Page 20 - Lozano Smith Board Member Toolkit 2026

Government Code Section 1090
The strictest of ethics laws, Government Code section 1090 prohibits public officers
from participating in the development, negotiation, or execution of a contract in which
the official is financially interested.

Board members are conclusively presumed to participate in the making of all
contracts entered into by the board, irrespective of whether the official actually
participates in making the contract. If a board member’s financial interest cannot be
characterized as a “remote interest” as defined in Government Code section 1091, a
“non-interest” as defined in Government Code section 1091.5, or does not fall under
the judicially recognized “rule of necessity”, all of which are discussed below, the
board is prohibited from approving the contract. Abstention cannot cure a section
1090 conflict.

“Remote” Financial Interests
Where a board member has a “remote” financial interest in a contract, he or she is
permitted to abstain and permit the rest of the board to participate in making the
contract. “Remote” interests are specifically defined in Government Code section
1091. Examples of “remote” interests include, but are not limited to, the interests of:
> An officer or employee of a 501 (c)(3) non-profit corporation;
> A parent in the earnings of his or her minor child for personal services;
> An employee or agent of a private contracting party if:
o The contracting party has 10 or more other employees; and
o The officer was an employee or agent of that contracting party for at least 3
years prior to the officer initially accepting office; and
o The officer owns less than 3% of the shares of stock of the contracting
party; and
o The employee or agent is not an officer or director of the contracting
party; and
o The employee or agent did not directly participate in formulating the bid of
the contracting party;
> A landlord or tenant of the contracting party;
> A supplier of goods or services when those goods or services have been supplied
to the contracting party by the officer for at least 5 years prior to his or her election
or appointment to office;
> A person owning less than 3% of the shares of a contracting party that is a for –
profit corporation, provided that the ownership of the shares derived from the
person’s employment with that corporation; and
> A person receiving salary, per diem, or reimbursement for expenses from a
government entity.
> A parent of a child who is an officer or director, or has an ownership interest of 10%
of more, in a party to a contract, where the parent knows of the child’s interest.

“Non-interests”
Government Code section 1091.5 describes a number of situations in which a board
member will be deemed non-interested in a contract, thus allowing the entire board to
vote on that contract. Examples of “non-interests” include, but are not limited to:

Guide to Effective Governance 17