Virginia law does not prohibit employees from serving on the board of directors of the nonprofit organization for which they work. But while it may be legal, it is relatively unusual for charities to have paid staff on the board on not considered a best practice from a governance perspective. The concerns relate to the potential for conflicts of interest and private inurement risk arising from having board members whose economic interests may be directly impacted by board decisions. The potential that nonprofits can be used for the benefit of insiders is significant enough that the IRS added a question on Form 990 that specifically asks about the number of directors who are not “independent” because they have an economic relationship with the organization.
That said, it may be totally appropriate to have paid staff on the Board, depending on the type and purpose of the organization. For example, it could be appropriate with a family private foundation or a subsidiary within a large healthcare system.
If paid staff serve on the board, conflict of interest issues can be addressed and problems avoided by following a clear conflict of interest policy that applies to the entire board. If your nonprofit organization does not have a conflict of interest policy or has questions about an existing policy, contact us anytime for assistance.