open to non-board members. Holding regular town-hall meetings is also a good idea.

A board that communicates well results in residents who are better educated about the problems of building management, and better-educated residents will be more likely to elect candidates who promise – and deliver – more than just “greater openness and transparency.”

William D. McCracken is a partner at the law firm Ganfer Shore Leeds & Zauderer.