A conflict of interest occurs when a public official or an employee or board member of an organization makes decisions that benefit her personally, or receives or is perceived to receive personal benefits from her work because she has insider knowledge. For example, if a member of a board of directors learns the organization plans to buy property owned by her cousin, she has a possible conflict of interest. To prevent conflicts of interest, organizations should raise awareness through education, develop conflict of interest policies, have employees sign conflict of interest statements and regularly monitor business operations and board deliberations for potential conflicts of interest.
Employees and board members may be unaware that their activities create a potential or actual conflict of interest, according to the National Council of Nonprofits. The organization should raise awareness by educating staff and board members as to what constitutes a conflict of interest, and encouraging discussion of possible conflicts. For example, organizations should discuss conflict of interest during new employee orientation and as a refresher during annual employee training. The NCN notes charitable nonprofits often spend time at board meetings discussing hypothetical scenarios and how the board would manage such situations.
In addition to training, conflict of interest policies can help delineate expectations for employees or board members and can also be used as a training tool. The organization should be specific about what it considers a conflict of interest. For example, people may work more than one job, especially if a full-time position is not available. Although the organization may not prohibit working at another job, its conflict of interest policy could specify that its employees cannot work for a competitor. The policy should clearly state the consequences for violating the conflict of interest rule. An ethics policy can also be helpful in identifying potential conflicts of interest and providing guidance for employees.
Many organizations ask employees and board members to sign a conflict of interest statement. The statement essentially reiterates issues covered in the training and policies, and documents exactly what the expectations are for employees and board members. An employee who handles purchasing decisions, for example, might be specifically prohibited from purchasing a competitor’s products. Board members, who also make financial decisions on the part of the organization, might be specifically prohibited from discussing or sharing information regarding the organization's business plans. The signed document is typically placed in the employee or board member’s file.
Although education, policies and signed statements help raise awareness of conflict of interest issues, the organization should monitor and document activities that have a high potential for conflict of interest. For example, managers should be aware of potential conflicts of interest for employees working outside jobs. Some organizations circulate conflict of interest questionnaires each year. If a board member discloses a potential conflict of interest, the meeting minutes should reflect that the board member was not present for discussion or voting on the particular issue. When a conflict of interest is identified, the board chair should act to protect the interests of the organization, especially if the board member is reluctant to recuse himself. Individuals should also take action; for example, a judge can recuse himself from a case if it involves a business associate.
- National Council of Nonprofits: Conflict of Interest
- National Council of State Legislatures: Conflict of Interest Definitions
- National Kidney Foundation: Policy and Procedures Regarding Conflicts Of Interest
- Pacific Gas and Electric: Employee Code of Conduct
- Texas Workforce Commission: Conflict of Interest
- Minnesota Attorney General’s Office: Conflict of Interest Policy
- Photo Credit Christopher Robbins/Photodisc/Getty Images
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