A member of your association’s board owns an office building that the association is considering for its new headquarters.
A board member is a partner in an accounting firm that is in the running to handle the association’s bookkeeping and taxes.
Your association needs to hire a new office assistant. A board member’s spouse applies for the position.
Which of these scenarios constitute a conflict of interest for the board member involved? The answer is “all of the above” and “none of the above.”
If the board is following the association’s conflict of interest policy (you do have one, right?), then none of them needs to be problematic.
Is the office building a good choice in terms of location, rent and other factors? Is the accounting firm competent and reasonably priced? Is the job applicant the best candidate? In other words, would choosing them be in the best interest of the association?
Did the board member who stands to benefit from the decision recuse himself or herself from voting? This doesn’t mean he or she can’t be in on discussing it, according to Gerard P. Panaro, an attorney who works extensively with trade associations and other nonprofit groups. “Legally, as long as there is full disclosure, the transaction is arm’s length and fair to the corporation, the interested director can participate in the discussion (and that may even benefit the organization),” he says.
Do you have documentation to back up the decision – written evidence supporting the determination that it was the best choice?
That’s where “all of the above” comes in. These hypothetical situations may be fully in compliance with your association’s conflict of interest policy, provided the proper disclosures and documentation are in place.
If it looks like a duck ...
These days, however, consider how to avoid even the appearance of a conflict. Actions need to pass what one of our association managers calls the “60 Minutes” test: Would it hold up under confrontation by an aggressive TV news crew? You may call it the “sniff test” (does it smell fishy?) or the “Caesar’s wife” test (above suspicion). They all mean the same thing: How does it look to your constituents?
In New York state, where our firm is based, conflicts of interest have been getting a lot of attention lately, thanks to:
The news. Two state legislative leaders have been convicted on charges related to various shady deals, and allegations of more cases continue to surface.
New legislation that strengthens the laws governing nonprofit organizations. Among other things, New York’s Nonprofit Revitalization Act of 2013 “follows both common law and best practices literature in requiring directors to make disclosures about potential conflicts of interest,” according to the attorney general’s office’s Charities Bureau.
You might not have a “60 Minutes” crew beating down your door if you rent offices in Betty Boardmember’s building or hire Dave Director’s accounting firm – but someone is going to ask. So be prepared and be proactive with that paper trail showing that the decision was in the best interest of the association.
As association executives, we’re responsible for those “ordinary course of business” decisions that don’t require a board vote – such as purchasing, both ordinary and extraordinary. Depending on the association, hiring staff might fall into that category as well. While these aren’t covered by the same conflict of interest laws covering boards, they should also be handled with care and with a solid paper trail that decisions are made fairly, according to established procedures and (here we go again) in the association’s best interest. The New York attorney general’s “Conflict of Interest Policies” booklet has several examples of such scenarios.
Whose hat is that?
One of our association managers uses the hat metaphor, encouraging her board members to consider “whose hat they’re wearing.” When they’re conducting association business, they need to have their “association hat” on. That means basing all their decisions – how to vote, whether to vote – on what is in the best interest of the association.
This particular organization also makes a point of noting the conflict of interest policy at the beginning of every meeting, to keep it fresh in board members’ minds and encourage them to consider its meaning.
Another association manager has the organization’s mission statement printed on the backs of the table tents that sit in front of board members at meetings. The president also often begins meetings with a reminder of the board’s role.
The more you know ...
The executive director’s role is not to police the board for conflict of interest violations. It’s to make the association’s policies known to the board, so it can police itself.
What’s the key to successful self-policing – and successful everything else, for that matter? Knowledge! A member of the ADG team tells the story of three boards she serves on. One welcomed her with a single email. Another provided a notebook with the board’s policies and procedures. The third onboards new members with a two-day training program. Guess which one left her feeling truly equipped to serve the organization.
We’re not saying every organization needs to put on two full days of board member training, but the more you do, the better your board will be at dealing with potential conflicts of interest – and conflicts in general. That’s definitely in the best interest of the association and everyone involved.
Copy Crank’s Corner
By Beverly Seinberg, Lead Copywriter
A new feature of this blog. This month: The Dating Game.
Dates should not have a suffix on the number (10th, 23rd, etc.) if the month is present. (July 4, 1776, not July 4th, 1776). Only use the –th, -st, -nd, -rd suffixes if there is no month (“See you on the 23rd!”).
In everyday usage it is not necessary to append this year to a date (May 1 is sufficient; you don’t need to say May 1, 2017). You may not even need next year if it’s clear from the context what year it is (“Join us for our 2018 Conference on February 1 and 2”). Exception: legal language (contracts, disclaimers, official rules).