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Can Continuing Care Retirement Community (CCRC) Residents Benefit from Having Residents as Voting Members on Provider Boards of Directors 

Question. The question of residents on CCRC governing Boards is a question that surfaces repeatedly. Most recently the inquiry came as follows.

     “Our Board of Directors has two Board Members who complete their terms this year. I asked the President of the Board to consider putting a resident on the Board but his response was very negative. This has been a long ongoing issue and I would like to try to build a case for adding a resident to our Board. Do you have any suggestions on how I could acquire good background material for this cause?”

Not long ago Katherine Pearson, a Law Professor from Pennsylvania, reported to the U. S. Senate Committee on Aging that, “Oregon has amended its CCRC law to require greater disclosure of the identities of persons who have direct or indirect ownership or beneficial interests in CCRCs within the state and to require resident representation on the governing boards of CCRCs.” Other states have now followed that example, and the inclusion of residents on Boards is becoming more common.

The suggestion that there should be residents on CCRC Boards is a matter that comes up frequently.

Response. I don’t think that I can be much help with persuading your board that residents should be added to their number. Some states, I believe, do have laws mandating that residents be on CCRC Boards, and I know of several communities in which residents are on the boards. But board members are under a legal duty of loyalty, care, confidentiality and obedience and that limits the effectiveness which they can bring to the board as advocates for resident interests.

There is a video discussion of board service which you can access by clicking on this sentence.

Some industry executives argue that residents have a conflict of interest and, therefore, ought not to be allowed to serve on CCRC Boards since it is thought that residents will seek to keep residency charges unnaturally low and will, therefore, impair the financial stability and prudent management of the community.

On the other hand, once a resident takes a seat on a board, the resident assumes legal liability unless the resident puts the interests of the enterprise before the interests of the resident group he or she may feel called to represent.

Of course, executives and managing firms, too, have a conflict of interest in the representations and recommendations that they make to a board. There is no one on the board who is likely to be in a position to push back against a wellreasoned position put forward by an executive.

As Jacob Schiff said in a quote that is now over 100 years old:."Q:What did you do as director? A. I directed as much as under the prevailing usages in corporations was permitted me to direct; in other words, I went to the meetings when they were called, I listened to the reports as submitted by the executive officers, and I voted upon the same and I gave much advice as as asked of me. And if you will permit me to say right here that the system of directorship is such that a director has practically no power;..". 

 I think this is as clear a statement of the limitations of board service as anything that might be put forward. Little has changed in this regard in the years since Mr. Schiff offered his candid appraisal.

As one resident, who has long served on the board of the provider organization for the CCRC where he lives, said to me, “The authority of a board to direct or change policy is greatly overrated.” The ideal is for a CEO or Board Chair, who truly has a service orientation, rather than a focused interest in self-preservation and self-aggrandizement, to recruit as directors and senior officers people who are the most highly qualified people available.

CCRCs, however, typically look to local luminaries to fill their board seats. I don’t think that is likely to change. It’s much too comfortable for the existing directors and officers to leave things as they are and to stay with the status quo than for them to change no matter how much change might open up new opportunities to them for service and improved performance. 

These people may be capable local accountants, clergy, insurance salespeople, nurses, or leaders in the chamber of commerce, but there are often residents whose experience matches the local leaders and who could elevate the attractiveness of the enterprise if they were not excluded. 

There is a saying that goes, “First rate people hire other first rate people. Second rate people hire third rate people. Third rate people hire fifth rate people.” In short, the best people are not afraid to have associates who might supersede them. They know that if they lose their job they can land on their feet in a new and better position, or they will start a business that will with time surpass the business that dismissed them. Mediocre and provincial people, in contrast, have a myopic vision and are fearful of much that is new. Original thinking is threatening to them, and they will not welcome those who seek to institute change for the better.

Many residents clearly believe that resident representation on boards is a desirable step forward. My own understanding is different, however, so acquiring board seats for residents is not an initiative which is likely to improve the lot of aging residents. Having residents on boards would simply sustain the status quo. But, if this is something that you feel is important, you will find that there are many residents across the country who agree with you.

                     -- Jack Cumming                    September 28, 2019