director

When board directors have ‘skin in the game’

Boundaries key for industry professionals who volunteer in their own condos
Monday, September 10, 2018
By Marc Bhalla

Many condominium communities aim to leverage the professional experience of their directors. Matching a director’s role with their expertise makes sense. If, for example, a member of the board has an accounting background, the treasurer’s role would seem a better fit for them over someone without relatable knowledge to bring to the position. Many prospective directors share their resumes in the course of running for election to highlight how they may be able to apply their professional experience to contribute.

What happens, however, when a prospective director has not only professional experience to offer, but professional experience in the condo industry? Are there additional benefits to the community, or drawbacks?

An uneven playing field

An advantage of having someone with ties to the condo industry serve on the board is that they can bring to the role understanding, connections and experience. No longer is the community limited to its property manager’s Rolodex. Camaraderie among directors at the board level can include a heightened sense of understanding with the director’s condo experience available to draw upon.

While there may be risk of stepping on the toes of property management, many managers express appreciation for working with directors who have condo-industry ties, citing their understanding as being helpful to staying on track at meetings and their connection base to offering an additional check and balance in decision making.

While the ties a director may have to the condo industry outside of their own community can offer benefits, they give rise to hurdles as well. Other directors may put the “industry insider” on a pedestal — granting them more control than they should — while others may grow wary of a hidden agenda. In either instance, the board risks moving away from the mindset of all directors being equal, which can be problematic.

Giving back or taking?

Serving as a condo director can have a polarizing impact for an individual within a community. It is not possible to please everyone. While some will appreciate the effort, it is only natural for directors to make enemies politically. When a director has ties to the condo industry that extend beyond the community they serve, it can be all too easy for someone to allege a conflict of interest, ulterior motives or self-interest guiding board decisions they oppose. This can be exacerbated when there is misunderstanding about the impact the decisions of the board has on the director’s life outside of the community.

What’s in it for them? Almost every condo director at some point is either asked or poses this question to themselves. Serving on a condo board can be thankless. Why would someone want to do it? Mistrust can easily be formed when this is not clear.

However, when a condo industry expert is personally invested in a community, would it not make sense for them to be tempted to give back? Some may feel an obligation to do so, if not for the collective benefit of all owners, to at least protect their investment.

A director is just a director

A challenge for anyone with expertise to be leveraged in the boardroom is the risk that they will be viewed as a free, in-house option for guidance in place of paid, professional help. For example, a lawyer serving on the board may be asked to provide legal advice to save the condo money. While free legal advice is often as valuable as what is paid for it, the protection offered to directors from attracting personal liability by relying on a qualified professionals under Section 37(3)(b) of the Condominium Act is hampered when the professional opinion comes from a board member.

While a condo community may be able to benefit from the insight of a condo expert serving on their board, it can be very important for the rest of the board — not to mention the director themselves — to appreciate their role in the boardroom and work within it. Returning to the example of a lawyer on the board, such a director may most appropriately contribute by helping determine when it may be appropriate to obtain a legal opinion rather than provide one personally.

Professional fallout

While some may wonder if the condo expert director could gain professionally from their role on the board, it would be a mistake to ignore what they have to lose. Consider a board that decides to terminate property management. While the average director may care less about the outgoing management company, a director with ties to the industry may face professional backlash if the outgoing manager is upset about their departure.

To manage this — as well as to address perceptions of gaining professionally from board decisions — many condo industry experts who serve on boards excuse themselves from taking part in awarding major contracts. They can assist in identifying appropriate candidates for consideration, and leave the determination as to which one to go with to the balance of the board. This does not entirely prevent the risk of backlash, but it’s one way of allowing a condo to leverage industry expertise while ensuring that the community alone is considered in coming to a decision.

While some do not like the notion of a director who is hesitant to fully contribute as a result of external factors, others see great value in what the condo expert director brings and considers steps they take to manage perceptions of conflict as a small price to pay for it. They view the director helping to identify capable prospective service providers as comforting.

The delicate balance

There is no question that there are complications when a condo director has ties to the industry, yet communities served by such directors can benefit greatly from their contribution. There are many ways to allow the community to leverage such expertise without crossing lines, but it’s important to establish boundaries to ensure that the contribution of an expert director is made appropriately.

Marc Bhalla Hons.B.A, C.Med, Q.Arb, MCIArb is a mediator and arbitrator who focuses his practice on condominium conflict management. He draws on his experience as a former condominium director to help troubled boards navigate internal conflict and otherwise applies his personal condominium experience to empathize with his clients. Marc can be reached at [email protected]

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