Conflicts of Interest

We’re working with a client that has an attorney who is a voting member of its Board. He also does all of the legal work for the organization and charges the firm’s regular fee for his service. It happens to be $750/hour— but that’s not the issue I’m about to write about.

Here’s the question. The attorney is a voting member of the Board and also gets paid for his services. Would this be considered a conflict?

How about what happened a year or two ago with one of my clients? A man on the Board owns a major construction company. He bid on the job for a new building, along with three other contractors. He got the job. He remains on the Board. Is that a conflict?

I’ll give you one more. But you have plenty yourself, I’m certain. A man on the Board of a major medical center supplies all of the milk for the three other hospitals in the system. It amounts to several million dollars a year. He says that if they keep him on the Board and they renew his contract, he will make a gift of $2 million. If that doesn’t happen, it will be a gift of $50,000.

Here’s why I raise these issues with you. In my judgment, they are all conflicts of interest.

About a year ago, I suggested you develop a Policy regarding Conflicts of Interest along with a Disclosure Form. I’m on the Board of an organization that sends these out each year. The Disclosure Form is to be signed and returned to the organization. If you don’t do something like this, it can raise some issues with the IRS regarding your tax exempt status.

For a sample of a Conflict of Interest form I believe is quite good, click here to download the document.