Interesting Conflict? Two Nonprofits Boards, Seeking Same Funding & Clients, Has One or More Board Directors Who Are the Same? — First of a series of two.

Interesting Conflict? Two Nonprofits Boards, Seeking Same Funding & Clients, Has One or More Board Directors Who Are the Same? — First of a series of two.

By Eugene Fram

It is not unusual to for two “competing” nonprofit’s to have a person(s) who fills a position on both boards. Examples: universities, and health care agencies. This dual volunteer deployment raises conflicts for the individual and for the organization.
• How should such nonprofit board members handle competitive information?
• To which organization does the board member owe allegiance in soliciting funds?
• How should these nonprofit board members direct their charitable gifts
• Most importantly, should public policy support, or even encourage, nonprofits to compete?

Results of 27 personal interviews with volunteer directors and CEOs focusing of the first and last questions. The respondents represented a wide range of charitable nonprofits.*
• There is no conflict of interest having the common director(s) share information. However, information sharing should be circumscribed so as not to give one organization advantage over the other. For example, sharing critical financial information, personnel information, marketing plans and donor lists would not be fiducially responsible.
• It is difficult or impossible to serve two masters. Taxes the volunteer’s loyalty. Yet it is a fact of life in many communities.
• The vast majority of respondents had a Free Market Philosophy relating to nonprofit competition. They even felt it acceptable to spend charitable dollars to fund an organization’s deficit resulting from competitive activity with another nonprofit.
Obviously the minority who favored a Regulated Market Philosophy felt that competition among nonprofits should be discouraged. Funding should be based on who is doing the best job for clients, not who is doing the best advertising. One person reported that it is theoretically sound to discourage nonprofit competition, but the reality is that it is difficult not to compete.

Has the recent recession kindled additional overt and latent competition among nonprofits, since this study? If it has, can data be developed showing charitable resources are being expended to support competition, even if the data are imperfect?** Can nonprofit directors and the public agree on competition’s benefits?
* Eugene Fram & Judy Withers (1999) “Conflict of Interest in the Board Room?” NONPROFIT WORLD, #2, MARCH/APRIL, PP. 19-21.
**JERRY TALLEY & EUGENE FRAM (2010) “Using Imperfect Metrics Well Tracking Progress & Driving Change,” LEADER TO LEADER JOURNAL, winter 2010, pp. 52-58.

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