Board Confidentiality:
Both A Requirement And A Responsibility
The Standard of Care: “Every Director and every officer of a corporation in exercising the powers and discharging the duties of office shall (a) act honestly and in good faith; and (b) exercise the care, diligence and skill that a reasonably prudent person would exercise in comparable circumstances.”
This would include maintaining strict confidentiality respecting all matters discussed by the Board of Directors at the Board of Directors’ meetings and/or at any other time that a Director is acting on behalf of the Corporation.
Sadly, too often, Board matters escape from the Board Room and end up within the ears of other owners, contractors, etc. who may or can interpret the information received to something that totally does not resemble the matters discussed at the Board meeting.
Without question, Board confidentiality is a serious responsibility, which, under no circumstances whatsoever, should be deviated from.
“Directors have an obligation and a requirement to act honestly and in good faith. Not respecting Board confidentiality puts the entire Board at risk”
Just recently, all Board members present at a Board of Directors’ meeting wholeheartedly agreed to confidentiality regarding an extremely serious matter that was to be decided and acted upon once a solicitor’s opinion had been received. Immediately subsequent to the Board meeting, this information was circulated through the building, resulting in unrest and the need to call a Special General Meeting.
On another occasion, we attended a Board of Directors’ meeting and discussed with the Board the Corporation’s current aged receivables listing. The very next day, an owner approached me and asked, why are my arrears now a known fact throughout the Corporation? The only way that this information could have become public knowledge was that a Board member, for whatever reason, decided to expose Board confidentiality and publicized this owner’s unfortunate situation. This was an extremely embarrassing condition, and we could only apologize profusely to this owner for this shortcoming.
At numerous times there are matters of strict confidentiality that are discussed at Board meetings. Decisions are made at Board meetings by the Board of Directors, and the disclosure of the results of those decisions should be officially released by the Board as a whole through a Communique from New Leaf Properties, and not by any one Director in formats of their choice. Official communication is of importance, not just “I think we discussed and decided that…” which is an easy means of communicating misinformation as opposed to fact.
It is extremely important that at the outset of each term of the Board of Directors subsequent to an Annual General Meeting, each and every Board member sign a Directors’ Code of Ethics.
Breaching the Directors’ Code of Ethics not only puts the Board member in question at risk, but the entire Board as a whole. Remember, Directors have an obligation and a requirement to act honestly and in good faith. Not respecting Board confidentiality puts the Board member and/or the entire Board at risk of being sued personally by an aggrieved party, and the Corporation’s Directors & Officers liability insurance may not respond in this instance. If that were the case, the Board member in question, or the Board as a whole, could be placed in the unenviable position of having to defend him/herself or themselves, and bearing the entire cost of a successful claim awarded against the subject Director or the entire Board for not acting honestly and in good faith by virtue of not maintaining Board confidentiality.
Members of the Board act on behalf of all other owners, and should be aware that if any member of the Board breaches Board confidentiality, there may be an opportunity for that Board member to be asked to resign by their fellow Directors and/or being removed from the Board by way of a requisition of owners requesting their removal.
It is our recommendation that the Board of Director adopts a Policy stating that “No Director or officer of a corporation shall be indemnified by the corporation in respect of any liability, costs, charges or expenses that the person sustains or incurs in or about an action, suit or other proceeding as a result of which the person is adjudged to be in breach of the duty to act honestly and in good faith.”
Should you have any questions or concerns, please contact us info@HERmanagement.ca
Nathalie Skyrie, CPM, ARM
403-813-3171