What constitutes a conflict of interest?
conflict exists when the personal or professional concerns of a board member or
a staff member affect his/her ability to put the welfare of the organization
before personal benefit. Since nonprofit board members are likely to be
involved with many organizations, it is not unusual for an actual or potential
conflict of interest to arise.
of interest relates to ethical behavior which covers all aspects of governance.
A statement by Independent Sector describes three levels of ethical behavior:
obeying the law; decisions where right action is clear, but one is tempted to
take a different course; and decisions that require a choice among competing
options (this poses the most difficult dilemmas for nonprofit boards).
Why must we be concerned about conflict of interest?
Board members have a legal responsibility to assure the
prudent management of an organization’s resources. In fact, they may be held
liable for the organization’s actions.
What is the importance of having a conflict of interest of policy?
IRS strongly encourages nonprofits to not only have a conflict of interest
policy but also to consistently monitor and enforce it. Because public confidence
is important to most nonprofits, boards should take steps to avoid even the
appearance of impropriety.
policy on conflict of interest has three essential elements: full disclosure,
board member abstention from discussion & voting on matters presenting
potential or actual conflicts, and staff member abstention from decision-making
on matters presenting potential or actual conflicts.
More from BoardSource.org (primary source)
More on the topic and a samplepolicy
IRS info on nonprofit governance
Sample conflict of interestpolicies