Adams Stirling PLC


Vendor Gifts. It is not illegal for an association vendor, such as a landscaper or even law firms, to give board members nominal gifts over the holidays. They are given as a token of appreciation for their business relationship. Tickets to a baseball game, a fruit basket, a bottle of wine, or dinner at a restaurant, are examples of acceptable gifts. Gift-giving becomes a problem if the gift is significant enough that it influences a director's judgment. Giving board members cash or trips to Hawaii are examples of problem gifts. If directors approve contracts based on the gifts they receive, the gifts become bribes. That's why most organizations adopt ethics rules setting strict limits on gifts. (See House Ethics Manual for the U.S. Congress concerning gifts.)

Retirement Gifts. Some boards give retiring directors plaque or a gift certificate. The gift is a small thank you to volunteer directors who put in a great deal of time and effort for their community. Such recognition does not require the approval of the membership. Board approval is sufficient. Some of the associations we represent give retiring directors plaques that cost $50 to $200. Some give outgoing directors gift certificates as well. There is nothing wrong with modest gift certificates. The larger the gift certificate, the more likely it will raise eyebrows among members. 

Dinners. Some associations pay for the lunch when directors. Feeding them does not make them paid directors. When directors miss meals to attend board meetings they get cranky. When their stomachs are rumbling, their blood sugar is low and they are looking at their watches, board members cannot give proper attention to the business at hand. When directors are fed, their patience seems to improve and they make better decisions.

Industry Practice. Some boards have popcorn and M&Ms at their meetings, others order veggie platters, still others have pizza or Subway sandwiches. As long as the cost is modest, the practice is more than reasonable and directors do not lose their volunteer status nor does it raise any ethical issues.

No Compensation. Directors cannot be paid for their service on the Board. (Corp. Code § 5047.5(a).) They are volunteers, not paid professional directors. 

Expense Reimbursement. Payment of per diem, mileage, or other reimbursement expenses to a director or executive officer does not affect that person's status as a volunteer. (Corp. Code § 7231.5(b)Civ. Code § 5800(b).) For example, if a director buys light bulbs for the common areas using his own money, the association can reimburse him without impacting his volunteer status. Directors should ALWAYS produce a receipt for those items for which they are seeking reimbursement.

Recommendation: Boards should adopt an ethics policy so directors will know where ethical boundaries are located.

ASSISTANCE: Associations needing legal assistance can contact us. To stay current with issues affecting community associations, subscribe to the Davis-Stirling Newsletter.

Adams Stirling PLC