NAR Directors Confront Power Shift As Executive Committee Steps Up

Key Takeaways:

– The National Association of Realtors (NAR) is undergoing a transition and addressing issues with its culture, policies, and procedures.
– NAR’s board of directors and delegate body meetings discussed leadership, confidentiality, and ethics proposals.
– NAR’s former President resigned amid sexual harassment allegations, and there were demands for the resignations of other executives.
– NAR’s CEO announced his early retirement after losing a class-action antitrust case.
– Nykia Wright, former CEO of the Chicago Sun-Times, will become NAR’s new interim CEO.
– NAR’s Executive Committee approved a new strategic priority to enhance and strengthen the organization’s internal culture.
– The NAR board discussed and approved various reports and appointments, including filling the vacancy of the immediate past presidency.
– NAR’s membership has seen a smaller decline than expected, and the association’s financial condition remains strong.
– Litigation costs are being funded from NAR’s operating reserves.
– Governance changes are coming to NAR, with power shifting to the Executive Committee next year.
– The NAR Executive Committee will have more members and meet more frequently, and its meetings will be open to interested NAR members.
– The NAR board’s responsibilities will change, with the Executive Committee now approving most committee recommendations.
– NAR emphasizes the importance of transparency and open meetings.

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The National Association of Realtors is in transition and nowhere was that more evident than at its board of directors and delegate body meetings Friday.

At NAR’s annual conference, NAR NXT, in Anaheim, California, 1,042 directors saw an introductory video from the trade group’s new interim CEO, debated over leadership and confidentiality, and voted to send back an ethics proposal before much of the board’s power shifts to NAR’s Executive Committee next year.

“We have a lot to address with regards to our culture, a lot to address with regards to our policies and procedures, and how we can move forward and make sure that we create those safe places for us to be able to come together and do the good work that we do, and at the same time, be respectful and be able to take care of our members and our staff,” NAR President Tracy Kasper said during the delegate body meeting.

NAR President Tracy Kasper at NAR Delegate Body meeting at Anaheim Convention Center on Nov. 17, 2023, Photo credit: Andrea V. Brambila

Kasper, President-Elect Kevin Sears, First Vice President Kevin Brown and several others were officially installed on Monday, officially closing the chapter on the tumultuous, early start to Kasper’s term.

In August, former NAR President Kenny Parcell resigned, two days after a New York Times exposé on sexual harassment allegations against him was published. In September, some NAR employees demanded the resignations of NAR CEO Bob Goldberg, NAR Chief Legal Officer Katie Johnson, and NAR’s head of human resources, Donna Gland. The employees alleged the executives protected those accused of creating a toxic work environment, including Parcell.

After initially throwing its support behind Goldberg, NAR announced his early retirement on Nov. 2, two days after the association lost a class-action antitrust case, Sitzer | Burnett, in which the jury awarded the homeseller plaintiffs nearly $1.8 billion in damages that will be automatically tripled to nearly $5.4 billion under the law. On Nov. 9, NAR announced Gland will retire at the end of the year after 38 years at the trade group.

An outsider joins NAR

On Nov. 20, Nykia Wright, former CEO of the Chicago Sun-Times, will take the helm at NAR. Kasper said NAR was excited to bring Wright’s “outside perspective” and “very good, calm voice of reason” to the organization. Wright did not attend the meetings Friday, but the directors and delegates viewed a video with her introductory message.

“From meeting many of you and your colleagues earlier this week, it is clear to me that this organization is filled with people who are deeply dedicated to its success,” Wright said.

“As you close out the NXT meetings, I have no doubt that you will be thinking about what is next for NAR in this fast evolving landscape for real estate. So too am I. For me, Monday is a launching pad.

“It is a moment to sharpen our focus on NAR’s mission: Our work to help people and families across the country realize the dream of homeownership.”

The scandal continues to leave its mark

The Sitzer | Burnett verdict and harassment scandal permeated the proceedings Friday.

A member of NAR’s Strategic Planning Committee announced that the trade group’s Executive Committee had last month approved a new strategic priority for the organization for 2024: “Enhance and strengthen our internal culture to ensure a safe, inclusive environment of members and staff to conduct the business of the association.”

That item later prompted NAR member Desiree Goldman to ask: “It wasn’t a priority before??”

Then, once the voting started, Leigh Brown, a North Carolina director who is currently running for Congress, asked for a report from NAR’s Leadership Team to be pulled from the consent agenda for further discussion because the report did not “address the vacancy of the immediate past presidency on the leadership team for 2024.”

Leigh Brown, a NAR director from North Carolina, at NAR board of directors meeting at Anaheim Convention Center on Nov. 17, 2023, Photo credit: Andrea V. Brambila

Brown said the NAR Constitution said that vacancy, which came about due to Parcell’s resignation, should be addressed by the board of directors. The board approved her motion to pull the report and discuss it, and another NAR director, Colleen Badagliacco of California, proposed that NAR’s 2020 President, Vince Malta, be appointed to the position.

But the parliamentarian, Warren Tichenor, pointed out that the NAR Constitution says the board has the authority to fill vacancies among officers and the board itself, but that the position of immediate past president is not an officer position of the association.

Another NAR director objected, noting that the immediate past president is on NAR’s Leadership Team and he thought that person must therefore be an officer, but Tichenor read out the positions listed as officers in the NAR Constitution, which did not include immediate past president, and said the language was “very clear.” After another vote, the board approved the Leadership Team report and dropped the matter.

Membership and litigation costs

NAR’s treasurer, Greg Hrabcak, told the board that the association’s membership had dropped less drastically than anticipated this year. As of Sept. 30, the trade group had 1,578,053 members, down 1 percent from the same time last year.

“NAR is in strong financial condition,” Hrabcak said. “This is due primarily to the continued strength of NAR’s membership.”

“Because of these smaller decreases, dues revenue and related ad campaign assessments are all significantly greater than budgeted,” he added.

Still, NAR continues to expect a membership decline of more than 10 percent in 2024, according to Hrabcak.

Hrabcak devoted exactly one line of his report to the expense of fighting an ever-rising pile of lawsuits: “Litigation costs continue to be funded on an as-needed basis from NAR’s operating reserves,” he said.

Power shifts to the NAR Executive Committee next year

Governance changes are coming to NAR. In 2024, the composition of the NAR Executive Committee, which is a subset of the board of directors, will grow from 52 members to 71 members, largely due to the addition of 12 “competency-based members” appointed by the NAR Leadership Team based on their skills and expertise.

The new EC will meet a minimum of four times per year — either in person or virtually — and more at the request of NAR’s president, the board of directors, or any 11 EC members. The EC has to give at least 15 days notice to the NAR board in advance of each meeting. Contrary to current practice, the EC meetings would be open to any interested NAR members.

“The standing meetings will take place in May and November as usual, with the off-cycle meetings tentatively scheduled for March in July or August,” NAR First Vice President Kevin Sears said in a video summarizing the changes that was played for the directors.

“This enables NAR to move into a more year-round governance system.”

The NAR board will continue to meet twice a year, but the scope of its responsibilities will change. The NAR board will no longer have the responsibility of approving most committee recommendations; that duty will now belong to the new Executive Committee, with some exceptions.

The board of directors will still have the authority to approve the NAR annual budget, set dues and assessment levels, and approve committee recommendations that the NAR leadership team or the Executive Committee refer to the board “because of their import and impact on the industry” or that have been referred to the board by a petition signed by at least 20 percent of the directors. Anything previously decided by the EC can be reviewed afterwards by the NAR board and the board’s vote will be final, according to NAR.

NAR shouldn’t ‘hide behind closed-door meetings’

As soon as the board began voting on committee recommendations, clues that some of the directors were anxious about the governance changes began to emerge.

NAR Director Daryl Braham moved to strike an information item from the Credentials and Campaign Rules Committee report that read: “The committee recommends that Hub users be advised that any confidential information pertaining to the CCRC’s work that is posted to the Hub will be immediately removed.” The Hub is NAR’s internal member communication platform.

“The time of transparency in our organization is critical,” Braham said.

He noted that even under the governance changes, the board is still responsible for the selection of officers, but current policy empowers the Credentials and Campaign Rules Committee to “subjectively block potential candidates from being brought forward for the BOD” and the item being challenged would prevent the board from “even asking questions as to the decisions of the CCRC as most questions will be censored under the guise of confidentiality and thereby circumventing the constitutional authority afforded this body.”

“We need to unite and no longer hide behind closed-door meetings,” Braham added.

NAR director and former treasurer John Flor spoke in favor of Braham’s motion. Stopping people from saying what they want to say drives them to social media, according to Flor.

“Then we’re airing our dirty laundry in public,” he said. “The Hub is our communication device to be able to do that amongst ourselves.”

John Flor, a NAR director and former NAR treasurer, at NAR board of directors meeting at Anaheim Convention Center on Nov. 17, 2023. As Flor speaks, NAR President Tracy Kasper confers with NAR General Counsel Lesley Muchow. Photo credit: Andrea V. Brambila

He noted that the board “is now going to have less authority” but is “still bound to elect the officers.”

He painted a scenario in which the CCRC proposes a policy change and the Executive Committee approves it and the board of directors doesn’t know about it.

“This is about doing what is fair and what is right and making sure this body doesn’t lose its voice,” Flor said.

A NAR director from Florida, Cynthia Shelton spoke against the motion. “I think it’s a mistake to disclose confidential information,” she said. “I think confidential information should stay confidential, but as soon as it’s decided that’s what should be posted and then we can discuss it.”

Kasper, after conferring with NAR General Counsel Lesley Muchow, clarified that having conversations about candidates is not being prohibited in the Hub, that the board will be notified of policy changes, and that 20 percent of directors can petition to vote on a committee recommendation.

Braham once again called for the item to be stricken from the report, citing “unintended consequences” of the governance changes.

“To have a small group of people take away the voice of the 900-plus member board was never the intent,” Braham said.

“But unfortunately that’s what it has become” and striking the item would allow the board “to retain its voice.”

But three other directors spoke against Braham’s motion, with one arguing that a “member of the media” could find the confidential information and use it against the industry, another saying that confidential information should be sent to NAR’s legal counsel rather than posted on The Hub, and another reminding the directors that they are all fiduciaries for NAR and urging them to look to the law to tell them whether something is confidential rather than taking that decision into their own hands.

Braham’s motion to strike failed with 60 percent of the directors opposed.

Ethics change sent back

The board approved a thin list of committee recommendations with either little or no discussion except for one.

The Professional Standards Committee proposed an amendment to Article 4 of the Code of Ethics that would require Realtors to inform — in writing — buyers, sellers, lessors and lessees of any personal, familial, professional or legal relationship to a party in any transaction. Article 4 currently only requires disclosure of conflicts of interests in writing to buyers or their representatives.

The Executive Committee amended the proposal and recommended its adoption, but two NAR directors spoke against the modified recommendation. One objected to the “style of writing” and moved to send the proposal back to committee “to get this done correctly” and another who said the proposal only seemed to have considered residential transactions and not commercial or farm deals.

Ultimately, 85 percent of directors voted to send the proposal back to committee. Because the proposal was meant to change the NAR Code of Ethics, NAR’s delegate body had to weigh in and on Friday afternoon also overwhelmingly voted to send the proposal back.

The NAR board did not consider any recommendations from the Multiple Listing Issues and Policies Committee at either this conference or its midyear conference in May, so there were no new MLS policies this year.

Given the scrutiny that MLS policies are currently under from federal regulators and proliferating lawsuits, it remains to be seen if NAR will consider any new such policies in 2024.

Email Andrea V. Brambila.

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Property Chomp's Take:

The National Association of Realtors (NAR) is undergoing a transition period, and the effects of this change were evident at its recent board of directors and delegate body meetings. The organization is looking to address issues related to its culture, policies, and procedures in order to create a safe and respectful environment for its members and staff. This follows a series of controversies, including sexual harassment allegations against former NAR President Kenny Parcell and demands for the resignations of NAR CEO Bob Goldberg and other executives.

As part of its transition, NAR has appointed Nykia Wright, former CEO of the Chicago Sun-Times, as its new interim CEO. Wright brings an outsider's perspective and a calm voice of reason to the organization. In her introductory message, she emphasized the importance of NAR's mission to help people and families achieve the dream of homeownership.

The recent scandal and a class-action antitrust case that resulted in a nearly $5.4 billion damages award have prompted NAR to prioritize enhancing and strengthening its internal culture. This strategic priority aims to ensure a safe and inclusive environment for members and staff to conduct the association's business.

During the meetings, concerns were raised about the vacancy left by Parcell's resignation as immediate past president. The board of directors approved a report from NAR's Leadership Team that did not address this vacancy, prompting further discussion. However, it was clarified that the position of immediate past president is not an officer position, and the matter was dropped.

NAR's treasurer reported that membership numbers have not declined as drastically as anticipated, with a 1% decrease compared to the previous year. However, NAR still expects a membership decline of over 10% in 2024. The association continues to fund litigation costs from its operating reserves.

Significant governance changes are coming to NAR in 2024. The composition of the NAR Executive Committee will expand, and the committee will meet more frequently, with meetings open to interested NAR members. The NAR board's responsibilities will also change, with the Executive Committee now responsible for approving most committee recommendations.

Some directors expressed concerns about the governance changes, suggesting that NAR should not "hide behind closed-door meetings." However, NAR believes that these changes will lead to a more year-round governance system and allow for a more efficient decision-making process.

Overall, the recent meetings and discussions at NAR reflect the organization's commitment to addressing past controversies and creating a better future for its members and staff. The focus on enhancing the internal culture and strengthening governance processes demonstrates NAR's determination to move forward and overcome challenges in the real estate market.

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