Optional_2023 Board Resources

as Disney explored expanding into online media. However, the director duty of loyalty can create a conflict simply by virtue of the director’s industry involvement when those activities compete with the organization. In 2018, Disney announced that Ms. Sandberg and Mr. Dorsey decided not to run for re-election on Disney’s board because of these recurring conflict/recusal issues. Hypo 3: Conflicting Financial Relationships St. James has engaged in a nationwide search for a new System CFO for the last nine months using a reputable executive search firm. The search firm has identified Nancy Moneypenny as its top candidate. She graduated summa cum laude from Harvard Business School and, for the last 20 years, has held several high-level finance positions, including as an investment banker at Goldman Sachs, JPMorgan, and as CFO of a Fortune 100 company. • Ms. Moneypenny is currently a member of NW Capital, LLP, an investment management firm. – St. James has a long-term contract with NW Capital to manage the portfolio of St. James Foundation. The contract is up for evaluation and renewal in 2020. NW Capital has achieved an average rate of return over the last five years well in excess of the S&P 500 average. – The Foundation’s CFO reports to the System CFO. • Ms. Moneypenny’s husband, Mr. Greenback, is CEO and shareholder in Castlight Health, a health technology company. – Castlight is one of the main vendors for St. James Accountable Care Organization (“ACO”). For the last five years, it has had a contract to provide all IT and other technology services, data analytics, and web-based services to the ACO. Compensation under the contract is $500,000 a year. The contract’s initial term was three years. It was renewed two years ago for another three-year term, which means the contract is up for evaluation and renewal in 2019. • Ms. Moneypenny and Mr. Greenback are old college friends of St. James CEO. The search firm has conducted an extensive background check of Ms. Moneypenny (and her spouse Mr. Greenback) and has concluded both have impeccable personal reputations and an absence of any other material financial or personal relationships with St. James or other members of the executive team or board. Question: What are the conflict issues? 1. Business relationship with NW Capital If Ms. Moneypenny retains her NW Capital ownership interest as St. James CFO, she would be in the position of overseeing the work of the firm in which she has a financial interest. She would logically be expected to monitor NW Capital’s performance, which could put her personal financial relationship with, and fiduciary duty to, NW Capital in conflict with her duty of loyalty as an officer of St. James. Even if she relinquished her ownership interest, she likely has personal relationships with other members of NW Capital that could conflict with her duties.