A Code of Conduct describes the expectations of board members during, and in some cases after, their service to the community. While many of the issues addressed are already codified by Arizona law, adoption of a written, signed Code of Conduct provides a tangible framework for board members to reference and follow in furtherance of bettering the community and working towards common goals.
The following are some of main reasons for your Board to consider adopting a Code of Conduct:
• Fiduciary Duties: A Code of Conduct will often include an explanation of the fiduciary duties that each board member is required to abide by, including the Duty of Care, Duty of Loyalty and Duty of Confidentiality (which extends beyond service on the Board). By adopting a Code of Conduct that includes fiduciary duties, each Board Member is more cognizant of their obligations, and more likely to exercise care & diligence, act in the best interests of the community, exercise sound judgment and protect confidential information.
• Conflicts of Interest: A Code of Conduct will often explain the procedure for identifying and handling an actual or potential conflict of interests that may arise. For example, if the Board obtains 3 bids for landscaping services and 1 of the bids was submitted by a board member’s spouse, the board member should declare that conflict in an open meeting prior to the Board voting on the matter.
• Orderly Meetings: A Code of Conduct will often establish procedures for orderly board and membership meetings, along with expected behavior by board members to ensure that disagreements amongst the Board do not become counterproductive.
• Compliance with Governing Documents: A Code of Conduct will often codify the board members’ obligation to enforce and comply with the Governing Documents. Have you ever heard the one about the CPA who failed to file his own taxes? If Board Members are not practicing what they preach by paying assessments and complying with use restrictions, it can seriously undermine the Board’s attempts to pursue non-board members on those same grounds.
• Board Conflicts: In the event that there is conflict between/amongst board members, a Code of Conduct may potentially provide a road map to resolution.
If your Board is considering adopting a Code of Conduct, please contact Mulcahy Law Firm, P.C., for assistance.