There are laws meant to prevent conflicts of interest (but as one of my bosses once pointed out, most people in those positions know how to skirt the boundaries without breaking the laws/regulations).
For example at my company, a member of our board is the CEO of another software company.
We were evaluating their product in addition to others for corp wide adoption. As the sales rep from his company mentioned they were "very interested" in them getting the contract.They were beat out (but made it into the top 2 in testing, it was a great product) and we ended up going with a competitors product.
Obviously that CEO was able to ensure his people knew a potential contact with us was "of interest" but he couldn't go so far as to actually use his influence on our board to convince my company to choose his product even though it didn't fit our needs as well as the other.
Its pretty complex, some of these laws and how they are supposed to prevent conflicts of interest (and how they may or may not work).
She was fired for becoming exec in other company?
In my opinion it seems kinda reasonable? some kind of conflict of interest and danger that SF would be associated with company X by the public due to execs working there