QUESTION: What can be done about a board member’s inappropriate behavior at HOA board meetings?
by Sophie Haimof, Esq.
As a volunteer director on a board of a homeowner’s association, I imagine one has already been exposed to wild situations, and depending on one’s tenure, a director may have already grown accustomed to misbehaving homeowners. Regardless of the nature of the situation, as a director, you are legally bound to act in accordance with California law and enforce your association’s governing documents concisely and fairly because a board of directors must act in the best-interest of the association. But what does a board do when the misbehaving homeowner happens to be a director who acts inappropriately during meetings, bullies other directors, uses profanity and lashes out when decisions are made contrary to his or her position? What actions can the board take to prevent such action? The following is an overview of several options the board can exercise which may be necessary for the board to implement, in order to maintain order.
Censure. A majority of the board has the ability to censure, or in other words, formally reprimand, a director for inappropriate actions. There are specific instances in which censuring a director would be appropriate, including without limitation, disruptive actions at meetings, including shouting, the use of profanity, and engaging in personal attacks against fellow directors. Censuring a director would also be appropriate in the event the director breached confidences and/or fiduciary duties, interfered with association operations, engaged in inappropriate or improper behavior toward association employees or vendors, or failed to disclose conflicts of interest.
Once a board has decided that a censure is appropriate, the board should notice a hearing for the censured director. The censure should be recorded in the meeting minutes which should distinctly reflect the reasons why the director was censured. Boards should be aware that although a censure will indicate the board’s strong disapproval for the actions of the censured director, a censure will not act to remove a director from the board nor will it impair the censured director’s ability to attend board meetings or participate in board discussions and decisions, unless the censured director has been recused from a particular vote. A director should recuse himself or herself from a board decision to avoid a conflict of interest or other potential breach of fiduciary duty. All board members owe an association and its membership certain fiduciary duties. One of these fiduciary duties is the duty of impartiality. The duty of impartiality requires that directors carry out their obligations in a fair and consistent manner and directors may not favor or act with partiality to any homeowner. Thus, when a director has a personal interest in the outcome of a board decision, that director must recuse himself or herself from participating in any discussions and voting on such decision.
Request for Resignation. A majority of the board can also request that a misbehaving director resign from his or her position on the board. Oftentimes, if a majority of the board decides to censure a misbehaving director, and if the director’s actions warrant a request for resignation, the board will simultaneously request that the misbehaving director resign from his or her position on the board. Something the board should keep in mind is that, while the board can request that a director resign, the director is not required to resign. However, if a misbehaving director fails to resign, the board may seek removal of the director.
Removal. The board may have the ability to remove a misbehaving director; however, removal is appropriate only under specific circumstances, provided the association’s bylaws allow for it. Otherwise, a director can only be removed by the courts, if: (i) the director acts fraudulently or dishonestly; (ii) grossly abuses his or her authority; or (iii) breaches a duty. However, this would require the board to bring an action against the misbehaving director. Alternatively, a misbehaving director can be removed by the vote of the membership, with or without cause, if at least five percent of the members of the association call a special meeting to recall such director and obtain the requisite votes necessary to approve the recall. It is important for boards to note that a recall process can be financially burdensome for an association. A misbehaving director can be removed by the board, if the association’s bylaws provide that a director can be removed if the director ceases to be qualified to serve as a director. If your association’s bylaws do not include qualifications for directors and specific instances in which a director can be removed from the board without a vote of the homeowners, the association can consider amending the bylaws to include the same.
Although removing a problem director may be unreasonably difficult or impossible, a majority of the board can vote to remove that director’s officer position. Officers hold their office at the pleasure of the board and can be removed by the board at any time with or without cause upon a vote of a majority of the board. This would eliminate the problem director’s officer designation (i.e. President, Secretary, Treasurer, etc.) and reassign that role to another director. Removed officers remain on the board of directors as a “Member at Large”, meaning they are now a director without any particular officer designation. Although not a complete solution to the problem, many times it is the officer role which causes a director to overstep their bounds, and this action can often go a long way to reigning in a rogue director’s actions.
Executive Committee. In carrying out any of the aforementioned disciplinary actions, it may become necessary to form an executive committee to exclude a misbehaving director from participating in certain discussions regarding the discipline of or litigation against such director. California law allows a majority of the board to elect to create an executive committee, consisting of at least two directors, to serve at the pleasure of the board. Only directors may be members of an executive committee. An executive committee should be formed to preserve any attorney-client privilege and confidentiality.
The board can undertake any of the foregoing options in disciplining a misbehaving director, if appropriate. But what can the board do to prevent situations like this from occurring again in the future, if a misbehaving director is elected to the board? The association should review its current governing documents and if the association does not currently have an ethics policy and member code of conduct in place, the board can consider adopting one. A code of conduct and ethics policy can be drafted to apply to both directors and committee members and can provide that directors must act in conformity with certain standards, for example, all members must treat fellow directors, homeowners, management and vendors with respect. The code of conduct and policy can also require directors to acknowledge their acceptance of the terms set forth by requiring the directors to sign a commitment pledge. It is important for associations to have the proper enforcement provisions in place in order to run efficient meetings and maintain order on the board and within the association.
Sophie Haimof is an attorney with Roseman Law, APC. Ms. Haimof represents common interest developments in dealing with all their transactional needs, including the creation and amendment of governing documents, contract negotiations, corporate governance and compliance with Davis-Stirling Act.