ORLANDO — Who is best suited to decide who represents 1.2 million agent and broker members on the board of the National Association of Realtors?
That was the subject of a spirited debate at NAR’s delegate body meeting Monday at the trade group’s annual conference.
Another important decision — how to go about selecting the successor to NAR’s CEO, Dale Stinton — was also made, but that decision involved no debate and passed swiftly.
What’s the delegate body?
The delegate body is a group composed of presidents of member associations (or their accredited alternates) that makes decisions on proposals to amend the NAR constitution and code of ethics.
The delegate body approved some minor constitutional amendments but voted down two controversial amendments from a presidential advisory group (PAG) that would have changed the way seats on the NAR board of directors are allocated.
The CEO search
Current NAR CEO Dale Stinton is gearing up for retirement once his contract with NAR expires at the end of 2017.
NAR’s board of directors and delegate body both approved an amendment to NAR’s constitution giving NAR’s leadership team — specifically, the president, president-elect, first vice president, treasurer, immediate past president and the two vice presidents appointed by the president — the authority to appoint the CEO search committee and select the CEO.
“While the authority to appoint the CEO is currently vested in the Board of Directors, historical practice has been for the Board of Directors to grant the Leadership Team such authority,” the leadership team said in stating a rationale for the change.
“Having the Leadership Team, as opposed to the large Board of Directors, be responsible for the process of interviewing candidates and selecting a CEO is the only practical and feasible way such search can be conducted.
“This amendment would mean that the Board of Directors would no longer need to affirmatively grant such authority to the Leadership Team through resolution passed at a BOD meeting.”
Both the NAR board of directors and the delegate body passed the amendment without discussion and with an overwhelming share of the vote.
The board also approved a motion giving the leadership team the power to choose Stinton’s replacement in the event the delegate body did not approve the amendment. That motion also passed without anyone voicing opposition.
The search committee for Stinton’s replacement will be announced in the next couple of weeks, according to NAR 2016 President Tom Salomone.
It will be chaired by Chris Polychron, the 2016 immediate past president at NAR, and the vice-chair will be Cathy Whatley, who was NAR president in 2003.
Delegate body members with suggestions for others who should be on the committee were encouraged to email the leadership team.
Shaking up the board’s composition
If passed, proposed constitutional amendments would have reduced the size of NAR’s board from 914 to 844, but would also have entitled state associations to name more seats on the board, reducing the number of seats allocated to large local associations.
Currently, state director allocations to the board are automatically deducted from the number of directors allocated to local associations.
The amendments would have removed that limit, decoupling the two in an effort to foster good relations between the state and local associations and give states certainty about the number of directors to be appointed, according to the presidential advisory group’s report.
But several delegates spoke out against the amendments before the votes yesterday, saying the amendments would shift the balance of power in the board to states and wouldn’t necessarily lead to a better selection process for directors.
“The National Association of Realtors is a member-driven organization,” PAG Chair Vince Malta told Inman after the delegate body meeting.
“Our members really have spoken and they had their say today as to how they want our director body to look and the interests it would reflect.”
Aiming for ‘diverse’ representation
The focus of the PAG was not to change the number of directors on the board, but rather to make sure that the directors represented the trade group’s diverse membership, Malta said.
“We wanted to make sure that all the players of our industry were really in the game,” he said.
“We have such diverse interests, from geographic, cultural, commercial, residential, leasing, large boards, small boards, medium-sized boards that we wanted to make sure that the local and state associations work together, rather than this automatic allocation where one is subtracted from the other, so we could have a more predictable, diverse NAR director allocation.
“That was the primary focus.”
Currently, only large local associations with more than 2,000 members can appoint a director to NAR’s board.
Allocating more seats to state associations would give the states more flexibility to appoint members from boards with less than 2,000 members and also give members of boards with more than 2,000 members the opportunity to seek state directorship positions with a term of up to three years, the PAG report said.
The current board structure may miss “very talented directors” from smaller boards and even from large local associations, Malta said.
“We thought by providing more state-allocated directors that it would incentivize [state and local associations to] get to the table together and work it out, providing the best complement of directors, rather than this automatic allocation system,” he said.
There was no language in the amendments that specified how state and local associations would work together.
When asked whether this may have played a role in the amendments’ defeat, Malta said, “That’s a very delicate discussion because the national association wants to make sure the states and the local associations have their say as to how a director is selected.
“We did not want to set up criteria or a system. We wanted them to work out the system that would work best for their local and state associations.”
‘They thought it would change the level of influence’
Ultimately Malta believed the amendments didn’t resonate with the delegates for two reasons.
The first was that some delegates felt there should have been more advanced notice of the proposals and more input into the process of drafting them, he said.
Secondly, the modifications proposed by the PAG were intended to produce the best directors to represent members’ interests and make sure they were in touch with the daily business of what Realtors do, Malta said.
But “some people fundamentally believe that the local associations are in a better position in which to pick the NAR directorship because they are in the front lines of the membership,” he said.
“And then the states’ philosophy was that they’re in a position where they’re not able to represent or have represented other associations than large local associations. So there were a lot of interests at the table.
“And I think ultimately they thought it would change the level of influence. That wasn’t the intention of the PAG.”
Delegates speak out: Don’t upset the balance
The NAR leadership team presented the PAG report verbatim (without changes) to NAR’s governing bodies.
The PAG affirmed that the current composition of the board continues to be representative of the membership, the report said, but nonetheless recommended some modifications, including the changes to state and local seat allocations.
Multiple members spoke in opposition to the allocation recommendations, which would give state associations 76 more seats than they currently have on the board (from 264 seats to 340), at the expense of their larger local associations (336 to 218).
This does not include 54 seats for state association presidents, which would remain unchanged.
Today, representation between state and local associations on the NAR board is balanced at about 35 percent each, and that balance — which the PAG has determined is representative — should be kept, one delegate said.
A delegate from the Mainstreet Association of Realtors in the Chicago area agreed.
“We stand in opposition of this because, among other reasons, the percentages would be thrown off. This change would give more weight to the state and we feel that wouldn’t be as fair,” she said.
Mario Arriaga, chairman of the Houston Association of Realtors noted that in Texas “our local associations work very well with our state association” already and opposed the amendments.
One delegate from California said he was opposed to the motion because of the effect it would have on his local association. (Delegates’ fiduciary duty is to the members of their associations, not to NAR, according to NAR’s general counsel.)
The delegate noted that his association has 9,400 members and is looking forward to having 10,000, when the association would receive an additional NAR board seat.
His local association has “no problem” with the state association, but is already carefully choosing that additional director from among the local membership in advance — efforts that the state is unaware of, he said.
“To go from four to two [local directors] would be a disservice to NAR,” he said.
Delegate Cory Shepard of the Greater San Diego Association of Realtors feared the state association appointments would be “political” and “not necessarily of the quality that we’re after.”
A delegate from a large association in Portland, Oregon, spoke in favor of the amendments, saying “we need to have the right directors” and the changes would make for “more diverse and effective leaders.”
‘A lot of directors don’t take this seriously enough’
Tom Salomone
NAR 2016 President Tom Salomone appointed the presidential advisory group to make recommendations for changes to the board’s structure after hearing concerns from members around the country in regard to how NAR directors are chosen, he told NAR’s board Monday.
He also realized the trade group had a problem when the last two elections for NAR presidents (including his own) only compelled about 660 out of about 900 directors to show up to cast a vote.
He complained that many directors who do show up to the board’s meetings twice a year don’t stay for the entire meeting.
“There’s a lot of people that don’t take this position seriously enough,” he said.
“[They should] take it as seriously as all of you do and be here. Because if not, I don’t think those people should be directors. So I leave it upon you in the future to address that problem.”
Not addressing the problem
Multiple delegates noted that the report didn’t tackle the problems brought up by Salomone, however.
A delegate from Illinois agreed with Salomone that members should be committed to showing up and staying for meetings, “but I did not see the PAG addressing that issue in this report,” she said.
“There is a problem with the process of how BOD members are selected. I think we need to go back to the drawing board.”
A delegate from a local association with 5,300 members said, “I think the intent of the PAG was absolutely virtuous, but I don’t think there was enough research done.
“I urge us to continue, if this votes down, to find some better solution after this.”
Another delegate asked Salomone, “Why do you think reducing the number of directors is going to make more people show up?”
Salomone said, “It’s for you to decide” and refused to give his opinion. When the delegate asked what the PAG’s opinion was, Salomone said, “The PAG’s opinion is what’s in front of you.”
The delegates voted overwhelmingly against the allocation amendments.
Board changes in the future
Salomone nonetheless said the PAG’s work “served a huge purpose” because it began a conversation of how directors should be chosen.
“One of the things that happens sometimes when you put reports like this together, it makes everyone think,” he said.
“I think the process of how we appoint or select our directors is now at the forefront of everyone’s mind.”
For instance, he said, one delegate suggested directors have appointments that last more than one-year to find committed directors.
Another delegate, Shepard, said he would be in favor of a written pledge to show up to director meetings, barring emergencies.
NAR’s current board composition has been in place since its last restructuring in 2000. Malta indicated this was not the end of the trade group’s efforts to shake up its governance.
“I think an association needs to look at their structure and I think that we’ll be doing that in the very near future,” he said.
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