A director who serves on a board for a company that provides the director with consulting work. This is a conflict, but i just dun understand why.
Directors should be independent. They look out after the interests on the owners. The consulting work that the board member engages in makes them money. This may lead them to make decisions that are in the best interest in keeping the money flowing rather than in the interest of the owners. The work they do my be totally legitimate, needed and provide value to the company BUT it should not come from a director
The director is supposed to be representing the interests of shareholders. If he’s being paid by the company for consulting work, he may be more interested in keeping that gravy train going than wisely spending the $ of the company on better pursuits that would enhance shareholder value.
Ok I see. Thank you guys so much for clearing that up. Makes sense