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    15 Replies Latest reply on Feb 14, 2008 12:07 PM by Excellent

    Board members and business owners

    legacy653 Newbie

      Hello,
      Nonprofit board members sometimes have their own businesses. Is it a conflict when the nonprofit uses said board members services? i.e. Board member own "xyz t-shirts", nonprofit orders 5k shirts from "xyz t-shirts".

      Any feedback is appreciated!
        • Re: Board members and business owners
          BDS INC Adventurer
          It's generally only a problem when the business does not accept competitive bids. So for instance, non profit could get 5000 tee shirts from Joe's T-shirts for $2500, but instead buys same quality T-shirts from board member for $6000.
          1 of 1 people found this helpful
            • Re: Board members and business owners
              legacy653 Newbie

              So, it is up to the board member to make sure the nonprofits' interests are served? i.e. gives the best price by giving a discount, donation or barter so that nonprofit benefits?

               

              I guess the board member may not make as high a profit as with a regular customer, but that is part of giving back. Which makes me ask, is it ethical for the board member to profit at all from the organization he serves on?
            • Re: Board members and business owners
              Excellent Adventurer
              In my opinion, I would think it would be a conflict of interest.
              • Re: Board members and business owners
                Ed O'Gee Adventurer
                agree with BDS but excellent does make a point. I think a good thing for you to do is to put up blind bids. Whatever your business is, you'll bid on the non profits business just like everyone else. You should take yourself out of the contract review process and leave that up to other board members, that way there is no real conflict.
                • Re: Board members and business owners
                  LUCKIEST Guide
                  Try this one, Maybe this answers your question

                  Directors must act honestly and in bona fide. The test is a subjective one—the directors must act in "http://en.wikipedia.org/wiki/Good_faith+ in what they consider is in the interests of the company...
                  However, the directors may still be held to have failed in this duty
                  where they fail to direct their minds to the question of whether in
                  fact a transaction was in the best interests of the company.

                  In relation to a http://en.wikipedia.org/wiki/Company_%28law%29, a director
                  is an officer (that is, someone who works for the company) charged with
                  the conduct and management of its affairs. A director may be an inside
                  director or an
                  outside, or independent, director.
                    Theoretically, the control of a company is divided between two bodies: the board of directors, and the http://en.wikipedia.org/wiki/Stockholder in http://en.wikipedia.org/wiki/General_meeting. . In small private companies, the directors and the
                  shareholders will normally be the same people, and thus there is no
                  real division of power. .
                  LUCKIEST
                  • Re: Board members and business owners
                    Lighthouse24 Ranger
                    EVERY non-profit I have been involved with has this statement in it's Code of Ethics or Code of Conduct for board members: "No individual board member shall profit from the organization." If it is in the best interest of the organization, a member may supply a product or service to the organization at his/her actual (auditable/verifiable) cost, but not at a profit. (Some previous posts obviously reflect a different viewpoint and experience, so ultimately it's the specific organization and individual who have to decide what's right.)
                      • Re: Board members and business owners
                        Excellent Adventurer
                        In reference to the quote, "No individual board member shall profit from the organization," does that mean that if someone is on the board of directors for a non-profit agency and that same person owns a for profit business that this person can not do business with the non-profit agency for whose board this person sits on?
                          • Re: Board members and business owners
                            Lighthouse24 Ranger
                            In my board experience, the board member's for-profit company would be allowed to supply a product or service to the non-profit organization (if the board agreed that is was in the non-profit's best interest) -- but the for-profit company would have to supply that product or service at actual/verifiable cost (i.e., the company/owner could not profit from it).

                            If we think that something MIGHT be an ethical issue, it's almost a sure bet that at least a few other people will conclude that it IS an ethical issue (and at least one of them will contact the media about it).
                        • Re: Board members and business owners
                          Lucky7 Newbie
                          That's a legal question and there's a lot more to it than yes or no.

                          I would suggest consulting with an attorney because there are legal issues for you as a board member, the organization itself, and your company providing the product or service to the non-profit.

                          It can get complicated and you don't want to damage the reputations of anyone involved.
                          • Re: Board members and business owners
                            capecoach Newbie
                            I can be more the appearance of a problem than a real problem. It would be great if the Board member offered his goods and services 'at cost' or for free. If not, make real sure that you are getting competitive bids before you select that Board member.