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Conflict of Interest

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Brown, Smith, Jones, Taylor and Blake are members of the board of governors of Mercy Hospital, which is a private, non-profit hospital. Blake is also the owner and operator of a business supply company. The hospital has been purchasing most of its office equipment from Blake since he became a member of the board several years ago. Blake has never voted on the motion to purchase from him. He has in no way tried to influence the decision of the other members of the board. The hospital needs 25 new computers, and the board - except Blake, who did not vote - voted unanimously to purchase all the new computers from Blake at the usual local price for such computers.

Identify the main facts of the case. You may itemize these in a bulleted list.

Identify any legal issues that are present, as well as the doctrines and/or duties that apply. You may itemize these in a bulleted list.

Identify any change in purchasing procedures that you would implement at Mercy Hospital.

Based on this scenario, if someone brought action for the corporation to have the purchase contract canceled, state how and on what basis the courts should decide this case.

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Solution Summary

This solution explains the case of Mercy Hospital where a member of the board is also the supplier of office equpment. The sources used are also included in the solution.

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Step 1
The main facts of the case:
• The Mercy Hospital a non-profit hospital has Brown, Smith, Jones, Taylor and Blake, the members of the board of governors.
• Blake has a business supply company.
• The hospital buys most of its office equipment from Blake since he became a member of the board.
• Blake does not vote on the motion to purchase for him.
• Now the board has decided to purchase 25 new computers from Blake at the usual local price for such computers.

Step 2
• The legal issues that are present is that it is the legal requirement that the board of governors must comply with the state law regarding conflict of interest.
• It is the duty of the individual members to follow the conflict of interest and ...

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