Deryck Walker of RMIT discusses the need for professional independent committee members and asks should committee members be paid?
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I was reflecting on my involvement with larger scale Strata Schemes, and both the significant risk and finances which are on the line in these situations.
Even in a medium size scheme (not large) fee income alone can be well into seven figures and above, with individual projects (even simple ones like carpet replacement) coming with a cost in the hundreds of thousands of dollars.
I believe this creates a specific need for professional persons to take paid positions on committees for large schemes, not dissimilar to board members who steer a listed company.
Would this be required for every scheme? Of course not, there could be an array of individuals available within the scheme who have the required knowledge and expertise, but this is not always the case.
Some large Strata Scheme Committees sit with members who know little or nothing about strata-specific legal obligations, and this creates significant risks for both the Committee and the Strata Scheme.
If you were running a large company, would you fill the board with entirely inexperienced board members? Of course not. Conversely, I would argue a good board consists of a mix of persons with mixed backgrounds and experiences. This sort of dynamic encourages thorough debate and as a result quality decision making with subject matter being scrutinised from multiple angles.
Some may argue this is the manager’s role to fulfill, in some cases, yes, but unfortunately some operators are not fulfilling their fiduciary duty to the scheme and provide advice which is clouded by conflicts of interest to bend committee decisions to garner benefit (regular disclaimer, some, not all!).
It is very commonplace that a Strata Manager holds significant power, both tangible and intangible. This power comes out of the significant knowledge they hold (with knowledge comes power).
By introducing independent professional committee members with a similar level of knowledge, it would work to redistribute the power balance to the benefit of the Strata Scheme, whilst also holding the manager to account to ensure they meet their fiduciary duties. All the while improving the quality and effectiveness of decision making, and reducing risk.
This article first appeared on LinkedIn Pulse.
This post appears in Strata News #153