Brand new nonprofits can face challenges avoided by established organizations. One of the strangest occurs when one person has founded the nonprofit to address a problem about which they feel passionately, especially when they are more concerned about solving the problem immediately than about building a team to solve it.
It makes sense for the person founding a nonprofit to be the executive director: presumably they know more about the mission of the organization and about the problem they are trying to address than other people, and they have demonstrated their dedication to the mission. And it makes sense that this person would want to retain control over the direction of the organization by leading the board. Where it gets weird is when the same person is the executive director and the president of the board.
If the executive director isn’t paid, if the whole thing is a labor of love, then the danger of conflict of interest is very low. But if the executive director’s position becomes large enough to justify a salary, then the founder is setting their own salary for the role of executive director in their role as the board president. This makes a mockery of the board’s governance role and is a serious conflict of interest. It eliminates one of the major checks on financial irregularities. Even if the president is nonvoting or recuses themselves on salary discussions, it is highly unlikely that they aren’t affecting the board’s decisions in ways that can lead to problems down the road.
In most cases, it also means that the organization is now relying on the knowledge and perspectives of just one person – and no matter how good that person is, it limits the organization’s ability to grow and adapt to changing circumstances. A board trapped between the president and the executive director who are the same strong, knowledgeable, passionate person is unlikely to be effective or to provide good ideas that don’t agree with the founder’s.
While technically the founder could avoid the conflict of interest by being the executive director and the nonvoting president of the board, a better path for the long-term good of the organization is for them to decide which role they want to play – governance or hands-on – and find someone else to take the other role. This adds another set of strengths and skills to support the mission, avoids conflicts of interest, helps build an effective board, and reassures donors that the organization is well run. It requires the founder to hand over some of the control, but it supports the organization’s work and sustainability in the long run.