When running or participating in a nonprofit, it’s common to wear multiple hats—sometimes as a board member, sometimes as a staff member, or even as a contractor. However, it’s important to understand how to navigate these roles legally and ethically. The key is transparency and keeping the nonprofit's best interest at heart, regardless of the hat you're wearing.
Wearing Different Hats: Board Member vs. Employee vs. Contractor
If you’re a founder or a key member of a nonprofit, you may find yourself in more than one role. This is perfectly fine, but think of these roles as different "hats" you wear. The trick is to only wear one at a time to avoid conflicts of interest or ethical missteps.
As a board member, you are responsible for overseeing the governance of the organization and making decisions in its best interest. This is usually an unpaid role, and you should not receive compensation for your board duties.
As an employee or contractor, you can get paid for the work you do in a staff capacity or for professional services (e.g., accounting, legal, or consulting work). However, there are important rules to follow when wearing these hats to avoid conflicts of interest.
Voting on Your Own Compensation
One of the most important rules is that you cannot vote on your own compensation. For example, if you’re both a board member and an employee of the nonprofit, you need to abstain from any board votes regarding your salary or contract payments. The rest of the board can vote on it, ensuring fairness and compliance with nonprofit laws.
Handling Conflicts of Interest
Conflicts of interest can arise when a board member stands to benefit from a decision made by the nonprofit. A common example is when a board member’s company offers a service the nonprofit needs. In these cases, it’s crucial to follow ethical procedures:
Disclosure: The board member must disclose their interest in any transaction where they could personally benefit.
Abstain from Voting: The board member should step back from any decision-making process regarding that transaction.
Review Alternatives: The organization should get competitive bids or review alternative providers to ensure that the board member’s offer is fair and in the best interest of the nonprofit.
For example, I once had a real estate agent and an attorney on my board during my time as a CEO of a nonprofit. We needed help selling a building and were gifted another property. I asked both board members to provide a cost estimate for their services, which we compared to outside providers. The board, excluding these two members, voted to proceed because their rates were better than others. Everything was transparent and managed according to proper procedures.
Can a Board Member Be an Employee?
Yes! It is possible to be both a board member and an employee, as long as you follow the conflict of interest rules mentioned above. For example, if you're a nonprofit founder, you might serve as both a board member and CEO. But again, you must abstain from any board discussions or votes about your salary or employment terms.
Many nonprofit founders choose to step back from board voting roles entirely as their organizations grow, focusing instead on their day-to-day leadership roles. This can help maintain clear boundaries between governance (the board's responsibility) and operations (the staff’s responsibility).
Conclusion
Navigating multiple roles in a nonprofit is not only possible but often necessary, especially for founders. The key is to wear each hat with care, maintaining transparency, and prioritizing the nonprofit's interests. Just remember: keep your conflicts of interest in check, abstain from voting on your own compensation, and ensure decisions are made openly and ethically.