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What happens when an internal Trustee finds themselves in a conflicted position? For example:


-Financial Interest: An internal trustee is also a shareholder or has a significant financial interest in a company that the organization is considering entering into a business relationship with. This conflict of interest arises because the trustee’s personal financial gain may influence their decision-making process regarding the business relationship, potentially compromising their duty to act in the best interests of the organization.


-Personal Relationship: An internal trustee has a personal relationship, such as a close friendship or familial tie, with an individual or organization involved in a decision or transaction that the organization is undertaking. This personal relationship may create a conflict of interest as the trustee’s loyalty or bias toward the person or entity could impact their ability to make impartial decisions in the best interests of the organization.


-Professional Opportunity: An internal trustee is presented with a professional opportunity outside of their role within the organization that could potentially conflict with their duties as a trustee. For example, a trustee may be offered a job or consulting opportunity with a competing organization, which could create a conflict of interest if their actions as a trustee could potentially benefit the competing organization to the detriment of their current organization.


What is the prudent action for the internal Trustee to do in these cases? Recuse themselves and bring in an external Trustee to work on this one specific issue.


Once the issue is resolved, the external Trustee can step back and the internal Trustee can resume normal duties.


Facing a similar situation? Let’s talk.