An Excerpt from
101 Ways to Improve Your Cooperative
A Law Primer
By: Randall A. Pentiuk, Esq.
CHAPTER ONE: FIRST EDUCATE YOURSELF
These suggestions are for new Board members and serve as a refresher for seasoned Board members, to prepare you for serving most effectively. Incumbent Board members should pay attention to them in order to be helpful to new Directors.
1. Compile all the important documents you need to know and have handy. These include your bylaws, articles of incorporation, any HUD agreements, the Management Agent agreement, the current budget, the last audit report and the Auditor’s management letter. Put into a binder and take to the Board and
Membership meetings for reference.
2. Make sure you have the current documents. It is amazing how many Boards do not know which documents are current. Ask your Management Agent, senior Board members, the Cooperative Attorney, and perhaps even HUD, to make sure. This is critical.
3. On that same note, insist on dating the pages of every such document. Demand that the office maintain a binder of the critical documents (dated, of course), and that there is a second binder kept in the off-site storage (as discussed later) for back-up purposes.
4. Familiarize yourself with the documents in your binder. Gain an awareness of the critical provisions, especially in your bylaws such as quorum, voting requirements, ways of calling meetings, duties of the various Officers, powers of the Board.
5. Join and attend the “trade associations.” These include the Midwest Association of Housing Cooperatives (MAHC) and the National Association of Housing Cooperatives (NAHC). Go to the classes and network with other Board members who can become resources. Visit the exhibition hall and buy the materials. Visit the websites:
MAHC – http://www.mahc.coop/
NAHC – http://www.coophousing.org/
We have one for National Cooperatives http://nationalcooperativelawcenter.com /and contains our course materials, primers and other pertinent legal information.
6. Adopt the “corporate” mind set. Realize that you are part of a Board that, just like General Motors, oversees a multimillion dollar operation. Train yourself to think “big.” Consider that your job is vitally important. If you don’t do it, it won’t get done. This isn’t about your personal agenda; you now need to think about the cooperative community in general. Learn what it is to become a fiduciary. You are one now, and owe a fiduciary’s duty to your membership. If you breach it, you may be personally liable to your members.
7. Learn the “business judgment rule.” This legal doctrine gives you immunity from liability for your actions as a Board if you sought and obtained advice from professionals such as the Cooperative Attorney, Auditor, and Management Agent. It also is a doctrine used by the Courts to avoid second-guessing Board decisions.
8. Understand that you are a just a member of the Cooperative except when your Board is in session. That is your only authority. Avoid the temptation to throw your weight around. You don’t have the right to issues directives on your own. It is the Board that acts, not you.
9. Learn that what happens in the Board room stays in the Board room. You are charged with maintaining confidentiality. You will be exposed to much personal information about members, and sensitive information that could harm the cooperative if it was released to the wrong people. Keep your mouth shut shut and any Board materials under lock and key.
10. Familiarize yourself with the basics of parliamentary procedure. Buy a copy of Roberts Rules of Order. Take my classes at MAHC and NAHC. Know these fundamentals:
Making a motion
Modifying a motion
Protocols during the meeting
Reconsideration of defeated motions
Right to dissent
Making an objection
11. If you are elected to an office on the Board, know your job. First, examine the job description in the bylaws. Then get specialized training at the MAHC and NAHC conferences. Ask for guidance from your Cooperative Attorney and Management Agent.
12. Know the roles of the professionals. Remember who the boss is. Your Management Agent works for the Board. The Cooperative Attorney and the Auditor also work for the Board. They do not work for the Management Agent. If that is not the case, get rid of them.
13. Understand how the Board is organized. Read the bylaw section on how officers are selected and realize that the officers serve at the pleasure of the Board, meaning that you can hold an election whenever the majority of the Directors decide.
14. Selecting Officers on the Board must be based on their qualities, not popularity. Someone who is not good with finances should not be the Treasurer; someone who is not good with record-keeping should not be Secretary, and someone who cannot lead should not be President.
15. Generally speaking the Officers can be removed from office by the Board, but the Directors cannot; only the members can remove Directors. But the Board may censure bad behavior and may also call for a special membership meeting to remove a Director.
16. Find out if there are any “automatic” removal provisions in your bylaws. Some provide for the automatic removal if a Director is late in paying carrying charges.
17. Conflicts of interest must be dealt with openly and above reproach, not secretly. If there is a real or perceived conflict, the involved Director is to abstain from discussion and voting. Seek legal advice when in doubt. Remember you are protecting the integrity and reputation of the Board.
18. The Board policy book should exist, and every Board member should have one. This records each policy decision ever made by the Board since its inception, arranged by topic and the date of the minutes where decided. It is a guide to the past, designed to avoid having to repeat decisions. It spells out matters such as how business is to be conducted. Few Boards take the effort to do this, so you end up relying on short term memory or rehashing decisions. Topics may include the way per diem for conferences are determined; which meetings are open; how many meetings will be held in a year; election procedures; employee benefits and compensation; employee bonuses; and the like.
19. A major responsibility of each Director is to see that he or she continues to be educated. MAHC now has a special program for Director training, designed to help you keep current on new challenges and developments. In fact, at the recent MAHC Board retreat, we decided to enhance every possible way of fulfilling the educational component of what we do – so look for better newsletters, a more resourceful website, improved classes and additional training materials.