This week, we are discussing board ethics. How to remain ethical while on a board, typical examples of potentially unethical behavior, and a litmus test to determine whether or not you should take specific actions.
“Are the actions I take going to break the public trust? Then you shouldn’t do it.”
Transcript:
On this week’s episode, the i501(c) You, the podcast four nonprofit board members. I’m going to talk a little bit about board ethics. Actually, I was in a meeting this past week and want somebody listen to the podcast say, Hey, I’ve got a meeting with a number of board of directors. Do you have anything on board ethics? We want to have that discussion.
And I said, We’ve touched on this topic throughout various podcast myriad ways, this podcast from a couple of weeks ago. Certainly touch a lot on ethics. If you go back to Cliff Walter’s episode, we touched on board ethics a little bit within the context of governance. So I thought what I would do is just synthesize this a little bit.
So Wayne, this one’s for you. If you’re having and still having that conversation on board ethics. Let me address a few items for you.
Hey, I want to jump in real quick. Somebody asked me the other day, what does the CORLEY Company do? Well, we do three things for non-profits. One, we facilitate meetings. Yes, like board retreats where we discuss governance and strategy with all the members of the board. Number two, advise CEOs and help them as they make decisions and implement actions to drive their mission.
And then finally, we produce podcasts such as this one, but also for a number of nonprofits to help you get the word out, get your message out. So if you’re interested in any of these services, please feel free to reach out to Michael@thecorleycompany.com. Now back to the podcast.
Interesting. And it really starts with the IRS. Yes. The Internal Revenue Service, if you go to the code, the IRS, a Section 501c3 must not be organized or operated for the benefit of a private of private interests.
So really, it starts right there. At the IRS level, the organization’s been designated tax exempt, and that means it cannot benefit anybody privately. Most board ethics issues are because somebody is trying to benefit as an individual. That’s called endearment. That is a big no no,
also here in Florida. If you look at chapter 617 in the Florida code, right there explicitly, it says, I’m going to paraphrase. So I guess it wouldn’t be explicitly duty of care and duty of loyalty under the obligations of a board of directors for a nonprofit, a duty of care, discharge your duties in good faith, try be educated.
What a prudent person would do. That is your obligation as a board member. Duty of loyalty. And here it is. You must operate in the best interest of the nonprofit and not your own interest. So that right there is trying to legislate ethics, which I that’s a whole discussion you could have in philosophy, whether you can legislate ethics or not.
And of course, then there’s also the duty of obedience, which isn’t explicitly in the Florida code, but your job is to support the mission of the nonprofit. So why is this why why is this important? You know, because nonprofit, it’s really rely on the public trust in order to do their work and advance the mission. And you as a board member, therefore, should do everything to advance the public trust, trust with the donors, trust with the community, trust with the public, with staff, whomever. You never want to do anything which is going to inhibit that trust.
Ethics. If you breach the ethics, you start to inhibit the trust that you have built. So specific examples, you know, everybody goes, well, everybody looks at a little bit differently. And that may be but, you know, as a board member, if you are going to benefit, if you have a interest, financial interest in space, that you want to lease to the nonprofit, that’s a no no.
That’s just unethical. Is it illegal? No, it’s not illegal, but it’s certainly unethical even to the point because it starts to breach the trust. People find out about it, they’re going to start to question, Wait a second. Is this guy is this gal in it for the organization or are they in it for themselves? We had a situation I’ve seen this situation a number of times where you have the CEO position becomes vacant and any board member steps in as interim CEO but maintains their seat on the board.
Well, that’s a conflict that’s inherently wrong. That just starts to break the trust with the public good and with people in the public, because why in the world would somebody sit on both? Step off the board, become the interim CEO, go back on the board, any vendor type of relationship. If you have a financial interest or you’re a marketing company, you want to provide marketing services to the nonprofit.
Is it illegal? No. Is it unethical? Arguably, because it’s going to break that trust, people are going to start to question things. So when we talk about ethics, very hard to legislate, very hard to quantify, to write down what is ethical or not, but use this as a litmus test. If the actions I take the vote I take, is it going to in any way spring break the trust that this organization has with the public, with its donors, then you shouldn’t do it, because once you start doing that, you’re breaking that public trust and it really starts to cause problems for that, that nonprofit.
So is there a book and I’m sure there’s probably a book on, you know, at the end of the day, what they told us in kindergarten. Right. Just do the right thing. Do the right thing. Put the organization first. You can go make money elsewhere. You can go do things elsewhere. But if you sit on the board of a nonprofit, you have a higher level, a higher expectation of integrity to put that organization first.
Once you stop doing that, it really does begin to hurt things. Not right away, but over time it certainly could. So anyway, so my rule of thumb or my suggestion, anybody is be conscientious, be very intentional about joining a nonprofit board. When you do that board becomes number one. Do not use as an opportunity to generate business for your organization, for your company.
You put that nonprofit first and you make decisions for the best interests of that nonprofit, recognizing that you are not going to benefit. And that’s okay because that is how you build trust. Put that nonprofit first so that I’ll get off my high horse. Now preaching to I know, to the choir, to many of you. But I thought that may be helpful for some of you that may be grappling with and certainly way and I hope that helps a little bit.
And this is Michael Corley with the 501cYou the podcast for nonprofit board members and we’ll see next week.
Timestamps:
00:00 – Board Ethics
01:20 – It starts with the IRS and State code
02:50 – Why is this important?
03:20 – Specific examples
05:40 – Be intentional about joining a nonprofit board
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