Stunning Failure of Duty of Loyalty

I attended a board meeting last week that I wish every board member could have experienced. The President of the Board is a senior officer of the company responsible for managing the funds of the organization and there is a voluminous list of “accounting errors”, “mis-codings”, and “mis-allocations”, which are to the benefit of XYZ, the board president’s company. The organization has repeatedly requested both an accounting of the mis-directed funds and proper oversight of the funds. A series of resolutions were presented to address those requests. Here’s the dialogue that ensued:

Member: As has been acknowledged by the president and at other meetings, there are significant accounting issues related to XYZ and its management of these funds or mismanagement of the funds and let’s hope it’s not worse than just mis-management. Because of those issues and the resolutions that are being contemplated tonight I guess I want to know if you, President, are going to be recusing yourself from the discussion of this? You are an officer of XYZ, right? President: Yes.   Member: So given your fiduciary responsibilities and legal responsibilities to XYZ, do you see yourself in any conflicted position as the President of the organization to discuss and vote upon any issues relating to the performance, mismanagement and perhaps illegal conduct of XYZ with respect to the organization. President: I do not.   Member: So you are prepared to vote tonight, as a Senior Officer of XYZ? President: correct. Member: The question is are you going to recuse yourself from a discussion of your company’s management of this facility or are you going to vote the interest of XYZ?   That’s the question.   President: I’m not prepared to answer that. Owner: Ok. Well hopefully other members of the board will be moving the resolution to have the accounting done by XYZ for it’s acknowledged mismanagement of organization funds.
Move and seconded resolution: “XYZ is to provide a full accounting of all funds owed the organization..
President: That’s a no. Member: So you’re participating in the vote? President: yes.

It was a stunning example of a board member breaching their fiduciary duties…. and it is not a case study.  It’s real life.   There was a tape recording made of the meeting and I expect we will be hearing more about this.  This also addresses issues of culture  and Tone at the Top emanating from the top leadership of XYZ….. and this is real life.

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About hopsuz

Experienced leader, both as CEO and as board Chair. Founder of the 25 year old The Hopgood Group, LLC. Co-author of the award winning "Board Leadership for the Company in Crisis". Consultant to companies large and small. Expertise in board evaluations and leadership challenges.
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One Response to Stunning Failure of Duty of Loyalty

  1. blarneycrone says:

    Yikes–you can pick ’em

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