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McGovern’s Vision for CAI-NJ

Posted on Author By Francis J. McGovern, Jr., Esquire

The Community Associations Institute (CAI) is a national, non-profit organization dedicated to providing the education and resources necessary to foster vibrant, responsive, competent, community associations and helping them promote harmony and responsible leadership.

Community Association Volunteer Leaders (CAVLs), Community Managers, Community Management Companies as well as Business Partner members made up of professionals and service providers, rely on CAI as the definitive source for:

  • The most up-to-date information on association management and operations to keep communities on the leading edge
  • Best practices in the community association industry
  • Innovative educational courses centered on creative learning
  • Networking forums for professionals, service providers, managers and community association volunteer leaders

The following is the text of a speech given by Francis J. McGovern, Jr., Esquire at the New Jersey Chapter’s December 10, 2014 Chapter Retreat held at Clearbrook Community Association in Monroe Township, NJ.  The audience was composed of New Jersey Chapter volunteer leaders and staff.

Good Morning.  I usually speak extemporaneously but today there are a few specific points I’d like to make so I’m reading from a prepared speech.

Preliminarily, I’d like to thank the Board members and, in particular, Marie Mirra and Nina Stanton.  Marie and Nina are two women who have inspired me.

I also have to credit a young man named Roger Nicholson for many of the thoughts that are in my speech today.  Since the first day that Roger joined the Board, he has regularly reminded us of our mission.

I.  Our Mission.

CAI-New Jersey is dedicated to enhancing the quality of community association living, through education, legislative advocacy and professional development.

II. Our Money Comes From Us.

Although relatively small rebates come from CAI National, the lion’s share of CAI-NJ’s funds come from your and my pockets.

This has to be kept in mind when thinking about “what I get for my sponsorship money”.  What we, as sponsors, should “get” above all else is education, advocacy and professional development which is naturally more focused on managers and community association volunteer leaders.

Networking, business development, beach parties and golf outings are secondary benefits of doing well by doing good.  We do well by doing good.
III.  Managers and Management Companies are the Glue That Binds Us Together

Managers and management companies are the glue that binds us together.  We must educate managers.  When I say “we”, I mean CAI-NJ.

By the end of March, 2015, I would like the Board and its committees, with the help of former chapter leaders, to formulate and begin implementing a plan for getting as many CAI-NJ managers to the CMCA level as soon as possible.

I would like such planning to include CAI-NJ reimbursing successful CMCA candidates for all or part of their course and test fees.

For 2015, CAI-NJ’s Legislative Action Committee is requesting $48,000 in funds and the Political Action Committee is requesting $7,300 in funds. I support these requests.  However, CAI-NJ should also be spending at least that much on Manager Education and Certification.

I would like the management companies to support CAI-NJ in this effort by, among other things, allowing managers time off to take the required courses and sit for the required exams without using PTO time.

We must educate managers.  Without educated managers, we are failing association volunteers, members, vendors, professionals, developers and government.

At a time when CAI-NJ faces unprecedented competition for participants and sponsors from the likes of the Co-Operator, IREM, Large Scale Management Companies and In-house education, CAI-NJ must step up to its mission or become irrelevant.

Anyone can give a course, hold a trade show or publish a magazine.  It’s everyone in this room’s job to fulfil CAI-NJ’s promise of education and advocacy.  The business partners fund it, the management companies provide the personnel and the CAVL’s must demand it.

IV. You Are The Future of CAI-NJ

There has been much said recently about using the talents of our past chapter leaders.

The Board has responded by appointing Ron Perl to the ADR task force, voting to invite past leaders to assist various committees and modifying the speakers’ bureau rules to allow greater participation.  My understanding is that in the near future the board will also be revisiting committee membership limitations.

Not only will these initiatives tap our membership talent, it will increase the quality of CAI-NJ’s offerings whether they are seminars, events or publications.

That being said, you are the future.  You must support your committee, get the job done and get to this [the Board] table so that you can carry CAI-NJ’s mission of education and advocacy into the future.

Thank you.

Information on CAI-NJ membership may be found at www.cainj.org

Business Judgement For Board Members

Posted on Author By Francis J. McGovern, Jr., Esquire

The Standards Of The Business Judgement Rule

Board members have a fiduciary duty to the association/corporation and arguably directly to the individual members.  Fulfillment of this duty requires that the board members exercise utmost good faith.

In ordinary corporate matters, the ‘business judgment rule’ is the standard by which board action is evaluated.  The business judgment rule generally provides that, so long as the board members fulfill their duties of ‘care’ and ‘loyalty’ the board’s decisions will not be second-guessed by a court.

The duty of ‘care’ obligates the board to make their decisions only after ‘due diligence’ – after the board members have become reasonably informed about the issue at hand.  The board members may rely on experts such as engineers, architects, lawyers, accountants, contractors, etc. in fulfilling their duty of care.  The duty of ‘loyalty’ obligates the board to make their decisions for the benefit of the association/corporation rather than for their own benefit.  In the ordinary corporation, once the duties of care and loyalty are fulfilled, the board’s decisions, good or bad, will not be disturbed by the courts.

In associations, condominiums and co-ops however courts frequently graft a ‘reasonableness’ test on to the business judgment rule review.  Although often denying it, courts do in fact second guess association, condominium and co-op boards.  Courts ask themselves: ‘Assuming that the duties of care and loyalty were met, was the decision reasonable’

In your example, assuming a certain membership vote was required but was not obtained (which is likely since the board will not disclose the alleged vote results); the board is not fulfilling its fiduciary duty.  It is not acting in good faith.  It is not fulfilling its duty of care as it is not complying with the governing documents and is not fulfilling its duty of loyalty as it is pursuing its own agenda in spite of the governing documents’ membership vote requirement.

Be aware that, when considering the improvement you described, a super-majority membership vote is typically required rather than just a simple majority.  Regardless, the options are limited.  Typically one or more members will sue to enjoin the board from further action.  Court’s will issue such an injunction if the members can show that the members will be irreparably harmed in the absence of the injunction, the legal basis for the members’ claims is generally settled, the members are likely to ultimately succeed on the merits and the hardship that the members will suffer, if the project is allowed to go forward, will be greater that the hardship suffered by the board/association/corporation if the project is temporarily stopped.  Another, or possibly concurrent, option is the membership undertaking a board member removal vote.  Although the membership typically has the power to remove and replace the board members, this option is usually too cumbersome and time consuming to be used effectively in immediately stopping improper board action.

In addition to the injunction, the membership should also make the board members aware that, in knowingly proceeding without the required membership vote, the board members may be exposing themselves to personal liability.  This liability may not be covered by the Association’s insurance policy and the board members’ actions may take them outside of any exculpation provision in the governing documents.  Essentially, in not complying with the governing documents, the board members are generating unnecessary legal fees and risking having to pay their own defense cost and liability award if the membership proves damages.