How to Handle Conflicts of Interest with Board Members

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An active board member often has numerous professional and personal affiliations and, undoubtedly, some of them cross paths with your organization. Finding board members with no conflicts of interest at all is unlikely. They might sit on other like-minded non-profit boards or be related to someone at your organization. In fact, they may have been chosen as a board member because of their commitment to your cause area or helpful contacts.

However, a conflict of interest can become a major obstacle to fulfilling the duty of loyalty — one of the main legal obligations of board members1— or create tension when values are not shared. In some cases, it may be necessary to re-evaluate the board member’s suitability for current board service. But these are not always straightforward, and it can be hard to know which cases warrant a board member stepping away from service and what is an appropriate or even beneficial duality.

Your organization can take the following actions to thoughtfully consider your Board member’s affiliations and clarify how you’ll handle those conflicts when they arise.


Create a Conflict-of-Interest Policy

Conflicts are not only financial in nature. Issue or values-based conflicts may have to be addressed as well. For example, if a board member takes a position at or supports another organization that is counter to the organization’s mission and principles.

Conflicts of interest are sometimes obvious and other times more obscure. To provide better guidance, consider including examples of what constitutes a conflict of interest for the organization. These examples may be organization-specific, and/or distinguish between real and perceived conflicts. For example, a health care organization may decide not to recruit Board members who work for, or in any way professionally represent the tobacco industry.

Conflict-of-interest policies should be applicable to the board and key staff, at a minimum. They may also include other employees and key constituents with influence over the organization, such as major donors or vendors.

Reframe Conflict as Duality

Some organizations, instead of using the term conflict of interest, use the term duality of interest. Duality of interest recognizes that, under certain circumstances, even if a board member has multiple interests, those interests do not necessarily create a conflicting situation. The scarcity mentality of the non-profit sector has encouraged a culture of competition. Shared interests amongst board members have the potential to create collaboration and sharing of resources.

Align With Your Gift Acceptance Policy

A conflict of interest may arise when an organization decides whether to accept gifts from an institution that a board member is affiliated with. Many organizations address this by including a clause in their gift acceptance policies stating that they may decline or return gifts that could injure the reputation or standing of the organization or cause it to enter activities that conflict with its mission. This includes declining gifts from individuals or companies that have conflicting views and values from the organization or an organization whose purpose is in direct conflict with the non-profit’s.

Consider forming a Gift Evaluation Committee responsible for determining whether the organization should enter a philanthropic relationship with a potential donor or whether the purpose of a proposed gift is acceptable to the organization. The committee would review gifts of concern and provide guidance and recommendations on a case-by-case basis, considering factors such as:

  • Reputation and public record of the individual or organization making the gift
  • Purpose of the gift, particularly if the purpose is restrictive, unusual, or has the potential to pose financial or programmatic conflicts
  • Source of gift, including the proposed asset and transparency of source
  • Potential for negative impact on the organization’s brand or harm to their community

Have Open Conversations with Current and Potential Board Members

Busy and engaged people, like board members, are involved in various activities in the community, and these affiliations are likely to collide at times. At least annually, consider requiring board and staff members to disclose — in writing — any relationships or associations that might constitute a conflict of interest. As you’re recruiting new Board members, be sure to have open conversations throughout the recruitment process so they can disclose any relevant affiliations.

By openly and preemptively disclosing these connections, your organization is better able to carry out proper due diligence and be prepared with a plan should conflicts of interest arise.

  1. “Legal and Compliance Issues – FAQs,” 101 Resource, February 26, 2020, BoardSource. https://boardsource.org/resources/legal-compliance-issues-faqs/

For more information, visit www.campbellcompany.com or call 877-957-0000 to launch the Campbell & Company team within your organization.

 

 

 

 

Campbell & Company News, Northwest, Midwest Region, Board

Meredith Richard and Sarah Marino

Meredith Richard is an Associate Consultant on the Fundraising team at Campbell & Company. Sarah Marino is Vice President of Fundraising at Campbell & Company.

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