With a heightened focus these days on good governance policies and practices in the association community, it would be wise to evaluate your association’s existing conflict of interest policy for officers and directors and consider whether any changes are in order – to the policy itself and/or to the procedures for disclosure and enforcement. If your association does not have a conflicts policy for board members, it should strongly consider adopting one.
There is no one-size-fits-all conflicts of interest policy; each policy needs to be customized to the individual association based on factors such as the extent of past or ongoing problems in this area, who constitutes your officers and directors (e.g., supplier members), the ability to attract and retain volunteers for leadership posts, the association’s tendency toward or against more formalized procedures, and the political desire to provide more or less flexibility in dealing with conflicts, among other factors. This is not to say that a conflicts policy should be strengthened or weakened based on political pressures, but no policy exists in a vacuum and one that is not appropriately tailored to an association’s unique circumstances can create as many problems as it solves.
All association officers and directors owe a fiduciary duty of loyalty to the association – which includes a duty to avoid conflicts of interest – but the scope and application of that common law duty is not always clear. Consequently, many associations adopt specific conflict of interest policies to spell out more clearly – sometimes with great specificity and sometimes with less – what is and is not a conflict, how conflicts should be disclosed, what happens in the event an actual or potential conflict arises, who passes judgment on such matters, and what the consequences are of a prohibited conflict. Some associations have detailed multi-page policies covering such matters, including comprehensive enforcement procedures, while others prefer a more streamlined approach that offers more flexibility. Each association needs to determine which approach suits its needs best. Below is one example of a model conflicts policy and annual disclosure form for association board members. Keep in mind that this is just one example, and not necessarily the most appropriate one for your association.
********************************
Board of Directors Conflict of Interest Policy and Disclosure Form
In their capacity as directors, the members of the Board of Directors (the “Board”) of the ABC Association (“ABC”) must act at all times in the best interests of ABC. The purpose of this policy is to help inform the Board about what constitutes a conflict of interest, assist the Board in identifying and disclosing actual and potential conflicts, and help ensure the avoidance of conflicts of interest where necessary. This policy may be enforced against individual Board members as described below.
- Board members have a fiduciary duty to conduct themselves without conflict to the interests of ABC. In their capacity as Board members, they must subordinate personal, individual business, third-party, and other interests to the welfare and best interests of ABC.
- A conflict of interest is a transaction or relationship which presents or may present a conflict between a Board member’s obligations to ABC and the Board member’s personal, business or other interests.
- All conflicts of interest are not necessarily prohibited or harmful to ABC. However, full disclosure of all actual and potential conflicts, and a determination by the disinterested Board (or ABC Executive Committee) members – with the interested Board member(s) recused from participating in debates and voting on the matter – are required.
- All actual and potential conflicts of interests shall be disclosed by Board members to the ABC Executive Committee through the annual disclosure form and/or whenever a conflict arises. The disinterested members of the ABC Executive Committee shall make a determination as to whether a conflict exists and what subsequent action is appropriate (if any). The ABC Executive Committee shall inform the Board of such determination and action. The Board shall retain the right to modify or reverse such determination and action, and shall retain the ultimate enforcement authority with respect to the interpretation and application of this policy.
- On an annual basis, all Board members shall be provided with a copy of this policy and required to complete and sign the acknowledgment and disclosure form below. All completed forms shall be provided to and reviewed by the ABC Executive Committee, as well as all other conflict information provided by Board members.
I have read the ABC Board Conflict of Interest Policy set forth above and agree to comply fully with its terms and conditions at all times during my service as a ABC Board member. If at any time following the submission of this form I become aware of any actual or potential conflicts of interest, or if the information provided below becomes inaccurate or incomplete, I will promptly notify the ABC President & CEO in writing.
Disclosure of Actual or Potential Conflicts of Interest:
______________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
Board Member Signature: ________________________________________________________
Board Member Printed Name: _____________________________________________________
Date: _________________________________________________________________________