Nonprofit Boards and Conflict of Interest scenarios

From NPT…

The policies included in every nonprofit’s Code of Ethics will vary, but one rule remains constant: A conflict of interest policy.

A nonprofit must not allow any outside financial interest, or competing personal interest to influence the decisions of the organization. This is not only the ethical thing to do, but it will also spare you any embarrassing press coverage. Yet deciding what actually constitutes conflict of interest can be a little vague.

According to Howard Berman in “Making a Difference,” the appearance of conflict of interest can be as serious as an actual conflict of interest. As a rule of thumb, you should avoid any situation that could be viewed as such. Berman listed four examples of situations that are conflict of interest:

  • A business dinner at a restaurant the daughter of the CEO owns counts as a conflict of interest, even if the prices are similar to other restaurants in the area.
  • A co-worker’s son was just hired for a job in your department. A conflict of interest may exist if the co-worker is directly supervising his or her son.
  • You are a claims examiner in need of extra income, and the opportunity arises to work part-time for a physician’s office, doing medical billing. This is considered conflict of interest because you may be put in a position to pay claims that you submitted from that part-time job.
  • Prior to joining the nonprofit, you worked as a health insurance consultant for many years. If the nonprofit you work at does work in this field, you will no longer be able to do consulting work.

About Gary Coiro

Nonprofit & Church Leader Nonprofit Leader and Consultant since 2004, following 15 years as a pastor. Competencies include board development, fundraising, staff development and management, strategic planning, church work, Bible teaching, and capital campaigns. Currently consulting and serving on the Church Ministries Management Team for a large multi-cultural evangelical church.
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One Response to Nonprofit Boards and Conflict of Interest scenarios

  1. Jim Sorrentino says:

    Conflicts of Interest run a continuum and may reflect personal values, organizational policies, professional practice code of ethics as well as funding, regulating and contract agency expectations. Some individuals may have much higher and others have lower standards regarding what constitutes a conflict of interest. Some Board members may feel offended at the thought of being asked to sign and agree to a conflict of interest policy.
    For all these reasons, its important for every NPO to develop a conflict of interest policy and code of conduct that starts with the external (funder, regulator) expectations and then adds more to reflect what’s more important to the organizational.
    Common areas covered in a conflict of interest policy include issues such as: outside employment and involvement on Boards with competing missions; business relationships; solicitation or acceptance of gifts, payments etc; seeking preferential treatment or personal benefit and an expectation to acknowledge and a abstain from any decisions where there is or appears to be a substantial conflict of interest.
    Developing a policy requires a commitment, time and participation of the entire Board and CEO.
    And, it should be annually reviewed, discussed, sign-off and modified as new issues arise.

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