An association’s “board of directors” is comprised of persons elected to govern the common interest development. Because most associations are incorporated as nonprofit mutual benefit corporations, they are legally required to have a board to exercise corporate powers in the management of the association’s activities and affairs. (Corp. Code § 7210.) The boards of older, unincorporated associations are often defined as “boards of governors.”
Number of Directors
The number of directors that are elected by the association’s membership to serve on the board is typically established in the association’s bylaws. The number is often an odd number (in most cases, five (5) directors) in order to prevent dead-locked boards and tied votes.
Role of the Board
The board is vital to the effective operation and management of the association, as well as to preserving the property values of the association’s members. The primary responsibilities of the board are to: (1) manage the common areas, (2) enforce the governing documents, (3) manage the association’s finances, and (4) set policies to assist the operation of the association. These responsibilities must be performed “in good faith, in a manner such director believes to be in the best interest of the corporation and with such care, including reasonable inquiry, as an ordinarily prudent person in a like position would use under similar circumstances.” (Corp. Code § 7231(a); See also “Duties of Directors (Generally).”) For information on the authorities and powers typically afforded to the board, see “Board Powers & Authority.”
The board is entrusted with significant financial and operational responsibilities in managing the association’s affairs. Directors are therefore held to a higher standard—they are deemed “fiduciaries” with the obligation to act in the best interests of the association and its membership. (See “Fiduciary Duties of Directors.”)
The directors serve on the board as volunteers. The term “volunteer” is defined under Corporations Code Section 7231.5(b) to mean:
“…the rendering of services without compensation. ‘Compensation’ means remuneration whether by way of salary, fee, or other consideration for services rendered. However, the payment of per diem, mileage, or other reimbursement expenses to a director or executive officer does not affect that person’s status as a volunteer within the meaning of this section.”
As volunteers, directors may not receive a salary or other form of consideration (i.e., a discount in assessment payments) in exchange for their services. (Corp. Code § 7231.5.) A director may, however, be reimbursed for “actual expenses incurred…in the execution of the [director’s] duties” without affecting the director’s status as a volunteer. (Civ. Code § 5800(b).) An association’s bylaws and CC&Rs typically contain provisions explicitly prohibiting the directors from receiving compensation in exchange for their services.
- Corporations Code Section 7231.5. Liability of Volunteer Director or Officer; Business Judgment Rule.
- Corporations Code Section 7231. Duties of Directors; Liability.
- Corporations Code Section 7210. Corporate Powers Exercised by Board; Delegation.
- Civil Code Section 5800. Limitation of Director and Officer Liability.