By: Pamela Dittmer McKuen, Special to the Tribune

June 30, 2006, Chicago Tribune

Let's say your association can afford to replace only half of the balconies. In that case, whose balconies get done? If the board president's cousin owns the best paint company in the area, should that company be hired?

Board members often must wrestle with seemingly minor ethical dilemmas, yet how effectively they weigh competing interests, avoid conflicts of interest and put the owners' interests first can determine how the board is perceived.

Drafting a code of ethics can help, says Chris Nyborg, a Hanover Park certified public accountant who specializes in associations. After all, it's not just the criminal acts of fraud and embezzlement that lead to suspicion and dissent. Plenty of seemingly innocuous decisions can add up to the same thing.

"Codes of ethics would reduce pressure when the board is making decisions, improve trust and respect on the part of the owners, help create a more positive image of the association and enhance their ability to retain employees," she said.

"Ethical codes can be helpful in understanding what behaviors are appropriate and not," said management professor Wally Scott of the Kellogg School of Management at Northwestern University.

For example, hiring the board president's cousin for the paint job could be OK "as long as everybody understands who is related to whom and who benefits," Wick said. "You could require board members to disclose any conflicts of interest and not participate in the voting of that," Nyborg said.

Ethics codes also can help to keep associations from straying across legal boundaries. For example, a small association might decide not to bother with the formalities of governing documents. Rather than electing a board, the owners vote and the majority rules. If everyone agrees, what's the problem?

"You can't simply ignore the law or ignore the documents or ignore what is right," said association insurance consultant Barbara Wick of Northfield. "What happens when there's a dissident member or someone sells his unit and the new resident doesn't want to do it that way?"

"Sometimes the issue of ethics starts out in a small way that crosses the line," Nyborg said. "Then there is a justification, and the lines become bigger issues. In the end, they are doing things that ultimately hurt the process of running an efficient and positive organization."

When writing an ethics code for your association, keep it simple. A treatise filled with legal jargon is likely to be admired and placed on a shelf somewhere, never to be consulted. Subjects you might want to include are hiring policies, check-signing authority, meeting structure, kickbacks, communicating with owners and adherence to governing documents.

"I believe that boards would benefit by having a straightforward simple set of guidelines, something they can refer to and something to show the residents as a commitment by the board members," Wick said.

For ideas, consult the codes professionals and trade associations. Codes should be formally adopted by the board, placed in the meeting minutes and shared with the residents. When a pertinent decision is to be made or a question comes up, consult the code for guidance.

"It could be part of new board training to have everyone on the same page with," Nyborg said.

"I'd ask the manager to commit to the same thing," Wick said.

Adopting a code is only the starting point, Scott said.

"You've got to have leadership constantly reiterating the acceptable behaviors and acting in a way that is consistent with them," he said. "If you don't have top management on board, nothing is going to work."

Even the best code won't provide all the answers, said Wick.

"No code will stop thieves or immorality," she said. "But for people who are wavering or not sure what is right, I think it would be valuable and raise the comfort level with the residents."