Nearly all board members assume their responsibilities with good intentions and a degree of humility.

If they weren’t concerned about a community issue – maybe one that affects them personally – they wouldn’t have joined the board.

Perhaps they want to reduce pollution in their neighborhood, or create opportunities for their kids to play music in an orchestra, or cure a disease that afflicts a family member.

Self-interest isn’t automatically bad

To state this differently, self-interest isn’t inherently a bad thing. It can be a powerful force for good.

Nonetheless, there will be moments when personal needs and desires are at odds with organizational goals. This can lead to serious problems in governance.

Is this a conflict of interest … or not?

To help you start a conversation about this topic, I’ve provided three hypothetical examples or case studies below. Take ten minutes at a board meeting to present and discuss one. If you like, you can tackle the second or third at a subsequent meeting.

In reviewing these case studies, consider the following questions:

1. Is this a genuine conflict of interest? If so, how would you define the conflict?

2. Would you ask the relevant board members to recuse themselves or resign? Why? Why not?

3. What’s your strategy for managing the situation? What choices would you make?

4. With the understanding that a perceived conflict of interest can be as damaging as a real one, what messages would you convey to the community – donors, funders, stakeholders, public officials, allies, etc. – about the choices you’ve made?

Case #1: The generous trustee 

Your nonprofit runs out of money while waiting to be reimbursed via its government grant. One of the board members offers a no-interest loan to tide the group over until the government makes payment.

Sounds great, right? However, the trustee’s son works at the nonprofit and without the loan, he might miss some paychecks. Which makes everybody wonder if he’ll be moving in with his parents, and how they feel about that.

Question: Do you accept the loan? If yes, under what circumstances?

Alternate version: What if the employee is the donor’s niece, rather than their son? 

Case #2: Making a profit off public policy

In response to the climate crisis, your environmental advocacy organization promotes renewable energy in all forms, including wind turbines and solar electric installations.

Two of your board members, including the chair, are heavily involved in the development of green energy. Their businesses stand to profit if the state takes a more aggressive position on permitting and siting renewable energy projects.

Question: Do the relevant board members need to resign or recuse themselves in some way?

Case #3: Honey, I’m running for office

Your board chair’s spouse decides to run for office. She has a great track record and her values align with your organization.

Question: Does your 501(c)(4) affiliate endorse her? Do you invest resources in her election? Does the role of the board chair need to change?

Bonus scenarios: Your board chair’s spouse decides to run, but she’s not the best candidate on your issues. How would you handle that situation?

If we were discussing a different relative – instead of the chair’s spouse, how about an ex-spouse, or a child, or a sibling? – would your answer be different?

Define inappropriate before it happens

Having talked through the case studies above, choose a potential conflict of interest that might come up in your own organization and discuss it. If you assume general goodwill and reasonable motives, you’ll find it much easier to reach consensus on what constitutes a conflict of interest.

For example, if you’re a trustee of a school, how far can you go to promote a school policy that would benefit a subset of students, including your own child?

If you’re working to conserve open space, how would you prioritize protection of adjacent land that could increase the monetary value of your own property?

Create examples to debate, then use these examples to develop a policy that applies to all board members. It’s much easier to create these policies before you need them, rather than in the heat of the moment.

A portion of this post is adapted from my latest book, What, Every Board Member Needs to Know, Do, and Avoid.