Managing Conflict of Interest

May 2020

Successful condo management requires support from management, staff, board and residents.  Should any individual or group place their self-interest above that of the community things go wrong.  Poor decisions are made, money gets wasted, and the corporation may be unable to pay for maintenance and repairs.

A potential conflict of interest is more than an accusation.  Some use it discredit individuals and influence decisions.  Any conflict of interest accusation should be based on information or knowledge that an individual is receiving some disproportionate benefit from their influencing a decision made by the board.  In the case of a director, the benefit comes from their voting in a particular way.  Most frequently it refers to some sort of compensation from a vendor providing product or service to the condo corporation.

It may be that a well-connected director knows who to approach for work required by the corporation.  The director may even be a shareholder or partial owner of the company.  So long as this has been disclosed to a condo board that determines no conflict of interest exists, that director can continue to participate in related discussions and decisions.

Committee members and residents may try to influence condo board decisions to financially benefit themselves by recommending particular products or services.  As with directors, this may not be a conflict of interest if those benefiting from the decision have fully disclosed the relationship.

When a conflict of interest exists among directors, they are expected to disclose the conflict and avoid voting on the matter.

It is a duty of the board to identify and avoid even the appearance of conflict of interest.  Money spent by the board, and decisions made by them, should not disproportionately benefit any director or other individual influencing these decisions.  The best way to ensure this outcome among directors is for them to recuse themselves from discussions and votes where a conflict of interest exists.  Ignoring any conflict of interest or potential conflict of interest is a violation of the board’s obligation to condo owners.

When a potential conflict of interest exists, the board should satisfy themselves as to its validity and proceed accordingly.