Articles

Board Members with Boundary Issues – A Significant Risk to the Organization

Jim sits on the board of a large non-profit, a position he has held for several years. During that time he became friends with the CEO, playing golf with him, joining him and his wife for dinner at least once a month, and visiting the CEO at his office during the week. Recently, several complaints of sexual harassment filtered up to the board. Jim was adamant that his “friend” would not have done what was alleged. “The claimants are all liars, and this is a calculated smear job,” Jim said at the most recent meeting, noting that he had assurances from the CEO that it was all untrue. He also accused the board president of “plotting a coup.”

Jim’s wife Brenda sits on the board of a local Christian organization providing shelter and food for the homeless on a non-denominational basis. Brenda and several other board members were deeply concerned when the organization recently hired a Sikh as the organization’s CFO. The top tier positions in the organization, they felt, should go someone who held their particular religious faith. They also challenged the board president to develop a policy to put this rule into effect, threatening to withhold their support for her if she refused.

Both scenarios may seem oversimplified, but they reflect real world situations where a board member misunderstands the scope of their duty and responsibilities as a steward and fiduciary of the organization. Board members owe a duty to the organization to act in good faith, with due care and loyalty to its interests. They likewise owe the organization confidentiality and must act to protect the organization from claims and liabilities where possible.

In Jim’s case, his friendship with the CEO is interfering with his, and perhaps the Board’s, ability to directly address allegations, which may not only present legal liability to the organization but damage to the organization’s public reputation as well. Any allegations of wrong doing should be reviewed and investigated as appropriate. To summarily reject the allegations, and accuse other members of the board of acting in bad faith subverts these obligations. Likewise, his comments suggest that confidential information from the board meetings has been shared with the CEO. If true, that would represent another breach of Jim’s fiduciary obligations. In this situation, Jim needs to be reminded of his obligations and if he is unable to act fairly on behalf of the organization due to his friendship with the CEO, he needs to recuse himself.

Brenda’s case presents a somewhat different issue, but should raise equal concerns. On its face, Brenda’s asserted concern that the senior level positions within the organization do not reflect the charity’s Christian faith, may appear reasonably related to the mission of the organization. The issue is more complex, however, and requires consideration of both the nature of the organization and the position in question, lest the refusal to hire an employee based on his or her religion, results in a discrimination claim.

While it is true that Title VII of the Civil Rights Act of 1964, as amended, has an exclusion for religious corporations, associations, educational institutions and societies in hiring persons doing work “connected with carrying on” the entity’s activities, the precise scope of this provision as it relates to religiously affiliated charities is not always clear.

The objections raised by Brenda and some of her colleagues, however, raise other questions:  Is religious identity even necessary to a position that involves the organization’s finances?  Is the organization better served by having the most capable person in the role regardless of the person’s religious identity?  Is the decision really one that should be made by the CEO, not the board members, given her responsibility of oversight of the position and general responsibilities for the management of the organization?  From this vantage point, would dictating the religious identity of the CFO be in the best interest of the organization and does it usurp, for the board, a function that really resides with the CEO, absent some provision of the bylaws vesting the authority in the board?

The question that Brenda and her colleagues raised should be dealt with on a more fundamental level, without targeting a specific hire. The process also requires respect for those to whom the authority to hire is delegated, with minimal interference from the board. The seductive lure of becoming involved in personnel decisions, as my colleague Steve Bers’ article discusses, is all too alluring quicksand, which puts the organization at risk. Here too, overreaching takes the board outside of its normal oversight and stewardship role. The results can be destabilizing, particularly if other members of the board feel threatened in the process.

To better understand these risks and whether actions taken by board members are overreaching, please contact Peter D. Guattery for more information.