Conflict of Interest Policies: What to Look Out for and Anticipate

You can’t pick up a newspaper without reading about political scandals, or corporate executives being put behind bars, or lobbyists being investigated. To help put the breaks on some of these types of wrongdoings, congress passed the Sarbanes-Oxley Act, which has set new and more stringent standards of accountability.

As we all know, the non-profit sector is certainly not immune to gross violations of ethics and standards of behavior. We read stories of non-profit executives getting paid outrageous sums of money while laying off staff; we see executive directors abusing their power and taking advantage of their employees; and we witness board presidents making money off of real estate deals that involve the very non- profits they reside over.

It’s imperative that every non-profit pass a conflict of interest policy that every board member signs. This policy will help assure the organization conducts business ethically. The policy can be a complicated set of standards or a basic document that is easily understood by everyone. If you want a sample of a conflict of interest policy, email info@richardmale.com.

Let’s keep this simple and look at some basic pieces of information that every non-profit should integrate into a very basic policy.

  1. The primary purpose of designing a conflict of interest policy is to protect the non-profit’s tax exempt status when it engages in an activity that might benefit the private interests of a staff or board member or cause harm to a person in the organization.
  2. If you discuss an issue in which a staff or board member has a clear financial interest, that person must immediately inform the board of this potential conflict and excuse themselves from any direct vote or action taken by the organization.
  3. The board should conduct a yearly salary survey to make sure the salaries of the senior staff are in line with their responsibilities and performance.
  4. When making decisions that might involve ethical considerations make sure the board secretary takes excellent minutes and make sure the motions are carefully reviewed prior to deciding on and passing the motion.
  5. If the organization makes a profit (excess revenue over expenses) , this profit should not accrue to any members of the governing board. A percentage of it can accrue to the staff members as performance bonuses or other incentives and rewards.
  6. Although it is not illegal for husbands and wives to work for the same organization or sit on the same board of directors, it must be carefully monitored and clearly disclosed when financial decisions are decided that impact either party.
  7. When hiring a professional development (fundraiser) staff member shy away from paying them a percentage of what they raise. Always put the charitable mission of the organization above an individual’s personal gain. Pay them a salary and set fee and if you want to give them a bonus, based on performance, carefully evaluate and discuss this decision among the leadership of the organization.
  8. If your organization accepts donor designed gifts for specific programs, it is the clear responsibility of the board and the executive director to make absolutely sure those dollars are used only for the designed purposes. This is the foundation or core of philanthropic trust between the donor and organization.
  9. Make sure the organization has clear standards around sexual harassment and other forms of abuse of power both on the board and at staff level. Have a policy that carefully monitors personal relationships between staff or staff/board members that could lead to abuse of power and other activities detrimental to the person and organization.
  10. Who should be privy to board minutes? Boards should be clear and careful when certain decisions are made in terms of who has the right to see the board minutes.

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