Downtown boards routinely face a practical reality that many nonprofit or corporate boards do not: board members often own property or operate businesses directly affected by board decisions. A board member might own a building eligible for facade grants. Another might run a restaurant on Main Street affected by parking or streetscape work. A third might be positioned to win a development contract for a DDA project.
This is not inherently corrupt. It is the nature of downtown board work. But conflicts create legal and ethical risk if boards do not handle them with discipline [1]. When a board member votes on a decision that directly benefits their business, the entire board faces questions about fiduciary duty, public trust, and whether the decision was made in good faith.
Conflicts are normal in downtown work. Undisclosed conflicts are the problem.
Boards that leave conflicts unmanaged invite legal challenges, loss of public credibility, and in some cases, criminal liability for the individuals involved. Boards that establish clear conflict policies and enforce them consistently protect themselves, their members, and their communities.
What Constitutes a Conflict
Georgia law does not prohibit conflicts of interest. It requires disclosure and, in many cases, recusal from voting. But what counts as a conflict?
A conflict of interest exists when a board member has a direct financial interest in a board decision. The key word is direct. If a board votes on a general zoning change that affects downtown property values broadly, every property owner on the board has an indirect interest, but that is not a material conflict requiring recusal.
Direct personal financial benefit is the test for material conflict.
A material conflict exists when a board member would receive a direct, personal financial benefit from a decision that the board makes. Examples include a board member voting on a grant to their own building, voting on a development contract that their company could win, or voting on a fee structure that directly affects their revenue.
The test is whether a reasonable person would question whether the board member could vote impartially. If the answer is yes, you have a material conflict.
Building a Conflict Policy
Most boards operate without written conflict policies. That is a mistake. A clear policy protects the board by establishing objective standards instead of making judgment calls in the moment.
Your conflict policy should require board members to disclose all material interests in downtown property, business operations, or contracts. This disclosure should happen at the start of board service and be updated annually. It should be documented in board records, not kept private.
The policy should define what triggers recusal. Most Georgia boards use a test based on direct personal benefit. If a decision would put cash in a board member’s pocket, they recuse. If the decision affects property values broadly but not the member’s business specifically, they do not.
The policy should specify recusal procedure. A board member with a conflict should disclose it at the start of discussion, then abstain from voting. Some boards require the member to leave the room. Others allow them to stay but not participate. Decide which approach fits your culture and document it.
The policy should address lobbying before recusal. A board member should not lobby colleagues in favor of a decision that benefits them, then recuse from voting. That is a form of self-dealing. If you have a conflict, you do not get to influence the outcome.
Finally, the policy should allow for real abstentions when a conflict exists but the member stays for quorum. Abstention counts differently than a no vote. Make sure your bylaws and voting procedures make this clear.
Documentation and Transparency
The mechanics of conflict handling matter less than transparency. Whatever process you choose, document it thoroughly. Your minutes should record every conflict disclosure and recusal [2].
When a member discloses a conflict, the minutes should state the conflict clearly. Not “Member Smith abstained.” But “Member Smith disclosed that his property would be eligible for facade grant funds under the proposal. He abstained from voting.” That level of detail protects everyone.
Transparency in conflict handling builds public trust more than perfect conflict avoidance.
Keep a written conflict log. Each year, prepare a summary showing which members disclosed what interests and which decisions triggered recusals. Review it annually. It will help you spot patterns or problems.
Make conflict policy visible to the public. Publish it on your website. Include it in meeting materials. When the board is transparent about how it handles conflicts, public trust increases even when conflicts occur.
When Conflicts Create Real Problems
Some situations are trickier than the straightforward cases. What if a board member’s spouse owns property affected by a decision? What if a member works for a company that contracts with the city? What if a member owns property that would benefit indirectly from a streetscape project?
These situations require judgment. Your conflict policy should establish a process for resolving them. Some boards give the board chair or an ethics committee the power to make materiality decisions in close cases. Others ask the full board to vote on whether a conflict is material and whether recusal is required.
Whenever possible, err on the side of caution. If a member thinks they might have a conflict, they probably do. Recusal costs nothing. It protects the board.
One situation that requires special attention is when a board member benefits from a decision they voted on, even with disclosure. Over time, this erodes public trust. If the same person repeatedly votes on decisions that benefit them, or if conflicts accumulate, the board should consider whether that member should continue serving.
What Happens If You Miss a Conflict
If a board votes on a decision and later discovers that a member had a material undisclosed conflict, what then?
Most conflicts do not invalidate decisions. Georgia law does not void a contract or decision simply because a conflicted board member voted for it. But undisclosed conflicts create liability for the individuals involved and can expose the board to legal challenge.
If you discover that a member had an undisclosed conflict, document it. Disclose it publicly. If the decision was material and the vote was close, consider whether the decision should be revisited or ratified with proper procedure.
The real protection is not having to fix conflicts after the fact. It is preventing them upfront through clear policy and consistent enforcement.
Board Member Liability
It is worth noting that individual board members can face personal liability for self-dealing. If a board member votes on a decision that benefits them without disclosure or proper recusal, and the decision later causes financial harm to the DDA or city, the member could be sued personally.
This is not common, but it happens. Insurance may not cover it. The protection is scrupulous attention to disclosure and recusal procedures.
Questions Your Board Should Ask
Does our board have a written conflict policy? If not, adopt one this year.
Have all current members disclosed their material interests in writing? If not, do it immediately and keep the disclosures on file.
What happens when a conflict is disclosed? Make sure the procedure is clear and documented in your bylaws.
Are we monitoring for patterns or repeated conflicts? Annual review helps identify problems.
Bottom Line
Conflict of interest policies are not about preventing corruption. They are about establishing the discipline and transparency that allow boards to make decisions with public confidence. A board that handles conflicts clearly and consistently earns trust. A board that tries to hide or minimize conflicts invites legal trouble and public skepticism.
The best conflict policy is the one your board follows consistently. Make it clear, document everything, and enforce it fairly. That protects your board, your members, and your community.
Frequently Asked Questions
Not necessarily. Owning property in the district creates a general interest, not necessarily a material conflict in every decision. The distinction matters. A zoning vote affects all downtown property owners equally. But voting on a grant to your own building creates a direct personal benefit. Board policy should define materiality clearly.
Disclose it immediately, before any discussion of the matter. Recuse yourself from voting. Leave the room or clearly abstain if the board's policy allows abstention. Document it in the minutes. Do not lobby colleagues before recusing yourself.
Yes, as long as they disclose before any discussion and recuse from voting. The problem occurs when a member votes or lobbies while withholding disclosure. Transparent conflict handling protects both the board and the member.
References
- General Assembly of Georgia. (1985). Georgia Redevelopment Powers Law. Official Code of Georgia Annotated (O.C.G.A.) \S 36-44-1 et seq.. https://law.justia.com/codes/georgia/2022/title-36/chapter-44/
- General Assembly of Georgia. (1982). Georgia Open Records Act. Official Code of Georgia Annotated (O.C.G.A.) \S 50-18-70 et seq.. https://law.justia.com/codes/georgia/2022/title-50/chapter-18/article-4/section-50-18-70/
