Congratulations – you are on the board or committee for a not-for-profit (NFP) organisation.
As a board or committee member of a NFP organisation you have a great capacity to do some good for the organisation and the community at large.
Often a potential conflict of interest situation arises. This article looks at how to properly handle the situation.
Where could a possible conflict of interest arise?
The most common conflict of interest is where you are on the board of a not-for-profit organisation and have an interest in a business which can supply goods and services to the organisation.
There are a raft of potential conflicts of interests which are not always financial and board and committee members should always err on the side of caution when dealing with these matters.
Where do your duties lie?
The organisation has put special trust in you – you have a fiduciary duty towards the organisation. You have a duty to always act in the organisation's best interest. This is regardless of your own or other's interests.
This is regardless of whether:
- you are a volunteer or are paid; or
- attended the meeting where the decision was made or not.
What do you do?
Only full and frank disclosure is acceptable
At first instance it is imperative that you disclose to the board / committee any potential conflict of interest – this is regardless of whether you personally financially benefit or not.
Do not participate in the decision making regarding the potential conflict of interest
- You should not be present when the matter is considered by the board / committee.
- You should not vote on the matter.
- You should not try and influence the outcome of the vote in any way.
The minutes of the meeting should minute the potential conflict of interest and that you were not present during the discussion and the vote.
Some tips for not-for-profits are as follows:
- Have a written policy for potential conflicts of interest.
- At the start of each meeting ask whether any member has any conflicts of interest in relation to any items on the agenda – record the answer in the minutes.
- Take careful notes of any potential conflict of interest and record how it is dealt with in the minutes.
Even the perception of a conflict of interest can damage a NFP's reputation and it is important that actual and perceived conflicts of interest are dealt with appropriately.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances. Madgwicks is a member of Meritas, one of the world's largest law firm alliances.