February 4, 2015 : Tracey Bird
How your charity can avoid conflicts of interestTracey Bird explains that while conflicts of interest can happen on boards, if you deal with them proactively, you can make sure your organisation doesn’t hit the headlines for all the wrong reasons.
It’s entirely natural for conflicts of interest to occur on third sector boards and committees. People that become trustees tend to be committed, energetic, and socially aware individuals, who, more often than not, have their fingers in lots of worthy pies and good causes. So don’t panic if you or someone on your board is faced with a conflict of interest. It’s not about trying to prevent it – it’s how you manage it that matters.
The Cambridge Dictionary online defines a conflict of interest as ‘a situation in which someone cannot make a fair decision because they will be affected by the result’. This is what happened recently when a local councillor failed to declare an interest and absent themselves from a vote to approve a grant to a charity. Unfortunately, this ended in a bad news story for the charity, and a misconduct proceeding for the individual involved.
All trustees have a legal duty to act in their organisation’s best interests when making decisions. If a trustee has a personal interest, financial or otherwise, in a decision, then they may not be able to comply with their duties as a trustee. Similarly if your duty to your charity competes with a duty or loyalty to another organisation or person, then again there’s a conflict of interest.
If you don’t have a policy and procedures in place to deal with potential conflicts of interest, you risk not only your charity’s reputation, but future damaging disagreement. There are three top tips to remember when dealing with conflicts of interest:
- Identify what the conflict of interest is – it’s good practice to have a written conflict of interest policy to tell your existing trustees (and help prospective trustees) how to identify and disclose potential conflicts of interest. Draw up a register of interests – and keep it up to date and review annually, or when new trustees are appointed. Have a standard agenda item at the beginning of each trustee meeting to allow trustees to declare any actual or potential conflicts of interest.
- Deal with the conflict of interest – prevent it from affecting any decision making by finding an alternative way forward, or take appropriate steps to manage the conflict, eg make sure the person affected withdraws from discussions about the issue and does not vote on the matter.
- Record how you dealt with the conflict of interest – keep a written record of the issue, which trustee was affected, and how you dealt with it in the minutes of your meetings. Note if the conflict of interest was declared in advance, outline the discussion, and record if anyone withdrew, and how you and the other trustees made the decision in your charity’s best interests.
There are lots of conflict of interest sample documents available on the web (check out this handy list from the Small Charities Coalition), and SCVO’s Guide to Good Governance has a sample code of conduct and register of interests. Remember, as in all good governance, prevention is better than cure!