While I voted weakly agree, I would add some caveats:
Anyone who is considering a dual-hatted situation like this needs to clearly understand that they are assuming two different roles and that their obligations in each role will differ. When acting as a nonprofit board member, for instance, the individual owes a duty of loyalty to the nonprofit. They need to be particularly alert to situations in which recusal or even resignation may be required.
In each case, the potential conflicts of interest need to be analyzed. If a conflict exists but is waivable, then it needs to first be waived by someone who can legitimately do so. For instance, in the Claire example, I think there is a conflict between Claire being involved in proposing a grant and in making a recommendation on whether to fund that grant. I also think that conflict is waivable by the ultimate donor. In contrast, if the funds were coming out of a publicly-supported charity, I would likely find the conflict non-waivable because there is no practical way to get ultimate-donor consent.
It’s undesirable to have too large a proportion of funder-linked seats in a public charity. Many larger non-EA nonprofits have rather large boards, which allows them to absorb several seats for major donors (or big fundraisers) without creating too many downsides. For example, having one funder-linked seat out of five seats total would bring this closer to neutral for me. If the board were smaller than that, it would probably move me into negative territory.
the individual owes a duty of loyalty to the nonprofit
I don’t think this is true. This is not what their board seat is for.
a conflict between Claire being involved in proposing a grant and in making a recommendation on whether to fund that grant
I don’t really think this either. I think suggesting that the org is worth supporting is her job. She doesn’t have a conflict of interest here, this is the job of a grantmaker, right?
The duties of a non-profit board member / trustee, including a duty of loyalty to the non-profit, are established by law. I’m not aware of any authority to create board seats whose occupants lack the most fundamental duty of a member / trustee. For example, the Charity Commission (UK) explains that a trustee must “do what you and your co-trustees (and no one else) decide will best enable the charity to carry out its purposes,” and that this duty is not about serving “the personal interests of supporters, funders or donors.”[1]
Thus, in their role as a trustee, the dual-hatted individual must act in the “charity’s best interests.” But in their role as a grantmaker, they owe a duty to their donor(s) to provide the best possible advice. I’d characterize a grantmaker’s job as neutrally evaluating all the grant proposals on their desk and recommending a funding allocation. This advice will not necessarily further the best interests of the charity on whose board the grantmaker sits.
So you have one person performing two different roles (an advocacy-like role and a comparative-evaluation role) on the same grant, each involving a duty of loyalty to a different entity (the organization on whose board the person sits, the donor who the person is advising). That’s a conflict to me, albeit often a waivable one by the donor.
Even on a for-profit board, board members have a fiduciary duty to all shareholders as a whole. A board member who is also a major investor is not exempt from that duty.
While I voted weakly agree, I would add some caveats:
Anyone who is considering a dual-hatted situation like this needs to clearly understand that they are assuming two different roles and that their obligations in each role will differ. When acting as a nonprofit board member, for instance, the individual owes a duty of loyalty to the nonprofit. They need to be particularly alert to situations in which recusal or even resignation may be required.
In each case, the potential conflicts of interest need to be analyzed. If a conflict exists but is waivable, then it needs to first be waived by someone who can legitimately do so. For instance, in the Claire example, I think there is a conflict between Claire being involved in proposing a grant and in making a recommendation on whether to fund that grant. I also think that conflict is waivable by the ultimate donor. In contrast, if the funds were coming out of a publicly-supported charity, I would likely find the conflict non-waivable because there is no practical way to get ultimate-donor consent.
It’s undesirable to have too large a proportion of funder-linked seats in a public charity. Many larger non-EA nonprofits have rather large boards, which allows them to absorb several seats for major donors (or big fundraisers) without creating too many downsides. For example, having one funder-linked seat out of five seats total would bring this closer to neutral for me. If the board were smaller than that, it would probably move me into negative territory.
I don’t think this is true. This is not what their board seat is for.
I don’t really think this either. I think suggesting that the org is worth supporting is her job. She doesn’t have a conflict of interest here, this is the job of a grantmaker, right?
The duties of a non-profit board member / trustee, including a duty of loyalty to the non-profit, are established by law. I’m not aware of any authority to create board seats whose occupants lack the most fundamental duty of a member / trustee. For example, the Charity Commission (UK) explains that a trustee must “do what you and your co-trustees (and no one else) decide will best enable the charity to carry out its purposes,” and that this duty is not about serving “the personal interests of supporters, funders or donors.”[1]
Thus, in their role as a trustee, the dual-hatted individual must act in the “charity’s best interests.” But in their role as a grantmaker, they owe a duty to their donor(s) to provide the best possible advice. I’d characterize a grantmaker’s job as neutrally evaluating all the grant proposals on their desk and recommending a funding allocation. This advice will not necessarily further the best interests of the charity on whose board the grantmaker sits.
So you have one person performing two different roles (an advocacy-like role and a comparative-evaluation role) on the same grant, each involving a duty of loyalty to a different entity (the organization on whose board the person sits, the donor who the person is advising). That’s a conflict to me, albeit often a waivable one by the donor.
Even on a for-profit board, board members have a fiduciary duty to all shareholders as a whole. A board member who is also a major investor is not exempt from that duty.