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Your Questions Answered: Dispelling Myths & Misconceptions About Association Board of Directors

Recently, I have fielded questions about association operations, including several about what members of a Board of Directors are entitled to—and what they are not entitled to.  It became apparent that, on a broader scope, there may be some myths and misconceptions to dispel about voting and use of proxies, as well as the “perks” of serving on an association’s Board of Directors.

Is it true that the association president votes at Board meetings only when there is a tie?

No, it is not true that the president can vote only to break a tie. Since the president is a member of the Board, he or she has exactly the same rights and privileges as all other Board members have, including the right to make motions, to speak in debate, and to vote on all questions.  Thus, in meetings of a Board of Directors, the presiding officer may exercise these rights and privileges as fully as any other member of the Board.

Shouldn’t minutes of a meeting (whether Board meeting or association meeting) include a summary of the discussions held?

It is not necessary to summarize discussions at meetings. Minutes are a record of what was done at a meeting, not what was said.

Is it okay for a proxy form to have a “default” person to whom the proxy is granted?  Doesn’t that prevent people from naming the persons they wish to cast the vote on their behalf?

While it is not mandatory, it is common practice to draft a proxy which grants power to a pre-determined officer (often the secretary of the association, unless the person acting as secretary is running for re-election to the Board, in which case a different officer is named), but also allows the proxy grantor to name someone else if he/she so chooses.  Commonly, a proxy will grant authority to, for example, “the Secretary of the Association or ______ [insert name]” to act on the grantor’s behalf.  The grantor may fill in the blank with the name of the person to whom he wishes to give the power to act on his behalf.  (If the proxy form included only a default, without an opportunity to name someone else, that would be improper.) By including a “default,” the proxy is not rendered useless if it is simply returned to the association without a name written in the blank.  For associations that might have difficulty achieving quorum for annual meetings, the “default” allows the proxy to “count,” both for establishing quorum and for voting on matters that come before the membership at that meeting.

Can directors use proxies for Board meetings?

The vast majority of homeowners associations are governed by the Minnesota Nonprofit Corporations Act (Minnesota Statutes Chapter 317A).  Under Minnesota Statutes Section 317A.237, proxy voting is not permitted for board meetings.  This provision of the Nonprofit Corporations Act applies regardless of whether an association’s governing documents provide otherwise.

In cooperatives, proxies are not permitted for any meetings, including both Board meetings and membership meetings.  While absentee voting may be permitted for co-op membership meetings, it is not permitted for Board meetings.

Are Board members allowed to receive payment or other compensation for their services?

Many associations’ Bylaws provide that Board members/officers are not entitled to receive compensation except for reimbursement of out of pocket expenses. Reduced or waived assessments constitute compensation.  Some Bylaws allow for compensation if approved by the association membership.

However, receiving compensation voids the volunteer liability shield available under Minnesota law.  While most associations have directors and officers liability insurance coverage, that insurance may not cover all claims that may be brought against a Board.  So, even if receiving compensation over and above reimbursement of out-of-pocket expenses is permitted, it is generally not a good idea to offer or accept compensation solely for service on the Board.  (If a director also happens to be, say, an accountant, that person may receive compensation for providing accounting services to the Association.  The compensation is for the accounting services provided, not for the service as a Board member.)

On a more practical level, if people are unwilling to serve on the Board unless they can receive compensation, one can only wonder whether those people are serving for personal benefit (compensation received) or for the betterment of the community.  There is, after all, a reason they call it “serving” on the Board: directors perform duties for another person/organization.  If a person is “in it for himself” or the compensation, he is not acting for the organization.

Do Rules and Regulations apply to Board members?  Are Board members subject to fines?

Absolutely. All governing documents – Declaration, Articles of Incorporation, Bylaws and Rules & Regulations – apply to all Owners and residents of the Association.  Serving on the Board does not negate a person’s obligation to abide by the association’s governing documents.  In fact, Board members should be setting the example for other owners/residents.  If a Board member receives special treatment (e.g., waiver of a fine simply because he/she is a Board member), that sends a message to owners that Board members are “above the law.” In turn, owners may begin to resent the directors and/or begin to question their actions, potentially creating a dysfunctional or toxic environment.

Does any individual Board member have the right to have fines and/or late fees removed from his/her account without approval of the entire Board?

No individual Board member has authority to act on behalf of the Board (or association) without Board approval (as evidenced by a vote of the Board to delegate certain authority to a specific officer/director).  Not only does a director not have authority to unilaterally have fines/fees removed from his account, but that director should not participate in the Board discussion and vote on the matter.

So, what are the perks of being a director?

Typically, if one asks Owners who serve on an association’s Board of Directors what those Owners gain from serving on the Board, they will usually respond that:

  • they have a better understanding of the operations of the association
  • they have a better understanding of (and appreciation for) the amount of money and other resources it takes to operate a successful association
  • they have a better understanding of some of the hard decisions the Board must make to establish a reasonable budget and operate within that budget every year
  • they have an opportunity to learn about their community and their neighbors—and maybe even make a friend or two in the process

Most directors agree that these intangible benefits far outweigh the occasional adverse encounter or absence of compensation for time devoted to service on the Board.  For most directors, it’s not just about “putting in the time.”  It’s also about working to create a community that is pleasant to live in.

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