blue rule


Published October 15, 2019

Weekly Idea - Conflicts of Interest

 

We were working with a client that had an attorney who was a voting member of its Board. He also did 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 was a voting member of the Board and also was paid for his services. Would this be considered a conflict?

How about what happened a few years ago with a client? 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?

Here's one more. You probably have plenty yourself. A man on the Board of a major medical center supplies all of the milk for three 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.

A few years ago, I suggested you should develop a Policy regarding Conflicts of Interest along with a Disclosure Form. A few Boards have them, but many don't. 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 that is quite good, click here to download the document.