Subscribe for Daily Updates!
I'm wondering if anyone has heard of provisions in a Proprietary Lease, by-laws etc. that state that a Board of Director must resign if he/she puts his unit on the market?
I'm thinking this might exist, or it's possible to have an amendment/new by law legally written, and probably worth it for us.
We've seen several instances in our co-op history where someone is elected to the BOD and then uses their position to push their agenda- which often involves something that will help them sell their unit- both inside and outside their apt. (ie, painting common areas when other priorities exist or even "fixing" something walls inside their unit before re-pointing, which is the cause of damage, is finished..etc).
It seems to me that having a person on the BOD who also approve the buyer of their unit, would be a conflict of interest.
Bottom line, I think that someone serving on the BOD when their apt. is for sale could be bad news.
Thoughts anyone?
I believe the only legal requirement is that a board member be 18. And prohibiting a board member from selling during his/her term could be considered restraint of trade.
Check with your attorney.
In the meantime, try to recruit board candidates who have no personal agenda; make sure that all new board members understand the concept of fiduciary responsibility; create an ethics standard for board members; if all else fails, RUN FOR THE BOARD.
We have no provisions in our lease or by-laws requiring resignation if a sitting board member puts his or her apartment up for sale; however, I agree that such an action could easily result in a conflict of interest.
At the very least, a sitting board member that is selling must recuse themselves from any vote related to a purchase application or from any change in policy that could help or hinder their sale. Whether it can be required legally, I don't know - check with your attorney - ethically, a selling board member should step down.
Thanks for the response. From speaking to different folks it's apparent that having a by-law created stating that if any board member lists his/her apt. he/she must resign from the BOD is not out of line, and is actually a good idea. We're pursuing it.
In our ByLaws, only an owner can be on the Board. The moment a Board member sells -- he/she resignes. But as long as they are owners, they can be on the Board.
This is a very good ByLaw in that, years ago, we had problems with B/M's putting people on the Board who were not even owners. They actually put the President of our MangCompany on the Board.
AliceT
Hi
I hope that in Big business there is a little more ethical behavior than we amateurs who live in my particular building. Our BOD president actually failed to act on the recent quorum vote to raise maintenance until she was forced to direct it so. Why? Because she is 70 years old and the increase priced her out of our building. She's one of the people now selling, in fact. Living in this area is expensive, we all know, but we have a fiduciary duty to create an operating budget that can pay our bills. Some people just can't afford to live here and it's a very tough situation, especially for the elderly.
That's a good idea to ask them if they plan on selling but in the end, where will it get us if it's not enforceable?
The pet projects will already be done by the annual meeting...and damage done.
Agreed, it's ethical but another reader just wrote that they have changed their by-laws...of course, that doesn't mean pet projects don't happen and THEN they sell....but at least they won't be on the admittance committee when the magic moment arrives.
BTW I served for about 5 years. I think it's very important for people to serve. :-)
By the way, I think you may have misunderstood. "I can't imagine a law that prohibits a shareholder from selling his shares just because the other shareholders elected him to the board. " I'm not saying that if someone is on the BOD they should be prevented from selling shares, I'm saying that when they list their apt. they should be made to resign from the BOD.
There was no provision in our prospectus regarding this subject so the Board voted to put this in the by-laws....If a Board member LISTS their unit for sale, they must resign from the Board. Now there is no personal agenda and they can't interview buyers. Just in case you are wondering...if they take the unit off the market, NO - they cannot come back to the board automatically. They must submit to the Board all over again.
Hi past pres,
That's very helpful to know. I have seen that it could lead to conflict of interest when someone calling the shots wants to sell thier apt.
I'm going to rally the troups and see if shareholders will get on board for the amendment. It will have to come from the shareholders- the BOD will never go for it at this time- 3 or the 7 have their apts. on the market.
THANK YOU! Off I go to start some trouble. ;-)
Introduce yourself to other members of Board Talk! Log in below or register here.
Board Talk members who registered prior to March 9th, 2016 will need to reset their password.
I can't imagine a law that prohibits a shareholder from selling his shares just because the other shareholders elected him to the board. Big business would cease to function if that were the case -- corporations are governed by the same rules, whether the corporation is Citibank or your co-op.
It sounds like your coop's problem, in part, is in failing to ask candidates if they plan to sell during their term -- not that people wouldn't lie, and not that plans don't change -- and in part failing to find candidates to run against those you oppose.
At the next annual neeting, make a big deal out of board members' pet projects (but remember that what looks like a pet project to you may be an overdue improvement to others). Say that you want board members to resign when they sell.
These are ethical issues, not legal ones.
Better yet, run for the board yourself and show them what you mean by setting standards.
Thank you for rating!
You have already rated this page, you can only rate it once!
Your rating has been changed, thanks for rating!
Board Talk members who registered prior to March 9th, 2016 will need to reset their password.