A Board Member's Fiduciary Duty: What it is and How to Fulfill it
A board member's effectiveness in performing their voluntary duties directly affects the success of their association.
According to Wikipedia, fiduciary duty is “the relationship of trust and confidence between one in a position or power, dominance or authority and another who is dependent on that person’s decision making, or exercise of authority”. In other words, directors are expected to act in the best interests of their associations and its owners in a way that inspires confidence. Board members should not exploit their position of power for personal gain or advantage, and they have to make the right choices in situations where the responsibility to act in the best interest of the association conflicts with personal or emotional needs.
In day-to-day practice, fiduciary duty is expressed as actions that help the association achieve success. Practicing thorough communication, planning ahead, sound decision-making, delegating work, taking initiative, critical thinking and team work are all ways that board members can live out their duty. But just as the community benefits when board members make their fiduciary duty the center of their leadership, neglecting it harms the association.
If board members don't make their fiduciary duty a priority, that also comes through in their actions - they can't work together, they skirt the governing documents, and turn a blind eye to state statutes. The result is political turmoil, financial collapse and physical deterioration of the community because the board's lack of care for their fiduciary duty can lead to lack of effectiveness in their roles. It is in the breakdown of good management practices and the lack of skilled leadership that give rise to claims of breach of fiduciary duty.
Luckily, board members have access to a wealth of resources for helping them understand and meet their fiduciary responsibilities. Not only do community management blogs and newsletters regularly reflect expertise on this subject, but professional advisors such as attorneys, accountants, reserve specialists, engineers, architects, insurance brokers and professional community association managers are all ready and willing to help.
Below is a quick list to help you remember what comprises fiduciary duty so that you and your fellow board members can fulfill this obligation and lead your communities to success.
What Makes Up a Board Member's Fiduciary Duty?
- Utmost care. Board members are bound to a higher standard of responsibility.
- Integrity. Board directors must act with fidelity and honesty.
- Duty of full disclosure. Board members must be transparent with all material facts that influence decisions.
- Loyalty. No “personal agendas” or conflicts of interest.
- Duty of good faith. This requires board members to always act in the best interests of the association.
Joanne L. Willoughby, AMS®, CMCA®, PCAM®
Director of On-Site Communities
Director of Education & Training
Association Services of Florida