I got a question the other day from a board member of an organization that supports people with disabilities. They have a board made up of business people, community members, and family members of people who are served by the organization. The board member was concerned that a potential new board member was employed by the organization's bank. "Isn't that a conflict of interest?", she aske me.
Well, yes and no. Certainly the banker COULD have a conflict. But, so could the family members. So could a community member if, for example, the organization were building a new center down the street that would affect their home's property value.
The issue with board recruits is to ask them: Are you here to represent your organization/employer/family member, or are you here for the best interests of our not-for-profit?
And, of course, you do need to have, and to discuss conflict of interest policies. Here's a great article from Thompson & Thompson about Avoiding Conflict of Interest. Here's some good info and a sample from the Nonprofit FAQ, and some good stuff on the issue from BoardSource.
Conflict of interest is an important issue to get your board and staff focused on. It is one of those things that is almost totally manageable in advance, but if you don't do some work to prevent problems, the problems that result are HUGE.