May our board pay someone for portfolio management if they are an employee of a company owned or led by a board member and direct descendant of the foundation’s father?
Yes, even if the individual being employed to do that work is a disqualified person, paying someone reasonable and necessary compensation to manage the assets of the foundation, regardless of how that relationship comes about, would be permissible.
So, the fact that the person could be a disqualified person, either by being a descendant, working at the foundation, or being an employee of a disqualified person’s company, all of those things do not matter. The person is disqualified under those facts, but it is an exception to the self- dealing rules to pay them for personal services, including investment management.
There are conflicts of interest that need to be navigated, and you may also want to consider concerns about your public image for someone with this relationship in this way, but it is legal under the tax code.