Among a board of directors, it is not unusual for individuals to hold different viewpoints and engage in a healthy debate on matters concerning the association. Occasionally, however, differing opinions result in a director attempting to undermine the decisions of the Board as a whole. For example, when a director leaks information to the membership to try and generate support for his or her position on a matter. This type of behavior by the director is a breach of his or her duty of care to the association. The association operates by a democratic process where a majority vote controls. This means that directors are required to respect the board’s decisions, even if they voted differently than the majority on a particular matter.
Duty of Care
When confronted with this type of issue, the remaining directors should attempt to amicably resolve the matter by confronting the rogue director and engaging in candid conversation regarding the director’s actions. The board should remind the rogue director of (1) the statutory duty of care that is imposed on every director of a non-profit corporation in Georgia, and (2) the potential consequences that could result for failure to comply with such duty. This will hopefully cause the rogue director to refrain from taking further actions to disrupt the decisions of the majority. The board may also need to remind the director that if he or she cannot refrain from acting contrary the majority’s decisions, it may be best for the director to resign from the board. Going forward, the former director can participate in the association’s affairs as an individual owner, as opposed to a director on the board.
Code of Ethics
In order to avoid incidents with rogue directors, the board may want to promulgate a code of ethics by which the board will operate. A code of ethics will outline the standards of conduct and require confidentiality for any privileged information that a director is privy to while serving in his or her capacity as a director. A code of ethics should also specify the enforcement measures available to the association should a director fail to abide by the code. In order to enact a code of ethics, the board should pass a resolution or amend the association’s bylaws. If enacted by resolution, each director or officer should sign the code of ethics in order to be bound by it. Please note, however, that a code of ethics is simply a method of memorializing the directors’ existing obligations to the association. In other words, under Georgia law, the directors are already required to uphold their duties to the association regardless of whether they sign a code of ethics.
Finally, if the rogue director continues to act contrary to the majority and refuses to resign, it may become necessary for the association to pursue other remedies available under Georgia law. This may include a vote to remove the director, or, in a more serious situation, seeking a temporary restraining order against the director. No matter what the situation is, it is best for the association to address the matter as soon as possible to avoid any future harm or liability as a result of a director’s improper behavior.