No, that's not a conflict of interest

We need to have a chat about conflicts of interest.

Quick recap: What’s a conflict of interest?

First, a Board Governance 101 reminder for those new to the governance world. Members of a board of directors have an obligation, at all times, to act in the best interests of that organization. Here in British Columbia, this is made pretty explicit for non-profit board members in the Societies Act, requiring directors to “act honestly and in good faith with a view to the best interests of the society,” and to “exercise the care, diligence and skill that a reasonably prudent individual would exercise in comparable circumstances.”

This is where the notion of conflict of interest comes from. A conflict of interest arises when your personal interests are in conflict with the interests of your organization. Many organizations’ bylaws and board governance policies prohibit not only real conflicts of interest, but they also ask that board members avoid perceived or apparent conflicts (i.e., where a reasonable person on the outside, looking in, would think that a conflict exists).

A conflict of interest is a problem because it could corrupt your motivation for exercising one of your official powers, or casting your vote. For example, if you’re married to an employee who reports to the board, your motivation on discussions related to that individual’s compensation might be corrupted based on that relationship (especially if you shared a bank account!), instead of looking after the best interests of the organization.

In short, you risk a conflict if you could be seen to use your official role, powers, or decisions to personally benefit yourself (especially financially) at the expense of your organization.

So what happens if you declare a conflict?

The recent provincial amendments to the Societies Act really do clarify what a board member is expected to do when a conflict of interest arises. It’s not enough to just abstain from the vote. If you really believe that a conflict of interest exists, you have a few responsibilities:

• You have to disclose, “fully and promptly,” the nature of the conflict to the board.
• Abstain from any votes related to the issue that’s given rise to the conflict.
• Physically leave the board meeting whenever that issue is being discussed.
• Refrain from doing anything -- even outside the meeting -- to influence the decision.

So you can’t just stick around at the meeting and participate in debate, and throw your hand up at the end of the whole thing and say “I abstain.” That’s not good enough. You’re not even allowed to be in the room when the matter is being discussed.

Lastly, when a board member declares a conflict of interest, it needs to either be recorded in your meeting minutes, or kept in a written record that you submit to your non-profit’s registered office, addressed to your board colleagues. In British Columbia, a society’s members have the right to ask to view any conflict of interest disclosures.

So, now, on to my point

If you don’t stand to benefit personally at the organization’s expense, you’re probably not in a conflict of interest. While erring on the side of caution is generally a good governance practice, erring too cautiously when it comes to conflicts can trivialize the concept. Boards would do well to refresh themselves on the concept of conflict of interest.

As an individual board member, if you’re not sure if a conflict of interest might exist, speak to your board chair, or your executive director, if appropriate; ask experienced staff who support your board governance functions; heck, ask legal counsel, if you need to.

Here are some examples to illustrate things that are not conflicts of interest.

• “I abstain, since this motion is to appoint myself to a committee.” This isn’t a conflict of interest. Even if you’re paid an additional stipend to serve on committees, you’re allowed to nominate yourself, and you’re allowed to vote for your own appointment. That’s not a conflict of interest, that’s just regular ol’ democracy.
• “Since I chair that committee, I’ll abstain from our report’s approval.” Why? If you’re the chair of that committee, you should be the person proposing the approval of your committee’s recommendations; and, if you agree with them, you should be voting in favour. Again, that’s not a conflict of interest, that’s just democracy.
• “Since I want to be a delegate for this conference, I’ll abstain from the motion to approve letting us go.” Your colleagues on the board have just as much of an opportunity to attend as you do, and there’s no personal financial benefit for you to attend. Being reimbursed for your reasonable expenses as a director, or having the organization’s pay for you to attend a professional conference, isn’t a conflict.

Imagine if you couldn’t vote on any motion that affected you? Under this logic, three or four board members could move to censure everyone else, or to strip them all of their directors’ fees, and the majority on the board would be powerless to stop them, because they’d have to go “Whelp! I’m named in the motion, I guess I have to abstain.” Nope. Not how it works.

Every time you declare a conflict of interest on something trivial, not only do you potentially obscure your board’s understanding of what constitutes a real conflict of interest, but an adorable kitten also gets sucked into the engine turbine of an airplane.

Note: This is the rant of a governance junkie, and not legal advice.

About the author

Christopher Girodat is currently the executive director of the Capilano Students’ Union, and has nearly a decade of experience in executive and management-level leadership roles. He’s a shameless “good governance” junkie (although it took him a while to get there), a video game nerd still (I’ve started Breath of the Wild, at least!), a politics watcher, and someone weirdly interested in privacy law and occupational health and safety.