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Quick Observation: On MLS Board Members

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And what say the Right Honorable Gentleman on the issue of IDX pricing?

Marilyn Wilson of the WAV Group has posted a plea for MLS boards to set aside personal agendas and work towards the good of the whole MLS, asking, “Is your heart in the right place?“:

I would suggest that every MLS board member in the country think about the importance of the role they are playing and be honest with themselves. Can you honestly separate your competitive spirit from your Association or brokerage from your role as a MLS board member?   Can you put aside rivalries and focus on your task at hand – to create a profitable, viable MLS that continues to evolve so that it can stay relevant to ALL of its customers, not just YOUR company or YOUR association?  Can you remember that the MLS is a technology service provider, designed to help its customers sell more real estate and should not be concerned with local politics?

Read the whole thing.

I have my own thoughts on the matter, but for now, I’ll limit things to a short, quick observation.

Seems to me that as a threshold matter, before asking MLS board members to think about their roles, Marilyn (and MLS board members) should ask themselves whether a “MLS Board” is in fact a Board at all. The answer, I think, is not obvious.

Corporate Boards

A Director of a corporation is a fiduciary to the shareholders of that corporation (at least under Delaware law) who owe duties of care, loyalty, good faith, candor, and monitoring.  Note that the people the Director is supposed to serve is the shareholder, for whose benefit the corporation is being operated.

On that standard, I don’t believe that a single MLS board in the United States today would pass muster. Right off the bat, the composition of most of the Boards — no outside directors, almost always a working broker or Realtor — runs into issues.  And that is assuming that the existing Directors do avoid conflicts of interest (which is difficult, when the MLS whose board you sit on charges a fee that directly impacts your profitability), petty rivalries that Marilyn mentions, and the like.

Non-profit boards have the same duties of care, loyalty, good faith, candor, and monitoring; they, however, tend to serve “stakeholders” — usually the community itself, represented by community leaders — rather than shareholders.  A Director of an anti-poverty charity, for example, might consider herself to be serving the poor of the local community.  Directors of a non-profit arts organization may serve the patrons of the arts, etc.

So in theory, the board of a MLS that is organized as a non-profit reports to the stakeholders — the brokers and agents whom the MLS serves.

I personally find that theory a bit of a stretch.  The MLS exists to help its members/customers make more money.  Its Directors, unlike an arts organization or a anti-poverty group, are appointed not because they donate millions of dollars to the cause, but because they are working brokers and Realtors themselves. And once again, the composition of the boards, even if a non-profit, is problematic if the Board is supposed to fulfill its duties.

There is, however, another theory of the MLS Board which explains everything.

The MLS Board as Parliament

I think most MLS Boards are not corporate boards at all, either of the for-profit or non-profit variety.  I think they are more like a legislative body, a parliament.  The Board members are often selected not for a particular business acumen, but as a representative of a particular stakeholder.  For example, many MLS’s are Association-owned, but Broker-governed to balance the interests.  Some boards might have a mix of Directors to represent large brokerages as well as small brokerages.  Others might have a mix of representatives from various Associations that the MLS serves.

Parliaments are comprised of leaders who are also “citizens” — at least in theory.  If Parliament decides to raise the tax rate, its own members also must pay that tax.  Any law it promulgates, its members must also obey.  Parliaments do not elect ‘outsiders’ (aka, foreigners) to join it, because it decides issues that are vitally important to the people whom they serve.

Whether we’re talking about a town council, a state legislature, or Congress, legislators are supposed to represent the interests of the constituents.  What outsiders might consider petty rivalry between (for example) two states who compete for business, resources, and the like (e.g., take a look at the relationship between the Western states over water rights) may be legislators doing their job, representing their constituents.

Seen that way, perhaps MLS Board members ought to be viewed not as Directors of a corporation, but legislators who make policy and govern the “territory” — selecting a chief executive, often from within their numbers, as a parliament might choose a prime minister.

You still don’t want to be an a__hole, as Marilyn puts it, but then again… the U.S. Senate is full of them… so maybe that’s not such a bad thing either.

-rsh

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Rob Hahn
Managing Partner of 7DS Associates, and the grand poobah of this here blog. Once called "a revolutionary in a really nice suit", people often wonder what I do for a living because I have the temerity to not talk about my clients and my work for clients. Suffice to say that I do strategy work for some of the largest organizations and companies in real estate, as well as some of the smallest startups and agent teams, but usually only on projects that interest me with big implications for reforming this wonderful, crazy, lovable yet frustrating real estate industry of ours.

4 COMMENTS

  1. Good topic. Marilyn is dead on as to ‘what should be’ on an MLS board (Per typical MLS bylaws.)
    Parliamentary comparison is closer to ‘what is’.

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