Is a Strong Conflict of Interest Policy Enough? A Morality Play, Act I

The University of Miami and its president Donna Shalala got an early but ugly Valentine on February 13 when the community woke up to a front-page article in the Miami Herald entitled, "Shalala’s side job stirs up concerns." It turns out that Dr. Shalala has been sitting on two corporate boards with her trustees’ blessing. The fact that she is making for her board service more than $360,000 each year – on top of her greater than $1 million annual salary from the university – in a time of upset with the One Percent wasn’t the biggest shock. It was that the corporations are owned by university trustees.

First, I must say that I have always held Dr. Shalala in the highest regard and I trust that her ethical standards and those of her trustees Roger Medel (Mednax) and Stuart Miller (Lennar) are above reproach. I’m confident, too, that all three organizations involved here have strict conflict of interest policies to which they adhere. But that doesn’t mean that those who care about the University of Miami shouldn’t be apprehensive.

When working with clients I always suggest that the litmus test for any decision is how you will feel if you wake up one morning to find the resulting situation on the front page of the newspaper. Tuesday the 13th, it was. And the response wasn’t pretty, if the Herald’s Flashpoint comments on the Opinion page were indicative. This is a private university that relies on big donations, a number of which Dr. Shalala has personally influenced. The university is just kicking-off a $1.6 billion – yes, with a “b” – campaign. I have to wonder if this publicity won’t, at least in the short term, negatively affect charitable giving and consequently what the university can offer.

I worry about the independence of a board where there is so much overlap of leadership. The university and the community are not well served if, even at a subconscious level, trustees and/or the university president hold back from sharing their most creative ideas or raising challenges and critical issues – responsibilities inherent in good governance – because they are afraid that showing vulnerability in one setting will impact their role in another. Moreover, any other trustee who hesitates to speak his/her mind because s/he isn’t part of a perceived inner circle ultimately cheats the university of his/her best efforts.

A related concern is that by going back to the same small group of community leaders to sit on so many of our boards, we are getting only one, relatively homogeneous view of what the community needs. While presumably an intelligent view, it is still an insular one. More diversity on our boards could only benefit the university and the community as a whole.

I can appreciate why any CEO would want someone of Dr. Shalala’s caliber on his/her board. But she doesn’t have to sit on a board to offer insights. If she is going to sit on a board, she’d be wise to steer clear of the boards of her own trustees. The University of Miami Board of Trustees should insist on this. After all, that group is responsible for ensuring the health of the university. It can’t risk the loss of independence, diverse thought or potential donations.

The university has been rather quiet about this flap. Time will tell what the fallout might be. But in my mind the situation serves as a morality play for other organizations. Having a conflict of interest statement is an important first step. But in scientific terms, while necessary it is not sufficient.

What are your thoughts? Is this a lesson other organizations should learn from? Or, is it much ado about nothing? Perhaps Dr. Shalala, with a lens already on her football team, is just too big a target and others don’t have to worry. Are there situations where it is appropriate for the CEO of a nonprofit to sit on the corporate boards of his/her own trustees?