where can I find information regarding non profit corporations and
conflict of interest on behalf of the executive director?

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Request for Question Clarification by rebeccam-ga on 02 Aug 2002 13:21 PDT

What state are you in?  (I work with a NFP organization in California,
and would look first to the California Corporations Code, for
example.)

Thanks!
Rebeccam-ga

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Clarification of Question by phyllis-ga on 05 Aug 2002 09:31 PDT

The non profit organization is in Ohio.

I would highly suggest contacting a lawyer who is a specialist if this
is an important matter.

While I agree that you may need a lawyer, there are other avenues to
pursue first. We do need to know the state where the corporation is
incorporated, this makes a very big difference, if only because we
don’t know where to send you for more information. The applicable laws
vary from state to state. Also, do you have access to the filing which
formed the corporation and contains such important information as what
the purpose of the corporation is?

Although federal code, especially the IRS code and tax rulings
regarding this kind of corporation might be important in some
instances, the way you phrase the question makes it appear that this
would be a matter for local jurisdiction unless the corporation is
publicly traded and thus would come under SEC regulations.

Next, do you have access to the bylaws of the corporation? And, very
important, is this a church? Courts are very reluctant to pursue any
action against churches because of their special first amendment
standing so any violations would have to be blatant and of fairly
large magnitude.

This organization is not a church.  It is a non-profit child care
organization.  The Execvutive Director incorporated another agency in
same feld under his wife's name.  The new corporation was incorporated
while the Executive Director continued working for original
corporation.

I keep hoping that someone based in Ohio will tackle this, I simply
don't know enough about non-profits in that state to give a good
answer, but I can make some general comments which may help.

First, in order to actually gain anything in the way of punishment
even if you could get this to court, you would almost certainly need
to demonstrate some real harm to the owners of the original
organization which is directly related to the actions of the director.

Second, what you describe may not be a conflict of interest at all
depending on the wording of the director's contract, especially any
non-compete clause. In the absence of one courts would probably just
consider this legitimate competition, especially when dealing with a
non-profit.