M1: Learner Manual

A conflict of interest occurs when a person who is part of the decision-making process is considering an issue in which they or a close family member stand to benefit in some way.

Conflict of interest is about Board members being aware of actual or potential self-interests that may conflict (interfere) with putting the organisation first. It is also important to recognise perceptions (by members, funding bodies etc.) of a conflict of interest.

Regardless of what law the organisation is incorporated under, Board members (and senior management) must:

·       tell the Board that there is a conflict of interest and why

·       make sure this is recorded in the minutes of the meeting

·       leave the room before related discussions and vote occur

·       in a community where everyone is related voting processes may be more difficult. Each Board needs to find an appropriate way of dealing with this.

If a Board member has a conflict of interest this does not mean they have done anything wrong. It is how the Board member handles the conflict of interest that is important. It is only wrong to conceal or fail to disclose any possible conflict of interest.

To avoid or manage a conflict of interest the Board members must refer to the conflict of interest section of the constitution, which has established procedures for disclosure. Upon appointment to the Board, all Board members will sign an agreement, that states they will make themselves aware of and adhere to the organisation’s constitution and policies and procedures, including those for conflict of interest issues.

Boards need to develop strategies (policies and procedures) for addressing conflicts of interest. Some strategies may include:

·       seeking competitive open tenders for major purchases that do not include business interests of Board members or their families

·       ensuring Board members who have an actual or potential conflict of interest stand aside from discussions and voting

·       training for Board members on conflict of interest

·       outsourcing specialist independent advice