Understanding Conflict of Interest for a Nonprofit Board of Directors

A nonprofit board of directors is a unique and special governing body. The board of directors holds the ultimate fiscal responsibility for the organization or agency, but depending on the situation, the board can be very involved or not, it can be a hands-on working board, or one that simply meets periodically to rubber-stamp staff decisions. Regardless of how the board functions, however, it is important for board members and executive staff to understand how "conflict of interest" can effect the stability and function of the board.

Unlike a for-profit board of directors, the members of a nonprofit board cannot benefit financially from the work of the organization. This means that board members are not paid'"they do not receive income for their participation and there is no profit to disburse among the members. There may be times when board members need to be reimbursed for expenses incurred while performing their duty, but they should not be "making money" for their participation.

This does not cover the extent of what could be deemed a conflict of interest, however. Care should be taken if board members are related to staff members of the organization or agency, or when a staff member becomes a board member (or vice versa.) It is important that full disclosure be made in order to avoid a conflict. It is also important that a nonprofit board member is not directly trying to cash in from involvement in the organization. For example, if a psychologist is a member of a board of directors for a nonprofit agency providing mental health services to low income clients, he or she cannot be siphoning off clients using information available only to members of the organization.

Full disclosure should be made by board members about their jobs, contacts, and other affiliations. Knowing how everything is related and where they may be potential overlap and conflict of interest can help keep everyone honest and above reproach.