Dealing With Director’s Abuse of Power

Question: With great power, comes great responsibility. But what happens if those with the power to ensure stringent corporate governance, bends the rules to attain his personal goals or returns a friend’s favor, that conflicts with the company’s well-being.

If a non-[profit] executive director, who is heading the Audit Committee of a listed company – is known to be acting upon personal goals than the company’s benefit, is there a process by which ‘mis-use of authority’ exhibited can be curtailed.

Are there any red-flags where such behavior is exposed?


Nonprofit executives (as wells a corporate executives) often times place themselves in some dangerous positions by taking advantage of and abusing their power which can have a devastating impact on an organization. This type of behavior should not be tolerated. Here are a few solutions to the problem you stated:

1. First, an executive director should not be heading up any committee unless this person is actually on the board (as a board member). All nonprofit board committees are required to have at least one board member on the committee. The committee can have other people on the committee that are non-board members; however, the board chair appoints a person from the board to head up the committee.

2. Nonprofit organizations should have some policies and procedures that address what steps should be taking to whistle-blow any wrong doing within the organization (Check to see if your organization has a whistle-blowing policy). Check the organization’s bylaws… This can be accessed directly from the organization or through the secretary of state where the agency is based. Here are some ways to determine if a behavior has crossed the line:

* Directors have a duty of loyalty. This dictates that officers/directors must act in good faith and must not allow their personal interests to prevail over the interests of the organization. Has this been violated? If so, this is a red-flag.

* Directors have a duty of obedience. This requires directors and officers to be diligent and prudent in managing the organization’s affairs.

* Directors have duty of care. This forbids directors from acting outside the scope of corporate powers.

3. Finally, remember that at the committee level no decisions are made in regards to governance. The committee gives a report, executive summary, or recommendations to the board and they make the decisions about appropriate actions. If you see that the abused is still not being addressed, here are potential next steps to consider:

* Report your complaint to the Attorney General of the state which the organization is based in (or was filed as a nonprofit).

* If the problem still is not addressed, as a final resort consider taking the matter to the press.