Hot Springs Village developer John Cooper Sr. could have made himself king. But he chose in 1970 to set up a non-profit organization, governed by property owners, to serve the best needs of the Village, attorney Michelle Algood told HSV Property Owners’ Association directors at the board’s annual retreat.
Directors learned more about their role as leaders of a not-for-profit organization at a two-day public retreat at Coronado Community Center.
Presenters were Dr. Ruth Czirr, a consultant and clinical/community psychologist; and Allgood.
Cooper’s company, Cooper Communities Inc., invested $100 million in Village infrastructure.
Board directors have a legal duty to perform their volunteer service to the best of their ability, making good decisions for the benefit of HSV as a whole.
Directors must be informed, reasonable and prudent. There are millions of American non-profit organizations, but HSV falls within the top one percent in financial value. A large majority of non-profit groups have very few assets, or none.
Inaction can be the wrong solution to a problem. Board directors are charged with making prudent decisions. “Worry can paralyze a board,” Czirr said. “For a board, that can be a kind of negligence.”
Some degree of risk will always exist. “We can’t make risk go away,” she said. “One of your fiducial duties is ‘due care.’ You must use good business judgment.”
“Y’all are dealing with some very serious responsibilities here,” Algood said.
Board members are fiduciaries who steer an organization toward a sustainable future by adopting sound, ethical and legal governance and financial management policies. Ensuring the organization has adequate resources to meet its mission is one key responsibility.
State law directs the Village’s operation. The Declaration of Convenants declares how the business of HSV will be conducted. The Declaration directs the board to maintain real estate values and to preserve the health and safety of Village residents and commercial owners.
Helping govern the Village are, in descending order, protective covenants, the articles of incorporation, bylaws and policies.
Village business must also be in line with Internal Revenue Service guidelines, Algood said.
Under IRS directive, the POA is a not-for-profit organization in a special category for property owner groups.
The board should continually look at key indicators, keeping everything in balance to help ensure the Village is in good health. In answer to a director’s question, she said three or four years ago the POA was at risk of an inability to pay its obligations.
The board has taken prudent steps to help ensure the POA remains financially healthy even in future years, Algood said. One step is to continually seek new owners, to help share the financial load of paying for the Village’s operation and upkeep.
The pair gave a detailed history of the Village. The timeline listed each person attending, including the public. Chief operating officer Linda Mayhood, who retires Dec. 31, was both the longest resident and longest POA employee in attendance. She moved to the Village and started working for the Village accounting department in 1972. Czirr said Mayhood’s knowledge and experience is a valuable resource.
Algood said the POA benefits from its good base of members, adding that many have considerable education, are retired and possess valuable skills.
The board initially was comprised of the founder and Cooper employees. Gradually power was ceded to owners, although Cooper Communities retains developer and utility rights.
While the group was studying governing documents, director Bill Roe said he learned from those documents. “A lot of people don’t believe that we really are a corporation,” he said. “It’s taken a while for me to accept.”
Chief executive Lesley Nalley said the board has pushed years ago to pursue a governance role, then gone back to more management decisions. “This is not the first time this has come up in the POA’s history,” Nalley said. “It’s very interesting that we repeat the same things.”
Algood said the board’s governance committee will help ensure the board meets its legal responsibility to serve the POA and the Village. Setting it up is difficult, but the future will be easier. “The first year of the governance committee is just no fun at all,” she said.
A “bad” word can trigger bad feelings, Czirr said. Taking ideas from those in attendance, her list included words such as “corporation” and “executive session.” But it’s important to know that the word “corporation” is derived from “corpus,” which means “body.”
“As board members, you have no individual power,” Algood said. “Your power is a vote.”
Executive sessions enable the board to meet specific legal obligations, she said. As a private body, the POA does not fall under the state Freedom of Information Act, Algood said, but the board has chosen through bylaws and policy to make meetings public, with the stated purpose of transparency.
Director Buddy Dixon suggested having the retreat in the month between the annual board election and the April board meeting, to allow new directors to learn from the experience of all seven board members.
Dixon said people have asked him what the first thing he will do as a director. “I say, ‘I don’t know. I haven’t been there yet.’”
A the retreat’s conclusion, Dixon told his peers he has a new understanding of the board’s legal duty to serve.
Directors collectively said the knowledge and views shared during the retreat will help them in the roles as board members.