For example, you can write something like the following: “Our organization strives to maintain the highest standards of integrity, and it is vital that the public be confident of our commitment. Accordingly, any appearance of a conflict must be avoided. To maintain our integrity and credibility, we have adopted the following policy. ” If you’re a non-profit, you can write something like this: “The purpose of this policy is to protect the Organization’s tax-exempt status when contemplating a transaction or arrangement that could benefit an officer, director, or employee. This policy is intended to supplement but not replace any applicable state and federal laws governing conflict of interest that apply to non-profit organizations. ”
You might call this person an “interested person” throughout the policy. Alternately, you could define “interested person” in your definition section.
“Interested person”: You might define this as follows: “Any principal officer, director, or member of a committee with powers delegated by a governing board, who has a direct or indirect financial interest, as defined below. ” “Financial interest”: You probably will define this broadly. For example, “A person has a Financial Interest if they have, directly or indirectly, any potential or actual ownership, compensation arrangement, or investment in any entity with which the Organization has a transaction or arrangement. ” “Immediate family member”: Often means spouse or partner, and children. You may define it more broadly.
Sample language might read: “An Interested Person shall disclose the existence of a Financial Interest and disclose all material facts to the directors. In an effort to aid the disclosure, each member shall complete a conflict-of-interest form as circumstances warrant, and no less frequently than annually. ” Revise this language to suit your purposes. You might want someone to report a potential conflict to someone else.
You could write: “Each individual covered by this policy must file an annual disclosure, which the Executive Vice President will review. As soon as any covered individual learns of a potential conflict, they must promptly disclose the circumstances to the EVP within 30 days and recuse him or herself until the matter is reviewed. ”
For example, if a board member has a conflict, they can make a presentation to the other board members. After the presentation, they leave and the board votes on whether there is a conflict of interest. If an employee reports a conflict, someone in management (such as the President or Vice President) can review to see if the conflict is significant. If it is, they can refer the matter to the Board of Directors, which will decide if a conflict or appearance of a conflict exists. They can then ask the employee to withdraw from the activity.
The board should determine whether they can with reasonable effort obtain a more advantageous arrangement or transaction. If they can’t, then the disinterested directors shall decide whether the transaction or arrangement is in the organization’s best interest, for its own benefit, and is fair and reasonable. You can also have the Chairperson of the Board appoint a disinterest person to investigate alternatives.
You might write: “If the committee has reason to believe an individual failed to disclose potential or actual conflicts, then it will inform the member. The member has a chance to explain the failure to disclose to the committee. If the committee still has reason to believe a conflict exists, it will take corrective action. ”
Members of the governing board who receive direct or indirect compensation cannot vote on matters related to their compensation. Members of committees whose committee handles compensation matters cannot vote on matters relating to their compensation. Nothing prohibits a voting member who receives direct or indirect compensation from providing information about compensation to any committee.
A requirement that the minutes contain the name of the person with a disclosed interest, the nature of the interest, and what action was taken to determine whether an actual conflict existed. Also note the board’s decision as to whether a conflict existed. A requirement that the minutes reflect the names of anyone present to discuss or vote on a transaction or arrangement, the content of the discussion, and the proposed alternatives. Also record the votes taken.
whether your compensation arrangements are the result of arm’s-length bargaining, reasonable, and based on credible survey information whether joint ventures, partnerships, and arrangements with management organizations comport with your written policies and are properly recorded whether these joint ventures reflect reasonable investment or payments for goods and services and do not result in impermissible private benefit or excess benefit transaction
For example, you can include the following: “To avoid confusion, members who address the public should clarify if they are speaking as private individuals or speaking for the organization. Sometimes the organization is asked to speak publicly on issues, or to provide representatives to state boards. Requests will come to the Administrative Office and be reviewed by the Executive Vice President. If appropriate, the EVP will forward the information to the President. ”
If you don’t yet have a lawyer, you can obtain a referral by contacting your local or state bar association. Call and schedule a consultation. Ask how much the lawyer charges.
Ask other businesses or non-profits if they have a form you can look at. Use it as a guide when drafting your own.
You can title your form “Conflict of Interest Disclosure Form. ”
For example, you can write: “A potential or actual conflict of interest arises when your obligations are likely to be compromised by other material interests or relationships, especially when those interests are not disclosed. You should disclose any business, personal, or volunteer affiliations that could give rise to real or apparent conflicts. ”
Do you serve as an officer of an organization that has a relationship or does business with us? Have you ever served as a director of a business in which our organization invests? Do you have a family relationship with anyone who has a noted relationship with our business? These family relationships include: spouse, parent, child, grandparent, grandchild, great-grandchild, and siblings. The spouse of any child, grandchild, great-grandchild, or sibling is also considered a family relationship. Have you ever participated in a compensation relationship, employment agreement, investment opportunity, or other arrangement, directly or indirectly, with a third-party vendor doing business with us that could personally benefit you? Have you ever received any direct or indirect loans, gifts, payments, discounts, fees, or free services from any organization or person engaged in any transaction with us? Do you share ownership of a business that does business with us? Ownership means voting power in a corporation, beneficial interest in a trust, or profits interest in a partnership.
Remember that this is confidential information which you shouldn’t share with other people. Safeguard the form as you would other confidential employee information.
