Former Wollongong City Council general manager Rod Oxley's role as director of Southern Phone Company is being challenged by councils who are shareholders of the company.
The Southern Councils Group (SCG) represents seven councils from Wollongong to Bega, all of which are Southern Phone Company shareholders.
The SCG has written to Southern Phone expressing the concerns the councils have "in relation to the suitability of Mr Rod Oxley continuing as a board member in light of the findings of the Independent Commission Against Corruption investigation into Wollongong City".
The matter was discussed in a confidential session by the SCG when it met last month.
The reason cited was that Mr Oxley was a former employee of a member council and SCG delegate.
SCG chair and Kiama Mayor Sandra McCarthy said the matters raised in the discussion remained confidential, "but the SCG charter enables it to raise concerns of communities in which we represent".
"Ultimately the decision rests with the directors of Southern Phone Company to make their determination," Councillor McCarthy said.
Southern Phone Company chairman Bill Hilzinger said he received notice of SCG's concerns on Thursday.
Mr Hilzinger said the matter would be taken to his board when it meets next in February.
Mr Oxley declined to comment on the matter.
Last month at the company's annual general meeting, Southern Phone shareholders voted 6-4 against increasing the annual payout to directors by $50,000 to $150,000.
Kiama councillor Monique Dare-Ward recommended against the increase, saying that as the company had suffered a $369,895 loss in 2008-09, its six directors did not deserve it.
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