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Markkula Center for Applied Ethics

Too Close for Comfort?: Conflicts of Interest

Conflicts of Interest at a Nonprofit

Kirk O Hanson

Jack Carson, executive director of New Chances, a nonprofit housing agency that had built and now managed 15 apartment complexes for low and moderate income residences in the area, was preparing for the organization’s bi-monthly board meeting. He was uncertain how to handle two of his board members and their requests. One, a local business owner, had asked Jack for the chance to bid on the electrical contract for the next complex to be built by New Chances. The other, a local church leader, had heard about the first’s interest, and urged Jack to press for a policy that no member of the board could have a business relationship of any kind with the organization.

As Jack thought through the dilemma, he realized that the other major electrical contractor in town had not survived the housing bust and was now out of business. There were smaller firms but he was not sure any of them had done a project as large as this. Secondly, he realized the husband of one of the other board members owned a large office supply store where New Chances bought all of its supplies, and the son of yet another was an executive with the maintenance company that serviced New Chances’ properties.

Where should New Chances draw the line in contracting with board members and their families?

Kirk Hanson is the executive director of the Markkula Center for Applied Ethics at Santa Clara University. This case was presented to the American Leadership Forum and to MBA students in SCU's Leavey School of Business.

Jan 1, 2012