A Board Code of Conduct – Good Idea or Bad Idea?

By Beth Mulcahy, Esq.

I am often asked whether a board member code of conduct is a good idea or a bad idea. It really depends… Some boards need a code of conduct to clarify appropriate and not appropriate conduct by board members. Other boards don’t seem to need or want a code of conduct. Unless an association’s documents state that a board member is required to sign a code of conduct, an association cannot require a board member to sign a code of conduct to serve on the board.

Set forth below is an example of a code of conduct focusing on a board member’s fiduciary duty to the association:

As a member of the (insert association name) board of directors, in accepting a seat on the board, and in agreeing to serve as a member of the board, I hereby acknowledge that my position on the board places me in a fiduciary relationship with (insert association name) and obligates me to carry out my duties with care, loyalty and confidentiality.

Duty of Care:
In exercising the duty of care, I will make an honest effort to render an informed decision with respect to each issue that may come before the board. I will exercise due diligence in being familiar with the association’s governing documents and established procedures and will make a reasonable attempt at all times to understand the issues and options brought before the board. I will use good judgment in acting on behalf of the corporation.
Duty of Loyalty:
In exercising the duty of loyalty, I will refrain from taking actions that are contrary or detrimental to the interests of the association. I will not conduct myself in any manner that conflicts with the interests of the association and/or has the likelihood of causing damage to the association and/or its members. I agree to be bound by the standards of conduct for directors of a corporation, as set forth in association bylaws and the Arizona Nonprofit Corporation Act, A.R.S. § 10-3830(A), which requires that I discharge my duties as a board member in good faith, within the scope of the authority given me under the governing documents and statutes, and with the care an ordinarily prudent person in a like position would exercise under similar circumstances.
Duty of Confidentiality:
In exercising the duty of confidentiality, I acknowledge that information may come into my possession as a board member that has proprietary, confidential or privileged status, whether the information is communicated in verbal or written form. I agree to maintain the confidentiality of all information provided to me and agree not to disclose proprietary, confidential or privileged information to anyone outside the board without the prior written authority or approval of the entire board of directors.
The date and signature should follow.

A code of conduct can be changed to reflect any special circumstances that may be facing a board. Please contact Beth Mulcahy, Esq. if you’d like to discuss implementing a code of conduct for your Board.

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3 Responses to A Board Code of Conduct – Good Idea or Bad Idea?

  1. Chris Oppen says:

    I believe that this is a great idea for the Board of Directors. It can hold a Director to a higher standard of doing their job and it also helps to keep “Bad Behavior” of a Director at
    bay. It gives the Board a way to say to that Member that they signed the “Code of Conduct” and agreed to adhere to it at all times, and to use it as a tool to get the Member back on track. Sometimes we need to be reminded that we are in this position of Trust, to take care of the Association Assets and Common Areas, and that as a Board we are supposed to work together for the sole purpose of the Association. If it is not in the By-Laws then it needs to be amended into them and made a requirement to being on the Board. Or possibility it can be discussed and voted on in an Open Meeting and agreed on by the Board of Directors and signed and put into the files. No matter the way it is put into place, I believe it should be an important part of
    what any candidate needs to consider before running for the Board.
    Regards,
    Chris Oppen Secretary lpehoa

  2. Stu Sauter says:

    ARS 10-3830 also states:

    10-3830. General standards for directors
    A. A director’s duties, including duties as a member of a committee, shall be discharged:
    1. In good faith.
    2. With the care an ordinarily prudent person in a like position would exercise under similar circumstances.
    3. In a manner the director reasonably believes to be in the best interests of the corporation….

  3. Bill Cullen says:

    Question: Although the documents usually don’t require a Board member to sign a Code of Conduct, if they do so voluntarily, is it enforceable?
    We have one at a property that if violated, requires the Board member to step down.
    The Governing Documents do not have any such language.
    Now, we have a Board member who has violated the Code she signed.
    What happens now?

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