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Official Opinion 95-40

Official Opinion 95-40

October 3, 1995
To: 

Vice Chairman of the Board
Georgia Housing and Finance Authority

Re: 

Within certain parameters and with diligent, good faith supervision of the enterprise, a member of the Board of Directors of the Georgia Housing and Finance Authority acting within the scope of his or her authority in carrying out the Authority's stated powers, may rely upon O.C.G.A. ¿ 50-26-6 for protection from imposition of personal liability.

You have asked for clarification of any personal liability which may be incurred by a member of the Board of the Georgia Housing and Finance Authority for good faith reliance on the decisions and recommendations of its Executive Director and for delegating certain duties to its Executive Director under policy guidance from the Board.

To begin, it is legally permissible for the Board to promulgate policy guidance and management goals to be administered and carried out by the officers and employees of the Authority. Official Code of Georgia Annotated § 50-26-5(g) permits the delegation of such duties, except for the issuance of bonds, to a member of the board, the executive director, or to any employee of the Authority. Cf. Stone Mountain Scenic R.R., Inc. v. Stone Mountain Memorial Ass'n, 230 Ga. 800, 806 (1973) (discretionary powers of the association cannot be delegated in the absence of statutory authority).

The Georgia Housing and Finance Authority Act also provides that the Authority may "exercise any power usually possessed by private corporations performing similar functions which is not in conflict with the public purposes of the authority or the Constitution and laws of [Georgia]." O.C.G.A. § 50-26-8(a)(26). Legal commentators have pointed out that a

total delegation of control of a corporation to an individual is generally considered improper. Robert J. McGaughey, Georgia Corporate Law Handbook (GCLH), §§ 5.08, 5.11 (1994). However, an officer may conduct all ordinary business and execute contracts and conveyances. See O.C.G.A. § 14-2-841; Tallman v. Southern Motor Exchange, Inc., 97 Ga. App. 565, 567 (1958). See also Armed Forces Service Co. v. Petree, 211 Ga. 867 (1955). Thus, the Authority may delegate day-to-day management of its affairs to its managing officer. Certain powers are not delegable: (1) appointment and compensation of the executive director; (2) filling of vacancies or election of positions on the Board of Directors; (3) adopting, amending, or repealing by-laws; (4) approval of mergers or dissolutions; (5) determination of financing structure of the Authority; and (6) vigilance of the welfare of the entire enterprise. (GCLH), § 5.08 supra. See generally O.C.G.A. § 14-2-825(d) (prohibited delegations to committees of directors).

The Authority, in determining the extent of what may be delegated, may look to the doctrines surrounding legislative delegations of powers to provide a working illustration. It is fundamental that the General Assembly may not delegate its legislative power, but may define completely a legislative enterprise and leave detail to administrators. Department of Transp. v. Del-Cook Timber Co., 248 Ga. 734, 737-39 (1982) (Transportation Code may delegate to DOT power to perform all acts incidental to systems of transportation); Villyard v. Regents of Univ. Sys. of Ga., 204 Ga. 517, 523 (1948) (General Assembly may delegate Regents "power to exercise any power usually granted to such corporations" in operating university system). Applying this illustration, the Authority may, for example, upon approving a program and budget or financial limits for such program, leave the detail of the program and its administrative management and individual approvals to the officers and employees of the Authority, subject to the Board's duty to maintain vigilance over the welfare of the enterprise. To assist in maintaining its oversight, the Board should require current regular reports from the Authority's officers as to the status of the programs and actions taken.

As a member of the Board, you are a public officer who is a trustee and servant of the people and are at all times amenable to them. Richmond County Hosp. Auth. v. Richmond County, 255 Ga. 183 (1985) (citing Ga. Const. 1983, Art. I, Sec. II, Para. I). You may therefore not be "inactive." You are required to carry out your responsibilities "as a fiduciary with the diligence of an ordinarily prudent man." Davis v. Ben O'Callaghan Co., 139 Ga. App. 22, 24 (1976); see also Woodward v. Stewart, 149 Ga. 620 (1919) (requirement for reasonable supervision over officers). Specifically, O.C.G.A. § 14-2-830(a) instructs a director to discharge his duties: "(1) In a manner he believes in good faith to be in the best interests of the corporation; and (2) With the care an ordinarily prudent person in a like position would exercise under similar circumstances."

In making decisions, a member of the Board may reasonably rely on other persons, such as officers, accountants, and attorneys. O.C.G.A. § 14-2-830(b); Mobley v. Faulk, 42 Ga. App. 314 (1930) (ordinary care in relying on information furnished by agent). In doing so, the members of the Board have a duty to keep reasonably informed as to the affairs of the Authority. See Bennett v. Carter, 168 Ga. 133(3,4) (1929). Moreover, the imposition of liability requires lack of diligence or lack of good faith, and will not be imposed for mere poor judgment. Mobley v. Russell, 174 Ga. 843, 847 (1932).

Official Code of Georgia Annotated § 50-26-6 provides: "Neither the members of the authority nor any officer or employee of the authority acting in behalf thereof, while acting within the scope of his or her authority, is subject to any liability resulting from: ... (2) Carrying out any of the powers given in this chapter."

Therefore, within the parameters stated and with diligent, good faith supervision of the enterprise, it is my official opinion that a member of the Board acting within the scope of his or her authority in carrying out the Authority's stated powers, may then rely upon O.C.G.A. § 50-26-6 for protection from imposition of personal liability.

Prepared by:

GEORGE S. ZIER
Assistant Attorney General