Friday, April 18, 2014

Agenda item: Address nonprofit board members' real, perceived conflicts of interest


Agenda item 15: Identify and address members' real and perceived conflicts of interest

What potential conflicts of interest lurk in your nonprofit boardroom? Are your board members aware that they exist, and do they recognize the importance of addressing them?

If we've recruited successfully, the potential for an occasional overlap of loyalties for well-connected members will exist. We must be prepared, up front, to recognize and address those conflicts. We also need to recognize the importance of being proactive in this area as an extension of our accountability to the organization and our community. That means we must be attuned not only to actual conflicts that arise, but to the perceptions of conflict that might exist.

What is a conflict of interest? The Wikipedia definition offers a good, general overview of the concept, and it boils down to one word: impropriety. It's "a risk that professional judgement or actions regarding a primary interest will be unduly influenced by a secondary interest."

If I use my position on the board for personal benefit, I am displaying a conflict of interest. If I use my divided loyalties to influence others, or allow those divided loyalties to determine how I vote or act, I am engaging in a conflict of interest.

As I write this, I'm realizing that the topic is begging for more than the "quick tip" that this series provides. I'll commit to writing that expanded post in the future. In the meantime, my "nonprofit agenda item" quick tip is this:

Engage your nonprofit board in a frank discussion about the potential conflicts - real or perceived - that exist within your current membership list. (If those conversations already are part of your board practice, use this as an opportunity for a check-in.) Where are the overlaps in commitment - professionally or personally - that might create a conflict with their responsibilities as board members?

Use this as an opportunity to prompt members about the importance of being mindful about where their own divided loyalties lie and reinforce what the National Council of Nonprofits calls a "culture of candor" that is so critical to nonprofit governance.

Explore not only the real conflicts that you expect to come up but the "what ifs" - the potential scenarios that exist within your organization specifically and your mission area generally. Examples of questions you might pose to the group might be:

  • What types of conflicts have nonprofits similar to yours encountered? 
  • What are the issues that are particularly touchy in our community? How are we connected to those sensitive topics as an organization and as individual board members? 
  • How has the community responded when challenges are raised with other nonprofit organizations?
  • Were those conflicts fairly unique (to the member, the situation, etc.), or are they recurring types of situations?
  • How did we handle those conflicts, and what might we do differently in the future?

Examine your meeting agendas ahead of time for any topics where conflicts might be problematic. Be ready to declare any potential conflicts that you have personally, and respond with the action that is appropriate to the situation and your board's policy. If necessary, be prepared to point out potential conflicts that others may not recognize and/or acknowledge.

A conflict of interest also may be a matter of perception. How we handle an issue or transaction as a board may follow the letter of the law and/or policy and still be perceived as ethically squishy inside and outside of the organization. It is important to not only tend to the clear conflicts that may arise, but to be attuned to actions that may be interpreted by others as ethically questionable.

Your board's reputation is everything. If you lose credibility with stakeholders, especially external stakeholders, your power tumbles and your capacity to govern shrinks. Conflict of interest is a topic that nonprofit boards cannot afford to ignore or discount.

I realize that this brief post may prompt more questions than provide answers. For more information, and several sample policies, please visit my "conflict of interest" bookmarks. The list will continue to grow as I discover new resources that would be valuable to readers.

1 comment:

Nancy Iannone said...

I've found that most of the boards I've been around, don't pay enough attention to conflict of interest issues. Particularly in working with small town boards, there are a lot of dual relationships between business,government, and nonprofits.
Even when those conflicts are recognized, the less obvious conflicts regarding perception often are not. I really appreciated what you wrote about the damage that perception of a conflict can do to the reputation and integrity of an organization.