06/15/2021

Board Conflicts of Interest

Options for effective action

Most association CEOs and general counsel are well aware of the importance of directors fully understanding and exercising their fiduciary duties to the association, including the duty to avoid conflicts of interest. Yet, especially among associations with directors who represent corporate members, conflicts can arise in complex areas, putting the association in difficult and potentially dangerous positions.

Consider this real-life scenario. It involves an industry association with a board primarily comprising individuals nominated by organizational members paying above a certain dues level. The association had a formally established policy position that was well known, was approved by the board, and represented one of its primary policy aims. One board member, based on her employer’s competitive interests, consistently undermined the organization’s position by lobbying against it publicly and assisting her employer in policy-based litigation where her employer opposed the association.

Although a mandate that an association’s directors not act against its established policy positions may seem to invoke an antitrust issue, this is generally not the case. If the association is a voluntary membership organization and if the director and her member company can thrive in the marketplace without association membership, antitrust concerns are rare. When a director acts against a formally established position of the organization, that conduct represents just cause for removal or other disciplinary action against the director, based on a violation of their duty of care (requiring that decisions be made in good faith as a fiduciary of the association from an ethical and legal standpoint) and potentially their duty of loyalty (in placing economic gain from an employer above the association's interests).

Please select this link to read the complete article from ASAE's Center for Association Leadership.