Fundraising, Management Issues/Qualifications for a Board Member

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QUESTION: Hi - Hope you can help. We are in the process of establishing a new non-profit volunteer group and are putting together our Board of Directors. We don't have employees and it will probably be quite a while before we do. I am the organization's founder and will serve as its Executive Director - Emeritus (with no voting power).

One of the ladies interested in joining our board, in my opinion is a perfect candidate, as she has more experience in the field we're in than any of us.(care for older adults). She is also in the process of opening up a  "for profit" business, that our organization could definetly benefit from once the two organizations are established. Her business would volunteer a service to us,however she would also be able to be a regular donor to our organization as she would ultimetly also profit from the referrals we send her. We'd really like her as a founding member on her board participating in all of our board meetings, and not as an outside consultant, if we don't have to do that.

The question is - is it possible that we can we legally have her as an officer on our board (President, VP ect... ) without their being a conflict of interest?   She'd gladly take one of the Appointments and we all would like her to, but just want to know before the appointment is made , is this proper?

Not looking necesarily for legal advise pursee, just want to know what is proper and how situations like this are typically set up. If you can advise us on this, it'd be great.

K.J.

ANSWER: Karl - Thanks for this question.  You have a complex situation here.  My short answer is that you can have this woman on your board, but I wouldn't.

As you know, a potential conflict of interest arises when a board member stands to gain (financially) from the decisions that are being made by the nonprofit.  Your situation is exactly this.  If this board (with this perfect candidate)is making decisions that could increase her profits, her decision-making as a board member could be compromised because she stands to gain from voting a certain way.  She might not be making decisions in the nonprofit's best interests - but instead she might be voting in a way that is in her own best interests.  

Having said that, in most states, conflict of interest is not a problem as long as it's foreclosed to other board members.  If they are AWARE that she stands to gain by her decisions as your board member, AND she excuses herself from voting in instance where she stands to gain, then it is not a problem.

In your case, as your org is still new and young, I would worry not only about the actual legal issues here - but the APPEARANCE of what you are thinking about doing.  How will the other board members be influenced by her presence - knowing that she stands to gain by certain decisions?  How will other donors that you might want to attract feel if they know that she's on your board and she's starting her own business that will be working hand-in-hand with yours?

I hope this helps.  Also, at my web site at the link below, you can download a free copy of a conflict of interest statement and policy that might help you.  

http://boardsthatexcel.com/7-steps/step-1-foundations/

Sincerely, Alyson

---------- FOLLOW-UP ----------

QUESTION: Hi Alyson - And thank you so much for your very thoughtful response.

In waiting for your response I did some online research and found some of the things you advised. Some I'm very confident in what you have suggested.

Yersterday we had a meeting and decided that rather than making this person a voting member of our board I thought it'd be a little simpler just to let her be a voting member of our organization, and the board will decide from time to time whether to use her services and referrals. She'd be able to attend board meetings and express her opinions and ideas (as all other members can) but would not be able to vote as board member. She'd only be able to vote on things that are opened to the entire membership. I think this is proper and I think it would work.

Thanks again and I'd love your thoughts ....

Answer
I think you have found a good solution.  Just be sure that you get as many options in the board room as you can.  This will help your new organization because you will see alternatives and can to debate the pros and cons of each choice.  This is a very important part of your board's responsibilities - choosing among options.  It sounds like you've solved this problem.  There is a free "Starting a new organization" booklet at the bottom of this page at my web site: www.BoardsThatExcel.com/The-market/

Good luck!  Alyson

Fundraising, Management Issues

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Alyson Ball

Expertise

Please send questions about nonprofit boards, nonprofit board committees, the relationship between board and staff, board governance, board roles and responsibilities, board recruitment, board orientations, board meeting and board retreats.

Experience

After a career in the private sector, I moved into the nonprofit sector and have been consulting, teaching and writing about nonprofit boards for the last five years. I teach at the University of Virginia School of Continuing and Professional Studies. I present and facilitate workshops to nonprofit members of associations and chambers of commerce.

Organizations
The Center for Nonprofit Excellence, VANNO (Virginia Network of Nonprofit Organizations, WUP - Women United in Philanthropy

Publications
My articles appear in www.ezinearticles.com which are then picked up by state-specfic nonprofit support groups and others associations and organizations throughout the United States and internationally.

Education/Credentials
Certificate of Nonprofit Management - Duke University, Master of Business Administration - The Wharton School, U. of Pennsylvania, Bachelor of Arts - Cornell University

Awards and Honors
Selected as a guest speak in The Center for Nonprofit Excellence's Board Development Academy.

Past/Present Clients
Past clients include Service Dogs of Virginia, the Ixtatan Foundation, Recording for the Blind and Dyslexic, African-American Teaching Fellows, and the Brockbank Education Fund.

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