Staff on the Board – Is it a conflict of Interest?

You Asked: The institution where I work has a long-standing tradition of having a number of staff members on the Board of Directors. Recently this has caused some hard feelings within the staff, because someone got a promotion that we thought someone else deserved. Some of us think it happened because staff members who are also on the Board pressured the CEO. What do you think about having staff members on the Board? Is it a conflict of interest or an abuse of power?

Answer: I think you just asked me to open a can of worms. There are many different traditions and practices in various kinds of organizations. Therefore, this is a very complex question. Although it may be a pretty straightforward conflict of interest in your case, I don’t have enough information about your institution to determine that. Here’s some information that may allow you to answer your own question.

Whenever there is one individual on two different levels of authority, there is the potential for a conflict of interest. And, by the way, an actual conflict of interest and the abuse of power are the same thing in my view. Which term is used depends upon the degree of abuse. There is a greater difference between the terms “conflict of interest” and “potential conflict of interest”.

Let me illustrate. It’s quite possible that an organization’s bylaws may require that the board include representatives from the staff. This may occur where the organization wants professional members of the staff to help guide the strategic direction of the organization. Even where this design has been incorporated with the best of intentions, it introduces a potential conflict of interest, but not necessarily an actual conflict of interest where power is abused.

The defining ingredient is what the individual does with the potential conflict of interest. If a person who wears these two hats decides to wear them both at the same time, then potential conflict becomes actual conflict and power is being abused.

It is vital that any staff member who is elected or appointed to membership on the board removes his or her staff hat before entering the boardroom. This does not mean that information that will help the board in planning and decision-making should not be shared. That’s probably the reason for the staff member being there. It does mean, however, that the staff member will act only as a board member, that is, only with the best interest of the entire organization in mind, not just a part of it. This is where the difficulty arises. This can be a very fuzzy line that can be missed even by the person trying to stay on the right side of it.

The most common potential conflict of interest occurs when the CEO is a voting member of the board. In such case the CEO is also a member of the group that is his or her source of authority. Thus, the CEO’s accountability is compromised by being partially accountable to oneself. Adding to this potential conflict is the reality that the CEO usually has more information than the other board members. The board may acquiesce or be manipulated or both in this case.

In my view the CEO should never be a voting member of the board. The potential for the abuse of power is simply too real. There should be a clear line between levels of authority, responsibility and accountability, particularly between board and CEO.

The decision about staff other than the CEO being on the board is more complex depending on too many factors to mention here. I am inclined to say that in most cases there is a better way to bring to the board the information, insights and concerns of staff than to elect or appoint them to the board.

Incidentally, another potential conflict of interest involves family members and married couples at multiple levels of authority. In such cases the close relative or spouse may not have a second level of authority oneself but would have unequal access to that authority. This is even more complex and is well beyond the scope of this article.

In your case, if it can be objectively demonstrated (by someone other than the board or the staff) that the staff member of whom you speak actually used their position on the board to prevent one promotion and to secure another, then there is a clear conflict of interest and an abuse of power. Of course, the conflict of interest or abuse of power does not need to take place during a board meeting, as your example may suggest. If, on the other hand, the person gave factual information in a meeting and abstained from the vote or consensus process in order to avoid a potential conflict of interest, it is less likely that there was actual conflict and abuse of power.

Unfortunately, it is usually difficult to determine whether the conflict is potential or actual, because it may depend on a person’s inner motivation. It is very difficult and perhaps impossible to verify that a person’s motivation is different than what is presented by the person. It’s for this reason also that it is better not to design potential conflicts of interest into the structure of an organization.

Les Stahlke, President/CEO
GovernanceMatters.com Inc.