Forum - January 2009

GOOD ADVICE
FOR
BEST PRACTICES

Here is a reminder of what all association boards should do, or have in place, to make sure their organizations are implementing best practices and taking steps to avoid unneces- • sary liability:

• Make sure the association is in good standing in the state in which it is incorporated and any states in • which it is registered to do business.

• Make sure the bylaws are up to date and in compliance with state law, and are being followed. If the bylaws • are not being followed in practice, change the practice or change the bylaws. Among other things, the bylaws should contain provisions:

• outlining the functions and powers of the board, officers and committees; •

• establishing criteria for membership in the organization;

• providing for indemnification of directors, officers and committee members;

• outlining the relationship between the organization and any affiliated entities.

• Make sure the association has adopted, and adheres to, reasonable and appropriate policies, including: •

• conflicts of interest, which should focus on disclosing conflicts of interest and provide a process for addressing conflicts for which disclosure alone is not sufficient;

• antitrust which should underscore the importance of • avoiding anticompetitive conduct and which should include policies and procedures to minimize the like- • liho d of illegal conduct; •

• eth cal business practices for directors and staff, which
s ould include policies on both giving and accepting •
ifts, perks and other assorted freebies;

• records retention/destruction, with schedules for various documents, responsibilities and time schedules for implementation, and procedures for ceasing any • destruction in the event that there is even a possibility of litigation or investigation;

• fr boa bilit

• comm ized to establish letterhead

Make sure th accounting con review by indep

Review the annua and to assure that mission and purpos

Ensure that there are and practices (or, in th tion, an appropriate man interfering with or microm for implementing and enfo

Review the organization’s in and officers, errors and omis sional liability, general umbrell miums, scope of coverage, exclu riders, and the like are reasonable the organization’s size, activities, r exposure.

Make sure the organization uses reaso obtains waivers and releases, and rece tion and, likewise, only provides limited and indemnification.

Review and document all relationships with and other entities.

Periodically review all contracts.

Rely on the advice of outside professional expe investment, accounting, etc.).

Ensure that members and staff are sensitive to th creating proper records (including e-mails); avoid defamation and slander; respect other’s intellectual property; maintain proper minutes.

Establish procedures for registering and licensing trademarks and for assuring that the organization owns the copyright on materials created on its behalf.

BEST PRACTICES

Educating directors on their fiduciary responsibilities, and emphasizing to them the importance of fulfilling those duties, is a terrific way of helping to get good people to serve as directors and of getting those people to be good board members. Of course, it also is an important element of an overall risk reduction program. However, it should not be the sole focus of the board’s efforts to

minimize liability. Boards also should pay attention, and institute practices and procedures, to minimize organizational liability.

The above list is not meant to be exhaustive or all-inclusive. In general, it is wise to follow the old adage: “An ounce of prevention is worth a pound of cure.” As such, the board, working with staff, legal counsel, auditors, and other trusted advisors should periodically conduct an institutional

review to ensure that its efforts to minimize personal and organizational liability are up-to-date and reflect best practices.

Mark Engle, CAE, is principal, Association Management Center, in Glenview, Ill. He may be reached at (847) 375- 4708 or mengle@connect2amc.com. Jed Mandel is chair of the Association Law Group at Neal, Gerber & Eisenberg LLP and serves as Forum’s general counsel. He may be reached at (312) 269-8042 or jmandel@ngelaw.com.