Is the work the board member doing related to their being on the board, or entirely different like a plumber fixing a leak?

If it is related to work they do in their capacity as a board member, then I believe it violates the Bylaws or a NYC regulation, and should be brought to your board attorney's attention.

If they are doing work as a contractor or some other unrelated capacity, then it is a conflict of interest, but is allowed provided the conflict is fully disclosed to the rest of the board (not shareholders), a contract is signed that includes performance metrics and specifications, how the board member is being paid and is approved by a majority of the board. A complete description of the conflict and the vote must be entered into the board minutes. You might also check with your attorney.

We've had this situation in my building. A board member was a high-end renovation contractor. If we had a job that met these requirements he was allowed to bid on it. He had to recuse himself from all decisions to eliminate the perception of any inside influence.

Thank you for this.

It’s the President of the Board and to me it’s beyond inappropriate and a conflict. I think it’s like construction but I think it’s just him and not his team as if he owns a company so wouldn’t he need to follow the same rules and have a license and the co-op insurance needed as a vendor? If we have a construction company and plumber etc already why would one person be needed?

Sounds like a conflict of interest that would need to be reported to all shareholders:

https://www.nysenate.gov/legislation/laws/BSC/727

Once it has been reported, shareholders can discuss it and take any necessary action at the annual meeting.

I don't believe a board member performing work for the co-op or having a financial interest in a company performing work for the co-op is a "conflict of interest" and is certainly not illegal, provided all the qualifications are met:

* The business relationship of the board member to the entity performing the work is fully disclosed to the board before the contract is signed

* All regular procedures for hiring a company (i.e. competitive bids, references, licenses, etc) are followed

* The nature of the conflict and the results of the board vote are recorded in the monthly meeting minutes

* The conflict is reported to the shareholders in the annual report (thanks, Phil!).

Essentially the board has to be able to certify the board member and/or their company were treated exactly like every other contractor and the contract was awarded on the merits and not on the relationship.

Shareholders do not normally have the power to alter or override a contract or other action authorized by the board. The exception is to call a special shareholder meeting for the purpose of altering or overriding a board action or removing a board member. Your Bylaws should contain the rules and procedures for special meetings.

I think you have a much larger problem, and that is work requiring a licensed or master professional is being performed by an unlicensed individual. Not only can you receive hefty fines and other punitive actions by the Dept of Buildings, but it is also an out-and-out safety violation and hazard with your building and shareholders at risk.

Instead of worrying about a conflict of interest, you and your board should immediately look into the licensing requirements of the work being done by the president. If they do not have the proper licenses and required insurance in effect, the board, through your attorney need to have them stop immediately.

As always, check with the co-op's attorney before taking any action. I am not a lawyer, and my suggestions and advice are worth what you're paying for them.

Thank you both!!!!

Definitely a conflict of interest, unethical, and possibly illegal
Board members have fiduciary responsibilities example reviewing and discussing bids, and proposals are often times sealed too. They need to recuse themselves from doing independent work that if also done incorrectly can potentially lead to lawsuits against the Coop. Better to stay away from it.

Let's use an example from real life,

One of the members of my board owns a high-end general contracting business. He has a top-notch crew, works with good suppliers, and gets a steep contractor discount.

The co-op is renovating the super's apartment ford about $100k.

Question. Should the board member be excluded from bidding on the job simply because he is a board member? He's done a lot of work in shareholder apartments so the quality of his work, materials, and schedule adherence is well known.

Should he be allowed to bid on the renovation? He commits to recusing himself from all reviews and votes. His estimate is 25% below all others because he's not marking up the cost of labor or materials. He'll be able to start the job sooner because of the size of his company.

Which would be a breach of board fiduciary responsibility to the shareholders, paying 25% more for the renovation, getting lesser quality appliances and other hardware items, and having to wait an extra 3 months while the job is slotted in, or letting the board member compete for the job after a full conflict of interest disclosure?

This is not a trick question.

Since we have a conflict of opinions,I think the best course of action is to ask your co-op's attorney to render an opinion. Conflicts of interest are not an illegal thing nor even a bad thing. They become the stuff of lawsuits when the conflict is hidden or is not disclosed to the rest of the board.

It it patently unethical for a Board member to receive payment for services rendered to the Coop. You should send a copy of Coop Board ethics to each member and shareholders.