Can a member of a Tennessee industrial-development authority board vote to make themselves the executive director?

Plain-English summary

The Four Lake Regional Industrial Development Authority is the regional economic-development authority for Macon, Smith, Sumner, Trousdale, and Wilson counties (Tenn. Code Ann. §§ 64-5-201 et seq.). Like most Tennessee development authorities, it has a board of directors (with members drawn from local officials and various appointing organizations) and statutory power to "[a]ppoint such managers, officers, employees, attorneys and agents as the board deems necessary for the transaction of its business" (§ 64-5-208(6)). The question Hon. Jack Bellar posed is whether a sitting board member can vote for themselves to be the Authority's executive director.

The AG split the answer along a structural line. The Authority's enabling statute does not specify whether the executive director is a public "officer" (a position with a term, conferring official authority) or an ordinary "employee" (working under a personal-services contract at the board's pleasure). That is a choice the Authority makes when it creates the position. The legal analysis is different in each case.

If the executive director is an officer with a specific term. Tennessee follows the common-law rule that an appointing body cannot use its appointment power to confer public office on one of its own members. Citing State ex rel. v. Thompson, 193 Tenn. 395, 246 S.W.2d 59 (1952), the opinion says the Authority may not appoint one of its members to that office.

If the executive director is an employee. Then Tennessee's conflict-of-interest statute, Tenn. Code Ann. § 12-4-101(a)(1), takes over. That statute prohibits any official "whose duty it is to vote for, let out, overlook, or in any manner to superintend any work or any contract" from being "directly interested" in such contract. "Directly interested" means a contract with the official personally or with a business the official sole-proprietor-owns or controls. A board member voting on their own employment contract is the paradigm "direct interest" the statute forbids. The opinion notes that subsection (c) of § 12-4-101 has an exception for county commissioners and city council members who are also employees of the same county or city and who follow specific disclosure rules, but that exception does not apply to a regional industrial development authority because the Authority is not a local-government governing body within the meaning of the statute.

The opinion's practical conclusion is that a sitting board member cannot vote to become executive director. Its recommendation to resign before the board votes addresses the employee and employment-contract branch. For an office with a specific term, the opinion says the Authority may not appoint one of its members; it does not prescribe a resignation procedure for that branch.

Currency note

This opinion was issued in 2010. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here.

The opinion describes the Authority's governing statutes and the conflict-of-interest statute as they stood in April 2010. Check current statutory text before relying on its analysis for a later appointment.

Common questions

Q: What is the Four Lake Regional Industrial Development Authority?
A: A regional Tennessee public authority established under Tenn. Code Ann. §§ 64-5-201 et seq. to develop the resources of a five-county area (Macon, Smith, Sumner, Trousdale, and Wilson counties). It has a board of directors drawn from local officials and appointed members.

Q: Why is "officer" versus "employee" the dividing line?
A: Because Tennessee law treats public officers and public employees differently. An officer holds a position created by law with a term and statutory duties; an employee works under contract at the will of the employer. The self-appointment rule (common law) applies to officers. The direct-interest statute (Tenn. Code Ann. § 12-4-101(a)(1)) applies to anyone with a contract.

Q: What is the Thompson rule?
A: State ex rel. v. Thompson, 193 Tenn. 395, 246 S.W.2d 59 (1952), holds that it is contrary to public policy for an appointing officer or body to use its appointment power to confer public office on itself or its own members. The reasoning is that the public has a right to disinterested appointment to office; a body that appoints itself fails that test.

Q: Why doesn't the § 12-4-101(c) exception save the board member here?
A: Because § 12-4-101(c) is narrow. It carves out only county commissioners and city council members who are simultaneously employed by the same county or city, provided they follow specific disclosure-and-abstention rules. A member of a regional development authority is not a member of the governing body of a county or municipality in the sense the statute requires, so the exception does not reach them.

Q: Can the board member just abstain from the vote instead of resigning?
A: For an employment contract, the opinion says the member may not vote and should resign before the Authority votes on it. The statute prohibits a direct interest in the contract, so merely abstaining does not address the conflict identified by the opinion.

Q: Who determines whether the executive director is an officer or employee?
A: The opinion says the governing statutes do not specify the position's appointment, status, or tenure. Its two conclusions depend on how the Authority establishes the position.

Q: Does this apply only to the Four Lake Authority or to other Tennessee development authorities?
A: The opinion is specific to the Four Lake Authority's statutory framework, but the underlying common law (no self-appointment to office) and the conflict-of-interest statute (§ 12-4-101(a)(1)) apply across Tennessee public bodies. The analysis would carry over to similarly structured industrial development boards, water and wastewater authorities, and other regional public entities, subject to any specific statutory variations.

Background and statutory framework

The Authority. The Four Lake Regional Industrial Development Authority is created under Tenn. Code Ann. § 64-5-201 to develop the resources of Macon, Smith, Sumner, Trousdale, and Wilson counties. The board composition is set out in § 64-5-203 (recently amended by 2010 Tenn. Pub. Acts Ch. 619 to address counties that adopt metropolitan governments).

The board's powers. Tenn. Code Ann. § 64-5-202 provides that "[t]he board shall make policy, which shall be implemented by the executive committee and executive director, if such position is established." (Emphasis added.) Tenn. Code Ann. § 64-5-208(6) authorizes the board to appoint managers, officers, employees, attorneys, and agents, fix their compensation, define their duties, and require bonds. The statute is silent on whether the executive director is an officer or an employee, leaving that choice to the Authority.

The common-law rule against self-appointment. Tennessee has long followed the rule that an appointing body cannot confer public office on itself or its members. State ex rel. v. Thompson, 193 Tenn. 395, 246 S.W.2d 59 (1952), is the seminal case. Op. Tenn. Att'y Gen. U92-129 (December 14, 1992) applied the rule to a Tennessee appointment context. The rule is rooted in fiduciary principles: the appointing body's duty is to choose the best candidate for the public's benefit, which is incompatible with selecting itself.

The statutory conflict-of-interest rule. Tenn. Code Ann. § 12-4-101(a)(1) provides:

It is unlawful for any officer, committee member, director or other person whose duty it is to vote for, let out, overlook, or in any manner to superintend any work or any contract in which any municipal corporation, county, state, development district, utility district, public building authority and human resource agency, as well as any other political subdivision of the state, shall or may be interested, to be directly interested in any such contract.

"Directly interested" is defined as "any contract with the official personally or with any business in which the official is the sole proprietor, a partner, or the person having the controlling interest." A board member voting on a contract that hires them is the textbook example of direct interest.

The § 12-4-101(c) exception is narrow. Subsection (c) of § 12-4-101 allows a county commissioner or city council member to be employed by the same county or city, provided they follow specific rules: they cannot vote on matters in which they are interested, must disclose the interest, and must abstain from action. The exception is limited to county commissioners and city council members, not to members of regional or special-purpose authorities. So a member of an industrial development authority board cannot use it to take an employment role with the authority.

Resignation in the employee branch. If the executive director is an Authority employee, the opinion says a member has a prohibited conflict in an employment contract with the Authority, may not vote on the contract, and should resign before the Authority votes. If the position is an office with a specific term, the opinion instead states that the Authority may not appoint one of its members.

Citations and references

Statutes:

• Tenn. Code Ann. §§ 64-5-201 et seq. (Four Lake Regional Industrial Development Authority)
• Tenn. Code Ann. § 64-5-201 (Authority purpose)
• Tenn. Code Ann. § 64-5-202 (board policy, executive director role)
• Tenn. Code Ann. § 64-5-203 (board membership)
• Tenn. Code Ann. § 64-5-208(6) (Authority appointment power)
• Tenn. Code Ann. § 12-4-101(a)(1) (conflict of interest)
• Tenn. Code Ann. § 12-4-101(c) (county commissioner / city council exception)
• 2010 Tenn. Pub. Acts Ch. 619 (amendment to Authority board composition)

Cases:

• State ex rel. v. Thompson, 193 Tenn. 395, 246 S.W.2d 59 (1952)

Related Tennessee AG opinions:

• Op. Tenn. Att'y Gen. U92-129 (December 14, 1992)

Source

• Landing page: https://www.tn.gov/attorneygeneral/opinions.html
• Original PDF: https://www.tn.gov/content/dam/tn/attorneygeneral/documents/ops/2010/op10-055.pdf

Original opinion text

April 23, 2010

Opinion No. 10-55

Four Lake Regional Industrial Development Authority: Appointing Executive Director

QUESTION

The Four Lake Regional Industrial Development Authority (the "Authority") is established under Tenn. Code Ann. §§ 64-5-201, et seq. May an active member of the Authority board vote for himself or herself for the position of executive director?

OPINION

If, as established by the Authority, the position of executive director is an office with a specific term, then the Authority board may not appoint one of its members as executive director. If, as established by the Authority, the executive director is an Authority employee, any member of the Authority's board would have a prohibited conflict of interest in an employment contract between that member and the Authority under Tenn. Code Ann. § 12-4-101(a)(1). The member may not vote on this contract and should resign before the Authority votes on it.

ANALYSIS

This opinion addresses whether an active member of the board of the Four Lake Regional Industrial Development Authority (the "Authority") may vote for himself or herself for the position of executive director of the Authority. The Authority is established under Tenn. Code Ann. §§ 64-5-201, et seq. The purpose of the Authority is to develop the resources of the region in Macon, Smith, Sumner, Trousdale, and Wilson counties. Tenn. Code Ann. § 64-5-201. Membership of the board of directors of the Authority is set forth in Tenn. Code Ann. § 64-5-203 and includes local officials and individuals appointed by a variety of officials and organizations. This statute was recently amended relative to any county in the region that adopts a metropolitan form of government. 2010 Tenn. Pub. Acts Ch. 619.

Tenn. Code Ann. § 64-5-202 provides in relevant part that, "[t]he board shall make policy, which shall be implemented by the executive committee and executive director, if such position is established." (Emphasis added). Among its other powers, the Authority is authorized to:

Appoint such managers, officers, employees, attorneys and agents as the board deems necessary for the transaction of its business, fix their compensation, define their duties, and require bonds of such of them as the board may determine[.]

Tenn. Code Ann. § 64-5-208(6). The governing statutes are otherwise silent about the position of executive director and his or her appointment, status, and tenure. Tennessee follows the common law rule that it is a violation of public policy for an appointing officer to use his or her power of appointment to confer office upon himself or herself, or for an appointing body to confer office upon one of its own members. State ex rel. v. Thompson, 193 Tenn. 395, 246 S.W.2d 59 (1952); Op. Tenn. Att'y Gen. U92-129 (December 14, 1992). If, as established by the Authority, the position of executive director is an office with a specific term, then the Authority may not appoint one of its members as executive director.

Further, a board member may not also serve as an employee of the Authority. Under Tenn. Code Ann. § 12-4-101(a)(1), it is unlawful for an official "whose duty it is to vote for, let out, overlook, or in any manner to superintend any work or any contract" in which a governmental entity may be interested to be "directly interested" in such contract. "Directly interested" means "any contract with the official personally or with any business in which the official is the sole proprietor, a partner, or the person having the controlling interest." Id.

In this case, any Authority board member has a duty to vote for or let out the employment contract between the Authority and its executive director. Subsection (c) of Tenn. Code Ann. § 12-4-101 contains an exception for a county commissioner or city council member who is also a county or city employee and who follows the rules in that subsection. But since the Authority is not a local governing body of a county or municipality within the meaning of the statute, that exception would not apply to a member of the Authority's board. Under Tenn. Code Ann. § 12-4-101(a)(1), therefore, any member would have a prohibited conflict of interest in an employment contract between that member and the Authority. The member may not vote on this contract and should resign before the Authority votes on it.

ROBERT E. COOPER, JR.
Attorney General and Reporter

BARRY TURNER
Deputy Attorney General

ANN LOUISE VIX
Senior Counsel

Requested by:

Honorable Jack O. Bellar
212 Main Street
P.O. Box 332
Carthage, Tennessee 37030-0332