Baker sought law allowing tax chief on private boards

Senate blocked move ethicists found alarming

Governor Charlie Baker has sought a change in state law that would allow his revenue commissioner to be paid $300,000 a year to sit on two major corporate boards, a move that has alarmed ethics specialists who say such a policy change would undermine the tax agency’s integrity.

The governor wanted the Legislature to change a statutory restriction so that Commissioner Mark E. Nunnelly, a wealthy venture capitalist who has worked without a state salary since his appointment in March, could keep his positions on the boards of Dunkin’ Donuts and Genpact Limited, a Bermuda-based information technology services firm.

State law prohibits the commissioner from engaging in any outside business for profit, as a way to prevent private financial interests from influencing public decision-making. According to Baker aides, Nunnelly has been donating his board salaries to charity since his state appointment.

Revenue Commissioner Mark E. Nunnelly, a wealthy venture capitalist, has not collected a state salary since his appointment in March.

The governor’s proposal, never debated by lawmakers, was quietly slipped into a supplemental budget bill. It made its way through the House but was blocked in the Senate this fall.

Karen Spilka, chairwoman of the Senate Ways and Means Committee, said the Senate did not support the measure because members felt the commissioner should “devote his professional efforts full time to the Commonwealth as we expect of other commissioners.”

The issue caught ethics watchdogs off guard.

“It is appalling, it is shocking,’’ said Pam Wilmot, executive director of Common Cause Massachusetts. “I was dismayed when I heard about it.”

After the proposal stalled two weeks ago, Nunnelly decided to step down from his board positions, Baker aides said.

“Mark has begun the orderly transition off of his two remaining for-profit boards and intends to complete that in the first quarter of next year,’’ the governor’s office said in a statement to the Globe.

Within the last several weeks, legislative sources said Baker was still talking about lifting the restriction. However, Jim Conroy, a senior adviser to the governor, signaled Friday that Baker did not intend to pursue the issue in the immediate future.

“Now that the commissioner has decided to transition off these boards, there does not appear to be the need for legislative action,’’ he added.

The law defining the duties of the commissioner states that the person holding the job “shall not . . . engage in any business or profession for profit during his incumbency.” That is the phrase Baker wanted struck. The law also requires the commissioner to devote “his entire time” to his state job.

The ban on outside business activities is designed to assure the public of the agency’s integrity and objectivity. It is meant to ensure that revenue commissioners do not face conflicts or outside pressure when deciding tax policies and settling corporate taxation issues.

Thomas D. Herman, who served as first deputy revenue commissioner in the Dukakis administration, described Baker’s proposal as “courting trouble.”

“This would free the commissioner to work for companies that he is regulating,’’ said Herman, who was assigned to establish ethics standards for agency workers during his tenure. “That’s an inherent conflict of interest.”

Wilmot said the sensitivity of the agency’s mission makes Baker’s move all the more troubling. “Collecting taxes is where government exercises the most power over individuals, with the exception of law enforcement, and the public needs to have the utmost confidence that it is being handled in an in impartial manner,” said Wilmot.

Among other duties, the revenue commissioner is in charge of regulating and defining tax policies and tax collection issues that have significant impact on corporations.

Dunkin’ Donuts’ parent company was embroiled in lengthy litigation with the department several years ago, a case in which the state eventually prevailed.

The governor’s office rejected a Globe request to talk directly to Baker and Nunnelly about the issue.

Baker’s office released a statement from the governor touting Nunnelly’s credentials in reforming “complicated institutions” and said the state was fortunate to have him head the revenue department.

Baker’s statement did not address potential conflicts posed by Nunnelly’s ongoing business dealings while running the agency. But Conroy said the governor believes Nunnelly’s full disclosure to the State Ethics Commission of his business ties and his policy of recusing himself in matters directly involving the two firms on whose boards he sat was sufficient to deal with any potential conflict of interest issues.

“After a full and public disclosure of board associations before the state Ethics Commission, and the institution of a plan for self-recusal were any conflicts to arise, the administration sought a legislative solution to allow the commissioner to continue his relationship with these two boards while donating the proceeds to Massachusetts charities,’’ Conroy said.

But Wilmot said the sensitivity of Nunnelly’s position demanded more direct divestment of business activities.

“The ethics laws apply to every public employee, but this is a higher bar, given the responsibility of the position,’’ she said.

The governor’s office also said Nunnelly would not release the list of charities to which he donated his board salaries or the dates on which they were given.

“Mark and his wife are prolific charitable givers, and it is their practice that their gifts be anonymous,’’ it said in a response to a request of the information.