Conflicts of Interest

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Conflicts of Interest:Recognizing ThemAvoiding ThemManaging Them

Bob King, Greenhouse Social Ventures

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BOB KINGGreenhouse Social Ventures

www.linkedin.com/in/bobking84

High impact projects in the nonprofit sector, including governance, program development, financial development and interim executive directorships.

Nonprofit organizations are just as susceptible to conflicts of interest as any other businesses, but often awareness of the risk is lower because ethics are sometimes taken for granted in the social sector.

This presentation teaches staff to recognize, avoid and manage conflicts of interest. It can be used as an introduction to the particulars of your own Conflicts policy.


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What is a Fiduciary?An individual in whom another has placed the utmost trust and confidence to manage and protect property or money.

In Texas, as elsewhere, the law considers an employee to have certain fiduciary responsibilities to their employers.

Duty of Loyalty &

Good Faith

Non-Compete

Use of Work Time

Safeguard Conf Info

Avoid or Disclose Conflicts


Conflicts of Interest

• A situation that could cloud your judgment because of the possibility of a clash between your self-interest and the interests of your employer.

• A situation in which your responsibility to a third-party limits your ability to discharge your responsibility to your employer.


Types of Conflicts• Self-dealing

– Ex: directing your organization’s business activity to a firm in which you have an interest

• Outside employment– Ex: a second job or side business that absorbs work time or distracts from productivity

• Competition– Ex: cultivating donors for future benefit when you know you will soon change organizations

• Cronyism– Ex: awarding business opportunities to family or friends

• Nepotism– Ex: hiring a family member to a paid position in the organization

• Gifts– Ex: accepting anything of significant value from a vendor


Not All Conflicts Are Created Equal

Obvious, Major Conflicts Taking money from a client or

vendor for whatever reason Accepting lavish gifts as an

apparent quid pro quo for a business decision

Making a business decision that materially benefits a family member or close friend

Borderline, Minor Conflicts Allowing a vendor to buy your

lunch Minor fundraising for another

organization Volunteer time commitments

absorbing work hours


Appearance of Conflict• Sometimes a business situation may not be an actual conflict,

but might appear to the outside world as if it were. • A well-run organization, and any professional individual, wants to

avoid not only actual conflicts, but also appearances of conflict.• Appearances of conflicts undermine your reputation and

integrity. Your co-workers and bosses, or your donors, might not know what to believe. They muddy the water for the entire organization and open it up for criticism, doubt and scrutiny.


Examples of Appearances of Conflict

Doing business with a company that employs a family member, even if that family member is not involved in the business relationship.

Awarding a competitive scholarship to a student who is employed by the organization, even if that student was selected by a totally objective process.

Eating a meal at an expensive restaurant with a vendor just ahead of the awarding of a large contract, even if you paid for the meal yourself.


Blind Spots

Conflicts do not necessarily suggest corrupt intentions. Often people are unaware that their activities or personal interests are in conflict with the best interests of their employer. We are ALL subject to occasional “blind spots”.

Goals:• Raise awareness• Encourage disclosure

and discussion of possible conflicts

• Create a “culture of candor”, not an inquisition

• Document compliance and exceptions


Quiz: Is this a Conflict?1. A donor takes a staffer to lunch at a

cafe and picks up the tab.2. A vendor takes a staffer to lunch at a

cafe and picks up the tab.3. A vendor takes a staffer to lunch at

an expensive restaurant and picks up the tab.

4. A vendor takes a staffer to the Super Bowl and picks up the tab.

ConflictNo

ConflictAppearanceof Conflict


Quiz: Is this a Conflict?1. A staffer sells her daughter’s Girl

Scout cookies to co-workers at the office.

2. A boss sells her daughter’s Girl Scout cookies to subordinates at the office.

3. A staffer brings her daughter’s Girl Scout cookies to a donor reception and charges the cost to the organization.

ConflictNo



Quiz: Is this a Conflict?1. A fundraiser also solicits donations

for his church.2. A fundraiser also solicits donations

for another organization with a similar mission.

3. A fundraiser solicits donations for a second beneficiary from the same donor prospects.

ConflictNo



Quiz: Is this a Conflict?1. A part-time staffer takes a second part-

time job as a waiter.

2. A full-time non-exempt staffer moonlights as a waiter.

3. An exempt staffer with after-hours responsibilities moonlights as a waiter.

4. A staffer does paid online work from his desk during lunch and coffee breaks.

ConflictNo



Quiz: Is this a Conflict?1. The CEO hires his wife to do legal

work for the Foundation.2. The CEO’s wife does pro-bono legal

work for the Foundation.3. The CEO hires his wife’s law firm to

do legal work for the Foundation.4. The firm of the CEO’s wife does pro-

bono legal work for the Foundation.

ConflictNo



Quiz: Is this a Conflict?1. A staffer awards a contract for a PR project to the low-

bidder, who happens to be her former employer.2. A staffer awards a no-bid contract for a PR project to

her former employer.3. A staffer awards a contract for a PR project to her

former employer despite them not being the low bidder, because everyone agrees their work is much higher quality.

4. A staffer awards a contract for a PR project to her brother-in-law despite him not being the low bidder, because everyone agrees his work is much higher quality.

ConflictNo



Quiz: Is this a Conflict?1. The CEO hires the son of the Board

Chairman for a paid summer job.

2. The CEO hires the son of the Board Chairman for an unpaid summer internship.

3. The CFO retains for the annual audit an accounting firm whose managing director has served on the Board for six years.

4. A special events manager hires a PR firm strongly suggested by a prominent donor.

ConflictNo



Conflicts Procedure1. Identify the conflict (or appearance of conflict)2. Notify superiors of the conflict3. Recuse yourself from the conflict – avoid making business

decisions while clouded by conflict4. Rarely, but sometimes, continuing on a path that includes

conflict can still be the right thing to do – but only if approved by the appropriate authority

5. Willful disregard of the Conflicts Policy should be met with significant consequences, up to and including termination.


Best Practices1. Have a written policy on conflicts that is annually reviewed and updated by the board’s

governance committee.

2. Be purposeful in creating a culture of candor, not a culture of inquisition.

3. Annual conflict of interest training should be required for all staff and board members, starting with onboarding training of new staff and board members.

4. Have all staff and board members sign an annual acknowledgment that they understand the policy and agree to abide by it.

5. Require an annual written disclosure of all significant outside activities, financial interests or relationships that may present a conflict or the appearance of one.

6. Elevate minor conflicts to the attention of senior staff, and major conflicts to the attention of the board. Reward staff for self-reporting.

7. Designate a staffer other than the CEO to serve as a watchdog for conflicts, and allow this staffer unfettered access to a board member.


Questions?

Conflicts of Interest

Government & Nonprofit

Transcript of Conflicts of Interest