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7 Key Steps to Deal With Conflicts
by Peter Scolari
Conflict of Interest Overview
Many people give up their time for non-profit organisations by sitting on Boards. Too often, it is easy to forget or recognize conflict of interest situations. Remember, even though you are giving up your time (most positions are voluntary) for the community or charity, you should always be acting in the best interests of the organisation and not putting your own interests first.
Being on a board involves the power to make decisions. It could be that your son is going for captain on the sports team or your brother's business can perform some contracting work for the organisation at a "good rate". All of these things are fine but there is a process for handling such decisions and you need to be able to identify immediately when there is a conflict of interest so that you can act appropriately and within the law and your constitution.
Key Step #1 - Recognise When a Conflict Interest Situation Arises
Generally, you will have a conflict of interest situation if you or your business/company (or someone close to you such as a relative) stand to benefit from a decision being made at a board meeting which you sit on.
There are two types of conflict of interest - Pecuniary (where money is involved) and Non-Pecuniary (where money is not involved e.g. Son is to be made captain on the team).
Key Step #2 - Consult your Constitution Regarding Conflict of Interest
Most Constitutions and legislation that governs your type of organisation (usually Acts) advise what should occur when you have a conflict of interest. You should consult these so you know what to do in these situations.
Key Step #3 - Formulate a Policy Regarding Conflict of Interest
Where the legislation and/or Constitution is silent regarding Conflict of Interest procedures, formulate a policy that can be followed when such a situation arises so that it is clear what has to be done. In fact even when it is not silent, it is sometimes a good idea to have a policy specific to your organisation that clarifies procedures in line with the regulations.
Key Step #4 - Declare Your Interest When it Occurs!
Make sure you make a declaration in the meeting that you have identified a conflict of interest situation. Your integrity will be assured if you volunteer the information rather than waiting for somebody else to raise the matter later on.
Key Step #5 - Follow Your Constitution and Policy
Be sure to follow your Constitution.
If the Constitution is silent on conflict of interest situations, you should ensure that you do not vote on this matter. It is also often good practice if you are not present in the room while the motion is being discussed.
Key Step #6 - Ensure the Minutes Record the Conflict of Interest
The Minutes should record that you have declared a conflict of interest and whether or not you were present for discussion of the motion and whether you voted on the matter.
Key Step #7 - Try Not to put Yourself into Conflict of Interest Situations
As a Board Member, you have a fiduciary obligation to act in the best interests of the members and the organisation. Wherever possible, try to avoid putting yourself in a conflict of interest situation or you could find that people will start to believe that you are on the Board for yourself only. However, sometimes this situation cannot be avoided and when it can't follow these key steps!
Failure to adhere to these procedures could be very damaging to you and the organisation and cause unnecessary turmoil within the community.
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About the Author:
Peter Scolari CA, GAICD is a principal with Scolari Comerford. He is a Registered Company Auditor and Tax Agent and is a graduate of the Australian Institute of Company Directors CDC course. Peter assists clients with all aspects of their business through the accountancy practice.