Director’s Code of Ethics
National Association of Housing Cooperatives
Editor’s Note: The NAHC
Board adopted this Code at its May 2002 meeting and each issue of
the Cooperative Housing Bulletin since then has highlighted
one of the articles. The code appears in its entirety below and
lists examples of what each article means.
Article
I.
A director has a duty of good faith and
loyalty to the cooperative. This means that:
a)
A director owes allegiance to the cooperative and must act
in the best
interests of the cooperative while acting in his or her
official capacity.
b)
A director should be diligent to ensure that the
cooperative’s interests are pursued during the meetings of the
board of directors.
c)
A director may not use the position for personal profit,
gain or other personal advantage over other member shareholders of
the cooperative.
d) A director is accountable to the member shareholders
of the cooperative for his or her official actions and can be held
personally liable for fraud or breach of fiduciary duty in the
conduct of the cooperative’s affairs.
e)
A director who exercises honest and reasoned judgment and
acts reasonably and in good faith for the best interests of the
cooperative will not be held liable for violation of his or her
fiduciary obligation to the cooperative. To carry out this duty,
here are some guiding rules to follow:
i)
A director should not discuss personal business during a
meeting of the board of directors nor advance his or her personal
interests while in official session at the expense of the
cooperative.
ii) A director should not make personal attacks on
other directors, staff or member shareholders while performing
official duties. Disagreements should be directed to the
disagreement, not the person who raises an opposing point of view.
iii)
A director may not accept commissions or rebates that
belong to the cooperative for his or her personal gain.
iv)
A director shall conduct his or her private life in a
manner that befits the dignity of a corporate director.
Article II.
A director has a duty to use care, skill, and
diligence when carrying out official acts. This means that:
a)
A director is required to act honestly and in good faith,
in a manner reasonably believed to be in the best interests of the
cooperative, and with the care that a prudent person in a similar
position would use under similar circumstances.
b)
A director should use his or her best efforts to keep
apprised of legislation or regulations that affect the
cooperative.
c)
A director should seek the advice of experts when making
decisions on behalf of the cooperative in areas of competence in
which the director has not been trained.
d)
A director must serve the interests of all member
shareholders impartially and without bias.
e)
A director must advocate that the cooperative comply with
applicable laws, codes, contacts, and agreements to which the
cooperative is bound.
To carry out this duty, here are some guiding
rules to follow:
i) A director is expected to make a diligent effort to
become trained and skilled in the business of cooperative housing
in such areas as finance, membership sale values, house rules,
governance, and oversight.
ii)
A director is expected to obtain a working knowledge of
laws that regulate the cooperative such as fair housing and
minimum code restrictions that affect the cooperative and its
operations.
iii)
A director is entitled to rely upon information and reports
presented by officers or other employees of the cooperative whom
the director reasonably believes to be reliable and competent.
Article III.
A director has a
duty to act within the boundaries of his or her authority.
a)
The authority of a board of directors is defined in the
charter and bylaws of the cooperative.
b)
A director’s authority is limited to those acts that are
transacted during the course of a duly called meeting of the board
of directors with a quorum present.
c)
A director may not act in an official capacity except in
the context of a meeting of the board of directors unless
specifically empowered to act by a majority of directors present
and voting in the affirmative at a duly called meeting.
d)
A director serving in official capacity may not violate
government laws that regulate the operations of the cooperative.
e)
A director serving in official capacity may not violate the
cooperative’s charter.
f)
A director serving in official capacity may not violate the
cooperative’s bylaws.
To carry out this duty, here are some
guidelines to follow:
i) The corporate charter received from the state defines the
business that the corporation can conduct. Its bylaws describe how
the cooperative will be operated.
ii) The board of directors is obligated to comply with the
bylaws of the cooperative. Member shareholders who may have been
wronged by the failure of the board of directors to comply with
the bylaws may have a case of personal liability against the
directors who violate the bylaws.
Article IV.
A director has a
duty to disclose every personal conflict of interest to the
cooperative.
a)
A director is required to make a prompt and full disclosure
of any material personal interest, either direct or indirect, he
or she may have in a transaction to which the cooperative is a
party.
b)
A director shall not vote on or participate in discussions
or deliberations on matters when a conflict is deemed to exist
other than to present factual information or to respond to
questions presented.
c)
A director shall assure that the minutes properly record
his or her abstention on any votes on matters for which a conflict
may exist.
To carry out this
duty, here are some guiding rules to follow:
i) A director who has disclosed a conflict should request
that the disclosure be recorded in the official minutes of the
meeting.
ii) A director may vote on an issue that benefits the
director if the issue is one that is decided for the general good
of the cooperative and the member shareholders. An example is
voting to replace windows. If the motion is to replace all
windows, you can vote. If the motion is to replace windows only on
your side of the cooperative, don’t vote.
iii) A
director may not use information learned about a member shareholder
during an official meeting as a topic of conversation with other
member shareholders.
iv) A director does not have authority to peruse files that
contain private information about individual member shareholders.
v) A director has a duty to protect the confidentiality of
information learned in the applicant screening process.
vi) A director must have a member’s consent to receive
confidential information about that member.
i) An individual director is not empowered to provide day-to-day
work instructions to staff unless clearly authorized to do so during
a meeting of the board of directors.
