A board member has a financial interest in a vendor contract. What governance action is required?

• A. Disclosure and recusal
• B. Proceed with contract
• C. Rebuke the vendor
• D. Hold a secret ballot

Answer: (A)

When a board member has a financial stake in a vendor contract, the governance action required is to disclose that interest and recuse from the decision. Disclosure makes the potential conflict transparent to the rest of the board, so proper oversight and governance can occur. Recusal prevents the conflicted individual from participating in discussions or voting on the contract, preserving objectivity, protecting fiduciary duties, and maintaining public trust.

This approach may be complemented by independent review or oversight if the policy calls for it, but the essential steps are disclosure and removal from the decision-making process. Proceeding with the contract would risk biased influence; reprimanding the vendor isn’t a governance remedy for the conflict; and a secret ballot would hide the conflict and undermine accountability.