BoardSource® Topic Papers and Articles
Nepotism and Boards
Nepotism — the practice of showing favoritism toward relatives — usually falls under the
purview of management when hiring practices come under scrutiny and supervisory
relationships are challenged. Governance can also become a victim of nepotism when family
members or close relatives work or serve together. The mere situation of having multiple
family members affiliated with the same organization can raise questions concerning
accountability, conflict of interest, and an individual’s ability to make independent decisions.
Both board and staff need to be sensitive to these concerns. Each situation should be
analyzed separately.
Close relations between board members
One of the benefits of a diverse board is a multitude of perspectives. This kind of board tends
to welcome new ideas and nontraditional thinking. Family members or close friends who are
eager to serve on the same board often share objectives. In a small group setting, this
approach may hinder innovation and keep the board from exploring new avenues. To avoid
nepotism, the board should pose the following questions:
Does the organization have well-defined criteria for board service? Are these applied to
each candidate? Is the board choosing candidates for their individual qualifications?
Is the nomination process producing candidates whose qualifications and motives are
genuine?
Does the board have good processes in place to promote independent decision
making?
Can the board trust that couples and family members leave personal issues outside of
the boardroom?
Can the formation of cliques be discouraged by not recruiting couples or family members
together?
Is the board small enough to be vulnerable if family members with similar interests make
decisions? Is it limiting board diversity by inviting members of the same family to join
the board?
If one member of a family or couple leaves the board, will the other one follow suit?
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Is it unfair to focus on established relationships? Couldn’t similar challenges affect other
close friendships formed before or during board service?
Is the board discriminating against candidates on the grounds of their family or marital
status?
Benefits of family service
It is perfectly understandable that in family foundations the board includes numerous family
members from different generations. Family is the backbone of the organization. However,
family foundation boards should also embrace diversity and bring in outside members who
can help balance and facilitate potential internal dilemmas. Some nonprofits get started by the
force of a couple working together, however, it is not necessary for both to serve on the board
as voting members. There are many other ways that a founder’s spouse can get involved with
the organization without turning the nonprofit into a family enterprise.
Close relations between a board member and staff
Some organizations have nepotism and fraternization policies that forbid board members from
having family or other close relations with staff. If a policy does not exist, each situation needs
to be treated as a special case. The board needs to determine whether it can or wants to live
with this potentially problematic situation.
It is not optimal for the spouse or a close relative of a board member to be the organization’s
chief executive. It is nearly impossible for the board member to remain unbiased and
detached when the board discusses the chief executive’s compensation, evaluates
performance or, in general, needs a critical eye to assess the overall success of the
organization. Abstaining from voting could keep this board member out of the boardroom
during most decisions. If a family member remains a candidate for the position of chief
executive, the board member should resign from the board.
If a close relative of a board member is in another staff position, the burden falls to the chief
executive. It is the chief executive who hires and supervises the staff and must be free to
choose the best possible person for a position without any fear of repercussions from the
board. Here are some questions that the board and the chief executive should discuss as a
proactive measure to avoid future problems:
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Does the board have a strong conflict-of-interest policy?
Is there a confidentiality policy?
Is a board member able to make unbiased decisions when a close friend is possibly
benefiting from the outcome?
Should the board be concerned about confidential issues being passed on to staff?
How does the chief executive feel about a staff member having a direct contact with a
board member and possibly passing on unfiltered information to his or her supervisor?
Is it possible that this staff member gains an indirect influence in the operations of the
organization? Would this encourage micromanagement?
Close relations among staff members
Family or close ties between staff members is mainly a supervisory issue. Every organization
should be prepared for a situation where a staff person is supervised by a relative or a close
friend. A policy preventing this can help avoid preferential treatment, including the perception
of favoritism, reverse discrimination, and concentration of power. In addition, a policy can help
promote a principle that superior performance matters for every employee.
How to deal with nepotism
The board should take the time to discuss the definition of ethical behavior and the importance
of full disclosure. It should also pay attention to accountability and internal controls. In
addition, it should consider expanding its view of family relations to include other close
relationships. Lastly, the board should have a policy addressing conflict of interest,
confidentiality, and prevention of nepotism.
References
Daniel L. Kurtz and Sarah E. Paul, Managing Conflicts of Interest: A Primer for Nonprofit
Boards (BoardSource 2006).
Berit M. Lakey, The Board Building Cycle, Second Edition (BoardSource 2007).
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