What are the best practices for avoiding conflicts of interest on your board?

1 Define conflicts of interest

A conflict of interest occurs when a board member's personal or professional interests interfere or appear to interfere with the best interests of the organization. For example, a board member might have a financial stake in a vendor that the organization contracts with, or a board member might have a family or close relationship with a staff member or a beneficiary of the organization's services. A conflict of interest can be actual, potential, or perceived, and it can be direct or indirect.

2 Adopt a conflict of interest policy

A conflict of interest policy is a document that outlines the principles, rules, and procedures for dealing with conflicts of interest on your board. It should encompass what constitutes a conflict of interest and examples of common situations that may create conflicts of interest. Furthermore, board members must disclose any actual, potential, or perceived conflicts of interest as soon as they arise or become aware of them. Additionally, a process should be in place for reviewing and evaluating disclosures and determining how to resolve the conflict. Board members should recuse themselves from discussions and decisions involving a conflict of interest or abstain from voting on such matters. Records should be kept of disclosures, recusals, abstentions, and resolutions of conflicts of interest. Lastly, there should be a procedure for reporting and addressing breaches of the policy and imposing sanctions if necessary.

4 Monitor and review conflicts of interest

A conflict of interest policy is not a static document that can be filed away and forgotten. It is a dynamic tool that needs to be monitored and reviewed regularly to ensure its effectiveness and compliance. You should evaluate the policy and its implementation in light of changing circumstances, emerging risks, and best practices. To monitor and review conflicts of interest, you can establish a board committee or appoint a board officer, conduct periodic audits or assessments, solicit feedback from board members, staff, stakeholders, and external parties, benchmark your policy against other organizations or industry standards, and update or revise the policy as needed. By following these best practices, you can avoid conflicts of interest on your board and enhance your organization's governance, transparency, and accountability.

5 Here’s what else to consider

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?