Dilemma: Right vs. Right
Best Grants, or Conflict of Interest?
John Fuller is on the board of the Gresner Foundation (the Foundation), a multimillion-dollar family foundation with a 12-member board. John is a family member who often disagrees with the majority of the Board.
John operates his own asset management firm and he is the sole manager of the Foundation's assets. He receives compensation in line with what the Foundation would pay others to manage a portfolio of this size. The Foundation is by far John's largest client. No other board member receives a foundation check, other than a modest per diem for days of board meetings and expense reimbursement.
Market-knowledgeable board members feel that John has performed above average, even well above average at times, although they have not brought in an objective analyst to assess the fund's performance.
The Gresner Foundation diligently tries to be objective and fair in its grant making. It prides itself on its practice of carefully screening all grant applications, making site visits, avoiding "pet projects" of individual board members, and trying to award grants that "make a difference." Over the years certain program areas have emerged as primary Foundation interests, although board members remain open to proposals from outside those fields in order to be responsive to emerging needs.
A problem arises when John begins vigorously advocating for several unusually large grants to grantees whose portfolios he either manages or wants to manage. One grant he particularly lobbies for is to the Foundation's largest award recipient, an institution whose connection to the Foundation goes back years before John joined the board. John currently handles a small part of their rather large endowment.
John also advocates smaller endowment grants to other organizations. Clearly, to have an endowment grant from the Foundation would "make a difference" in their security and in their ability to attract additional endowment support. These organizations are not outside the Foundation's traditional interests, nor does the Foundation have a policy against endowment grants.
If the Foundation gives grants to these applicants, John may be asked to manage the endowment funds for them, presumably at a fee in line with what they would pay to others and assuming their legal guidelines are similar to those governing his service to the Foundation.
Is it ethical for John to manage the Foundation's assets and to vote on grants? If so, is his advocating for and voting on grants that may benefit his business ethical? Does it matter whether or not the grantees pay him at or below the going rate for services rendered? What should the Foundation board do?
Note: This and other dilemmas on this site come to you without their real-life resolutions. We encourage you to think for yourself about how you might resolve them, since the nature of each dilemma is highly individualistic. In sharing these dilemmas, we do not endorse them in any way, but rather offer them for your consideration.
