Joel Rauer is a board director and property executive. He holds tertiary qualifications in Property, Economics, and an MBA, and is a Graduate of the Australian Institute of Company Directors (GAICD). Joel currently serves as Non-Executive Director and Treasurer of MADEC Mackay, and as Non-Executive Director and Company Secretary of Women & Children. Joel is also a Director at CBRE Asia Pacific.

Audrey is right to be concerned. While the board may have acted with righteous intentions, the situation highlights several governance missteps that now risk the charity's reputation. First, even in not-for-profit settings, perceived conflicts of interest must be treated with the same seriousness as actual ones. The appointment of a Director's spouse to value and sell the property, regardless of commercial terms, should have generated a formal conflict declaration and recusal process. The subsequent sale to a family member of the agent only compounds further the perception of impropriety.

As a property professional, I know how real estate markets can be transient and move quickly, and price fluctuations are not uncommon. However, the optics of a $50,000 gain within two weeks, by a party connected to the original agent, undermines trust, creates serious inquiry and interrogation, especially when the original offer came from the executor.

Audrey should act swiftly to protect the charity's integrity, and it may be appropriate to consider:

• Commissioning an independent review of the transaction and governance processes.
• If appropriate, issuing a transparent response and / or public statement acknowledging the concerns and outlining steps being taken.
• Reviewing and strengthening the board's conflict of interest policy and procurement protocols or establishing them if they are not in place.
• Considering whether the Director involved should temporarily step aside during the review.

This is a reputational risk, not just a procedural one. Transparency, accountability, and a willingness to develop from this situation will be keys to restoring public confidence.

As a seasoned property professional, the guidance I would offer to Directors and boards involved in property transactions is threefold; first, always ensure dealings are conducted at arm's length to maintain transparency and integrity; second, consider using auction or other more appropriate open-market methods to establish fair value and avoid any perception of price manipulation; and finally, in situations like this, avoid appointing agents who are related to board members, as this clearly constitutes a conflict of interest and can significantly undermine stakeholder and public trust.

Joel Rauer is a board director and property executive. He holds tertiary qualifications in Property, Economics, and an MBA, and is a Graduate of the Australian Institute of Company Directors (GAICD). Joel currently serves as Non-Executive Director and Treasurer of MADEC Mackay, and as Non-Executive Director and Company Secretary of Women & Children. Joel is also a Director at CBRE Asia Pacific.

This is an unfortunate sequence of events. As chair, Audrey must take a decisive lead in ensuring that governance is strengthened in the long term and reputation damage minimised in the short term.

She should create an ad hoc taskforce of herself, the audit committee chair, the chair of the Governance or nominations committee (assuming neither Audrey nor the implicated director are chairs of those committees), and the Company Secretary or CEO.

The committee should review the boards policies and constitution to ensure that they remain satisfied with the robustness of these. Then they should review the minutes of the relevant board meetings and construct a timeline of what happened and what role was played by the board and the implicated director. Did they breach any existing governance arrangement, and would they have breached any better ones that seem necessary with the benefit of hindsight?

Now Audrey is ready for a conversation with the board's legal advisor and can provide the relevant policies, suggested enhancements, and timeline. Legal advisors are an investment not a cost but if you take the time to prepare a good briefing for them, your can save time and money.

It appears that only the decision to award the valuation and sale to a related party were within the board's purview; the subsequent sales and gains happened after those two decisions and without involving the board.

Merely removing a related party from discussions is a weak protection - in future the board should seek independent service providers and several quotes to ensure they make a reasonable choice.

The charity did, however, make $100k more than they would had they sold to the executor without the professional valuation. Presumably, the executor was offered a chance to match or better the price at which the Charity sold. If not, Audrey needs to know why not.

The implicated director is now defiant and feels she has been attacked for offering to help. She possibly had no idea the property would sell again almost immediately. If she will not stand down, there is risk in asking the Members to vote her off the board. Careful legal advice on what to say and how best to proceed is essential.

Good luck, Audrey, and beware of conflicts of interest in future!

Julie Garland McLellan is one of Australia’s most internationally acclaimed company directors and board advisors. She is renowned for her practical experience as well as deep governance expertise and qualifications. She is based in Sydney, Australia.

This is a serious issue that has negative reputational consequences for the charity as well as the directors associated with the business, but importantly for Audrey as the Chair of the charity board. From a reputational perspective, all directors - and their family members - should understand that a charity organisation should not be used for personal gains and the actions of the director will be seen to be creating financial gain from the charity as they used their insider knowledge of the process to gain a financial advantage in the sale and purchase of the property.

To address the negative reputational impact from the executor's claims, and subsequent media campaign, Audrey needs to take decisive action by:

1. Consulting legal counsel to understand the best course of action to take against the director and to aid in redirecting the financial gains back to the charity.
2. Raising the issue at a special board meeting and call on the director and her family to redirect all profits made from the transactions back to the charity. However, unless Audrey wants to pursue a legal option, this can only be an appeal to the director's good will to do the right thing.
3. Removing the director from the board of the charity citing the conflict-of-interest issue and the negative reputational impact caused by the actions of the director's family members.
4. Consulting with a public affairs / reputational management specialist to craft a legally sound media holding statement that reiterates the commitments of the charity, stating the removal of the director from the charity's board and detailing the course of action the board has taken to address the situation. This statement should only be shared with media per the reputational management specialist advice.
5. Avoiding future conflicts of interest, Audrey needs to ensure that Governance documents are revised to reiterate the stance on reporting of conflicts of interest. All directors need to sign the updated Conflict of Interest documents.
6. Finally, Audrey should also step down as Board Chair to take responsibility for the oversight and the fact that this conflict of interest happened under her guard.

Corinne Klajda is Managing Partner, Accord Group Polska / AltoPartners Poland. Corinne is a certified mentor coach, exclusively for CEOs, and regularly facilitates board discussions delivering leadership consulting services. Corinne is an active YPO member and a guest lecturer at the Warsaw School of Economics or at the Executive Program for Women at the Kozminski University. She is based in Warsaw, Poland.

Audrey faces a challenging situation involving potential conflicts of interest that could damage the charity's reputation. To address this, she should take a systematic approach to resolve the issue and restore public trust.

First, Audrey needs to ensure full transparency by conducting an internal investigation. She should gather all relevant documentation, including the valuation report, sales contracts, and communications related to the property sale. It's crucial to confirm that these transactions followed the charity's governance policies and adhered to legal and ethical standards.

Next, she should consider engaging an independent third party, such as an external auditor or legal advisor, to review the transactions and provide an objective assessment. This will help determine if there were any actual conflicts of interest or procedural breaches.

Audrey should also communicate openly with the executor and the public. She can issue a statement clarifying the steps taken to ensure transparency and legality. If the investigation reveals any oversight, admit it candidly, detailing corrective actions and changes to policies to prevent future occurrences.

To mitigate conflict of interest in the future, Audrey should lead efforts to strengthen the charity's governance framework. This includes revising conflict of interest policies, ensuring all board members understand and adhere to them, and requiring full disclosure of potential conflicts before any transactions.

Finally, Audrey should engage with the charity's supporters, reassuring them of the organization's commitment to integrity. Hosting information sessions or community meetings might help rebuild trust and demonstrate the charity's dedication to transparency and ethical practices.

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