Reading the applicable provisions of the association’s bylaws and these statutes will help each member of the board of directors understand his/her power and authority. Yet, these documents will not tell a member of the board how to successfully navigate the board of directors’ relationship with its managing agent. Too often, it is forgotten that these two important players on the management team are not playing an independent sport. While there are distinct roles to be performed by the board of directors and management, their relationship is interdependent. After all, theirs is a principal-agent relationship. The board of directors is the principal who engages the managing agent (the agent) to act on its behalf in a specific situation — the day-to-day operations of the association. The scope of the engagement is defined by the terms of the parties’ management agreement. Like the above provisions of the association’s bylaws and Illinois law, the terms of the management agreement give the board of directors and management a general understanding of each party’s role. Yet, to really understand the role of each, it is critical for the board of directors to remember that it owes a fiduciary duty to its members, and it must communicate.
The Ultimate Duty of the Board of Directors
A fiduciary duty is a legal obligation that requires one to act in the best interest of another. A fiduciary is a person who acts as a trustee, has a duty to act primarily for another’s benefit, manages money or property, and must use a standard of care based upon trust and confidence. As part of this duty, the board members owe a duty of loyalty to the association. In addition, they must avoid self-dealing and conflicts of interest. Further, they must act with a duty of care. This means that they must educate themselves on issues and make informed decisions. These duties must be kept in mind as the members of the board fulfill their duties and responsibilities. It is also imperative for the members of the board of directors to remember at all times that this fiduciary duty cannot be delegated to someone else. So, even though the management agreement may delegate specific duties to the managing agent, the members of the board of directors remain fiduciaries of the members of the association. Accordingly, it is imperative that the board of directors effectively communicates with the managing agent.
As with any relationship, communication is a key component of the relationship between the board of directors and management. Communicating effectively with management helps the board of directors meet its fiduciary obligations. Further, communication is what ensures strategic alignment. Likewise, understanding the pillars that ensure the board and management remain in sync is key to the board of directors and professional management relationship and to ensuring each player understands its role on the association team.
36 | COMMON INTEREST®
The Day-to-Day Role of the Board of Directors
Arguably, one of the most important roles for the board of directors is to make decisions. The board of directors will also adopt policies and procedures for the association. The board of directors must also be ready to:
1. Adopt appropriate budgets. 2. Attend meetings.
3. Be prepared for the board meetings by reviewing information in advance and asking questions as needed.
4. Run the association like a business.
5. Be familiar with the terms of the association’s declaration, bylaws and rules and regulations. 6. Enforce the association’s restrictions. 7. Provide oversight.
8. Serve the community as a whole (not just a selective few).
9. Avoid improprieties and self-dealing.
10. Respect the decision of the majority of the board and not act on his/her own.
11. Communicate the expectations, goals and priorities of the board to management and the community.
The Role of the Managing Agent
The decisions and adopted policies and procedures by the board of directors will then guide and direct the managing agent, who assists in the performance of the association’s day-to-day functions. But what does that really mean? As previously stated, what duties the managing agent must perform are dependent on the terms of the parties’ contract. Yet, typically, it means that management will:
1. Execute the board’s directives.
2. Communicate with the members of the association on a regular basis.
3. Communicate with the members of the board of directors.
4. Collect assessments. 5. Pay association expenses.
While these are common functions performed by a managing agent, in order for management to successfully perform these tasks, it is imperative for the board of directors and management to discuss the board’s expectations. That is, in addition to making decisions, as noted above, the board must communicate to management its goals and priorities. These can change as the members of the board of directors change. Hence, management must be certain it understands the board’s expectations for key day-to-day functions. After all, management is on the team to act on behalf of the board of directors. The following are questions that help a manager understand the board’s expectations so that he/she can successfully fulfill his/her role:
• Summer 2026 • A Publication of CAI-Illinois Chapter
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