Tuesday, October 16, 2007

First Draft of Conflict of Interest Policy

In addition, this conflict of interest policy will be discussed this evening. Please review and comment on this as well:

Nellie Gail Ranch Homeowners Association
“Conflict of Interest” Policy

The purpose for this policy is to address concerns relating to perceived “conflicts of interest” and to explain how the Board of Directors of the Nellie Gail Ranch Homeowners Association (“Nellie Gail”), a non-profit mutual benefit corporation, intends to function in the face of perceived “conflicts of interest” or “interested transactions” involving its Directors.

To begin, it is important to understand that the phrase “conflict of interest” is not something established in the laws governing homeowner associations. Rather, the law governing associations merely recognizes that certain procedures must be followed where a Director has a direct financial interest in a matter being decided by the Association, as discussed below.

Next, it should be recognized that Homeowner Associations differ significantly from a typical “for profit” corporation. As a practical matter, any transaction involving the Association is also likely to involve the personal financial interests of directors because Board decisions typically have an impact on the finances of all Owners.

Pursuant to the California Corporations Code (§7233(a)), a contract or other transaction between a corporation and one of its directors, or between a corporation and any corporation, firm, or association in which one of its directors has a material financial interest, is neither void nor voidable if either:

a) The contract is approved by the board of directors, after the interested director discloses the material financial interest to the board and if the interested director abstains from the vote; or

b) The contract is ratified by the members.

An interested director, although they must abstain from the vote, may be counted in determining the presence of a quorum at a board or committee meeting that authorizes, approves, or ratifies a contract or transaction. (Cal. Corp. Code § 7234.)

Because of the nature of an association, such as Nellie Gail, Directors will be required to participate in decisions that bear upon their lifestyle and personal choices, as well as their vocations and personal experiences. In fact, Nellie Gail looks to its Directors’ for their expertise in making such decisions in the best interest of the Association. Simply put, it is unavoidable that any Director of a common interest development will be impacted personally, simply by owning a home in that development.

As such, in an attempt to minimize any perceived “conflicts of interest” regarding its decisions, the Nellie Gail Ranch Owners Association Board of Directors does hereby adopt the following policy regarding “interested directors”[1]:

1. No Association Director shall make, participate in making, or in any way attempt to use his or her official position to influence an Association decision in which he or she knows or has reason to know that he or she has a direct financial interest which is distinguishable from the financial interest of the Members of the Association generally.

2. In those instances where a Director has a material financial interest in a matter presented to the Nellie Gail Board for approval, that Director shall:
a) disclose said material financial interest to the Board; and
b) abstain from a vote on the topic.

3. Nothing in this policy shall prevent a Director from participating in the approval of contract in which they do not have a personal financial interest, or prevent a Director from voluntarily abstaining on a vote for personal reasons.

[1] An “interested director” is involved in a transaction to which the corporation is a party and in which he/she/they has/have a material financial interest. (Cal. Corp. Code § 5233.)

5 comments:

Anonymous said...

I was unable to make it to the board meeting, but like this idea.

I would also like to see something about campaigning. There should also be full disclosure for anyone running for the board. More clearly stated:

Anyone with a fiscal relationship with any aspect of Nellie Gail Ranch, should be disclosed.

I do understand that we are not able to avoid some conflict of interest, when we all want this to be a better place. However, I think monetary gain should be addressed with any candidate running for office.

Anonymous said...

I really don't understand why this would not pass? How come the majority of the board members REALLY voted no on this?


Would you please respond here so that we can understand clearly the reasons you as a board member did not vote for this?

I also need confirmation that I have this correct:

Jan Curtis voted NO
Dr. Bob Bettey voted NO
Cindy Greengold voted NO

James Vaughn voted YES
Bill Enholm voted YES

I think that when almost every other HOA has a code of ethics, and our own attorney's have suggested our board members sign a code of ethics, there should be no problem.

Where is the resistance coming from?

Concerned Resident said...

To clarify: there was no vote on this. It is being brought back for discussion and hopefully a vote at the next board meeting. And Dr. Bettey and Cindy said they'd sign it, but think it is unnecessary. I asked that we not vote on it until the residents could weigh in on it. So use this time to review and send your comments to the HOA. Thx! Sorry for any confusion.

Rebecca said...

Thank you for the clarification. I think it is very important for all of us to be as accurate as possible.

Anonymous said...

When are we going to get back to this very important issue? We need this implemented by the board so they show good faith. If they do not want to do this it makes me think they have something to hide.