January 9, 2024 • 6 mins
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.”
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
Join us every week as we release a new podcast with information about how you can be the best board member and provide great service to your organization.
Listen to the podcast on any of the following platforms:
Apple Podcasts
Spotify Podcasts
Amazon
iHeartRadio
Visit us at: www.thecorleycompany.com/podcast
Mark as Played
Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
(00:00):
On this week's episode, the i501(c) You,the podcast four nonprofit board members.
I'm going to talk a little bit about boardethics.
Actually, I was in a meetingthis past week and want somebody
listen to the podcast say,
Hey, I've got a meetingwith 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
(00:23):
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 bitwithin the context of governance.
So I thought what I would dois just synthesize this a little bit.
So Wayne, this one's for you.
If you're having and still havingthat conversation on board ethics.
(00:43):
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 strategywith all the members of the board.
Number two, advise CEOs and help themas they make decisions
and implement actionsto drive their mission.
(01:04):
And then finally, we produce podcastssuch as this one, but also
for a number of nonprofits to help youget the word out, get your message out.
So if you're interestedin any of these services,
please feel free to reach outto 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,
(01:25):
the IRS, a Section501c3 must not be organized
or operated for the benefitof a private of private interests.
So really, it starts right there.
At the IRS level, the organization'sbeen designated tax exempt,
and that means it cannot benefitanybody privately.
(01:46):
Most board ethics issues arebecause 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 617in the Florida code,
right there explicitly,it says, I'm going to paraphrase.
So I guess it wouldn't be explicitly dutyof care and duty of loyalty under
(02:09):
the obligations of a board of directorsfor 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 ofthe nonprofit and not your own interest.
So that right there is trying to legislateethics, which I that's a whole
(02:34):
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'texplicitly in the Florida code,
but your job is to supportthe 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 workand advance the mission.
(02:56):
And you as a board member,therefore, should do everything to advance
the public trust, trust with the donors,
trust with the community,
trustwith the public, with staff, whomever
want to do anythingwhich is going to inhibit that trust.
Ethics.
If you breach the ethics, you startto inhibit the trust that you have built.
(03:19):
So specific examples,you know, everybody goes, well,
everybody looks ata 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 leaseto the nonprofit, that's a no no.
That's just unethical.
Is it illegal?
No, it's not illegal,but it's certainly unethical
(03:41):
even to the pointbecause it starts to breach the trust.
People find out about it, they're going tostart to question, Wait a second.
Is this guy
is this gal in it for the organizationor are they in it for themselves?
We had a situationI've seen this situation a number of times
where you have the CEO positionbecomes vacant and any board member
steps in as interim CEObut maintains their seat on the board.
(04:05):
Well, that's a conflictthat's inherently wrong.
That just starts to break the trustwith the public good and with people
in the public, because why in the worldwould somebody sit on both?
Step off the board, become the interimCEO, go back on the board,
any vendor type of relationship.
If you have a financial interestor you're a marketing company,
(04:26):
you want to provide marketing servicesto the nonprofit.
Is it illegal? No.
Is it unethical?
Arguably, because it's going to break
that trust, people are goingto start to question things.
So when we talk about ethics, very hardto legislate, very hard to quantify,
to write down what is ethical or not,but use this as a litmus test.
(04:49):
If the actions I take the vote I take,is it going to in any way
spring break the trustthat 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 problemsfor that, that nonprofit.
(05:10):
So is there a bookand 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 boardof a nonprofit, you have a higher level,
a higher expectation of integrityto put that organization first.
(05:31):
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 thumbor my suggestion, anybody is
be conscientious, be very intentionalabout joining a nonprofit board.
When you do that board becomes number one.
Do not use
(05:51):
as an opportunity to generate businessfor your organization, for your company.
You put that nonprofit firstand you make decisions for the best
interests of that nonprofit, recognizingthat you are not going to benefit.
And that's okaybecause that is how you build trust.
Put that nonprofit firstso that I'll get off my high horse.
Now preaching toI know, to the choir, to many of you.
(06:13):
But I thought that may be helpful
for some of you that may be grappling withand certainly way
and I hope that helps a little bit.
And this is Michael Corley
with the 501cYou the podcast for nonprofitboard members and we'll see next week.
On this week's episode, the i501(c) You,the podcast four nonprofit board members.
I'm going to talk a little bit about boardethics.
Actually, I was in a meetingthis past week and want somebody
listen to the podcast say,
Hey, I've got a meetingwith 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
(00:23):
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 bitwithin the context of governance.
So I thought what I would dois just synthesize this a little bit.
So Wayne, this one's for you.
If you're having and still havingthat conversation on board ethics.
(00:43):
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 strategywith all the members of the board.
Number two, advise CEOs and help themas they make decisions
and implement actionsto drive their mission.
(01:04):
And then finally, we produce podcastssuch as this one, but also
for a number of nonprofits to help youget the word out, get your message out.
So if you're interestedin any of these services,
please feel free to reach outto 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,
(01:25):
the IRS, a Section501c3 must not be organized
or operated for the benefitof a private of private interests.
So really, it starts right there.
At the IRS level, the organization'sbeen designated tax exempt,
and that means it cannot benefitanybody privately.
(01:46):
Most board ethics issues arebecause 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 617in the Florida code,
right there explicitly,it says, I'm going to paraphrase.
So I guess it wouldn't be explicitly dutyof care and duty of loyalty under
(02:09):
the obligations of a board of directorsfor 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 ofthe nonprofit and not your own interest.
So that right there is trying to legislateethics, which I that's a whole
(02:34):
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'texplicitly in the Florida code,
but your job is to supportthe 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 workand advance the mission.
(02:56):
And you as a board member,therefore, should do everything to advance
the public trust, trust with the donors,
trust with the community,
trustwith the public, with staff, whomever
want to do anythingwhich is going to inhibit that trust.
Ethics.
If you breach the ethics, you startto inhibit the trust that you have built.
(03:19):
So specific examples,you know, everybody goes, well,
everybody looks ata 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 leaseto the nonprofit, that's a no no.
That's just unethical.
Is it illegal?
No, it's not illegal,but it's certainly unethical
(03:41):
even to the pointbecause it starts to breach the trust.
People find out about it, they're going tostart to question, Wait a second.
Is this guy
is this gal in it for the organizationor are they in it for themselves?
We had a situationI've seen this situation a number of times
where you have the CEO positionbecomes vacant and any board member
steps in as interim CEObut maintains their seat on the board.
(04:05):
Well, that's a conflictthat's inherently wrong.
That just starts to break the trustwith the public good and with people
in the public, because why in the worldwould somebody sit on both?
Step off the board, become the interimCEO, go back on the board,
any vendor type of relationship.
If you have a financial interestor you're a marketing company,
(04:26):
you want to provide marketing servicesto the nonprofit.
Is it illegal? No.
Is it unethical?
Arguably, because it's going to break
that trust, people are goingto start to question things.
So when we talk about ethics, very hardto legislate, very hard to quantify,
to write down what is ethical or not,but use this as a litmus test.
(04:49):
If the actions I take the vote I take,is it going to in any way
spring break the trustthat 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 problemsfor that, that nonprofit.
(05:10):
So is there a bookand 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 boardof a nonprofit, you have a higher level,
a higher expectation of integrityto put that organization first.
(05:31):
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 thumbor my suggestion, anybody is
be conscientious, be very intentionalabout joining a nonprofit board.
When you do that board becomes number one.
Do not use
(05:51):
as an opportunity to generate businessfor your organization, for your company.
You put that nonprofit firstand you make decisions for the best
interests of that nonprofit, recognizingthat you are not going to benefit.
And that's okaybecause that is how you build trust.
Put that nonprofit firstso that I'll get off my high horse.
Now preaching toI know, to the choir, to many of you.
(06:13):
But I thought that may be helpful
for some of you that may be grappling withand certainly way
and I hope that helps a little bit.
And this is Michael Corley
with the 501cYou the podcast for nonprofitboard members and we'll see next week.
Popular Podcasts
Dateline NBC
Current and classic episodes, featuring compelling true-crime mysteries, powerful documentaries and in-depth investigations.
Stuff You Should Know
If you've ever wanted to know about champagne, satanism, the Stonewall Uprising, chaos theory, LSD, El Nino, true crime and Rosa Parks, then look no further. Josh and Chuck have you covered.
The Nikki Glaser Podcast
Every week comedian and infamous roaster Nikki Glaser provides a fun, fast-paced, and brutally honest look into current pop-culture and her own personal life.