Inman

NAR’s top lawyer weighs in on association director conflicts

By May 17, 2018 No Comments
NAR’s top lawyer weighs in on association director conflicts
REPOSTED DIRECTLY FROM INMAN NEWS. THIS CONTENT HAS NOT BEEN MODERATED BY WFG NATIONAL TITLE.

WASHINGTON — As the board of directors of the National Association of Realtors gears up to vote on proposed dues increases, the trade group’s chief attorney reminded its members who the directors owe fiduciary duty to: NAR.

Katie Johnson

At a meeting of the organization’s Association Executives Committee on Wednesday, NAR General Counsel Katie Johnson noted that on Saturday, when the 800-member board meets, she will, as usual, relay to the directors what their fiduciary duty is.

“It’s important, and it’s the same message whether it’s dues, whether it’s MLS or whether it’s about fair housing policy: every director has to vote their conscience as to what is in the best interests of NAR,” Johnson said at the meeting, which is part of the trade group’s midyear conference, the Realtors Legislative Meetings and Trade Expo.

“There is no such thing as bloc voting, there is no such thing as a state having a position or a local having a position on an issue on which all of their representatives agree to vote. Every single individual makes their own conscious decision.”

Johnson’s reminder comes as some local Realtor associations, most notably the Houston Association of Realtors, have objected to the dues increases NAR’s board will vote on later this week. HAR’s own board of directors voted to oppose the increases, saying that instead of raising dues NAR should reallocate its budget resources.

NAR has proposed hiking its annual dues by 25 percent, from $120 to $150 per year to increase its annual spending for political advocacy, a transaction management platform for members and other initiatives by $35.5 million. To pay for the additional spending, NAR seeks to raise dues by $30 in 2019 with additional built-in increases of 2.5 percent per year beginning in 2020.

More than 80 percent of Inman readers oppose the proposed dues increases.

At the committee meeting Johnson read aloud NAR’s fiduciary duty statement, which states, in part, “Your decisions must be made independently and free of any undue influence from any person or organization, including any local or state association, MLS or brokerage.”

The statement acknowledges that many directors also serve as directors of local or state Realtor associations, and therefore, the directors owe fiduciary duties to multiple organizations.

“If the duties you owe to another organization prevent you from giving undivided allegiance to NAR, then you are individually responsible for addressing that conflict as you deem appropriate and, at the very least, in a manner consistent with NAR’s Conflict of Interest Policy,” the statement reads.

After reading the entire statement, Johnson told the roomful of state and local association executives, “That’s the message. I hope you help us spread it.”

John Leonardi, CEO of the Buffalo Niagara Association of Realtors, stood up among the audience and asked for clarification: State and local associations can still voice their support or nonsupport of a NAR-level issue, correct?

Johnson responded that local associations “can do whatever they want to do” but “doing that puts your directors in a very difficult position.”

“If your directors who make a vote to say, ‘On behalf of my local association we support this issue, this policy, we approve this motion,’ they’ve joined in that decision, which almost might prevent them from making an undivided allegiance or unbiased decision to the other board where the issue is being passed,” Johnson said.

“[Local associations] should absolutely share their feedback, their pros, their cons. Debate is good, debate is healthy, debate is very much encouraged. When you act as a board and take a position, the director who is a director of both boards is potentially conflicted unless they’re not, unless they can say, ‘I personally individually also believe that what I voted on at the local level is also in the best interest of NAR.’”

Reached later via email, Leonardi told Inman that Johnson’s response didn’t help much.

“The point of my question was to make the room aware that at every level a director has a fiduciary responsibility to the board they serve. It doesn’t preclude a local or state association from either supporting or not supporting an initiative of NAR,” he said.

“Katie’s presentation to me came across as it was verboten for state or locals from voicing their opinion.”

His Buffalo Niagara association hasn’t taken a position on the dues hikes, he said.

In the run-up to the board vote, NAR has put its considerable resources behind a campaign to promote the dues increase proposals, including mobilizing its leadership and communications teams, setting up a website and holding livestreamed events.

Asked what local associations that disagree with the proposals can do in the face of this muscle if not come out against the proposals, Johnson responded via an email sent to Leonardi that NAR then shared with Inman.

“As I mentioned, local and state association directors are encouraged, as are all members, to voice their opinions, contribute to debate, and offer solutions on NAR initiatives. That is never forbidden and is always encouraged,” Johnson said in the email.

“For example, members have shared their feedback through in-person discussions, letters, phone calls, online posts, and surveys. And association executives provided a lot of feedback to NAR leadership at the AE Institute in March. Those are all good and helpful ways for associations to voice their opposition to an NAR motion.”

Johnson said her comments were specific to the conflict of interest that occurs for someone who is a director of a local or state association and is also a director of the national association.

“When any of those boards adopts a resolution on an issue that will be voted on by another board, that creates a potential conflict for that multi-board director,” she said.

Editor’s note: We have updated this story with an additional comment from NAR’s Katie Johnson.

Email Andrea V. Brambila.

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The views and opinions of authors expressed in this publication do not necessarily state or reflect those of WFG National Title, its affiliated companies, or their respective management or personnel.

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