Training & Development

Quint column: Steer boards clear of conflicts of interest

Quint Studer.

Many companies and organizations have some version of a board. Most common are either advisory boards or a board of directors.

The main roles of a board are strategic direction, financial integrity, the selection and evaluation of the top leader, and making sure the company is adhering to all legal requirements. Additionally, fundraising and achieving investments are common add-ons.

There are some important omissions here: I didn’t say day-to-day operations, getting friends/relatives hired or gaining business due to being on the board.

Sadly, those last items take place way too often in some organizations. They also put the leaders in the organization in a very difficult situation.

The board controls the CEO’s pay, so it’s tough for the top executive to tell those who control their future/salary to point out to board members they are overly involved in operations or have conflicts.

I’ve worked with various organizations with boards. The best ones didn’t allow board members to do any business with the organizations they serve.

A board member had to choose: Do I prefer to be on the board or would I prefer to bid for business?

When this ethical policy is brought up, the concern of losing good board members is also brought up. Yes, it’s possible. However, there are plenty of qualified people to take their place. A board really needs to lead this effort to create a board without conflicts of interest. Others put strict limits on dollar amounts.

One way to try and get around this issue would be to have board members self-identify any time a potential conflict arises and leave the room and/or abstain from voting on any issue that involves them.

But if we’re being realistic, even though the person isn’t in the room during a vote, influence is felt since they will still need to share the board room with this person.

Are there times when a board member can be involved in operations? Yes, but it’s in a limited role. Here are times when board member involvement may be good.

Recruitment. Board members should be promoting the company in the community, and as the organization is recruiting talent, a board member or members can be helpful in describing the company and the community to potential hires. This also works in identifying and recruiting board members. They may even identify talent. However, they need to not be part of the selection process.

Specific skills. A situation in which a board member has expertise in a specific area that can be helpful. Perhaps a board member is part of a company that as a great employee orientation program. They can be valuable in providing input as the organization improves its orientation process for new hires.

Investment and fundraising. Board members are vital in this area. From identifying prospects to making the pitch, it’s usually an integral part of the responsibility.

Here are some tips to create and cultivate a healthy board culture:

— Have clear board member descriptions. These spell out the role of a board member. The “what to do” and “what not to do.”

— Measure. Complete a board evaluation each year in which board members evaluate themselves, other board members and the board as a whole.

— Eliminate conflicts. Decide to not have board members who are able to engage in conflicts of interest.

— Have a board education and development system. Great organizations build great boards.

Great boards do not happen by accident. They are built. Clear roles without conflicts are the basic tenants of an effective board.