A conflict of interest exists when someone with a fiduciary responsibility (see Ethics and Stewardship) is in a situation where their own self-interest and the interests of the organization might be in conflict. A common example of a conflict of interest comes up when a board member also runs a business that sells something the organization might need and has a chance to influence the purchasing decision. Organization are often advised to have a written Conflict of Interst Policy that everyone who is in a position to experience such a conflict accepts, often by signing a pledge.
Here are four examples of Conflict of Interest policies to serve as models:
The IRS has published a suggested conflict of interest policy. It is included in the instructions for completing Form 1023 (the Application for Exemption under Section 501(c)(3)). This detailed and comprehensive policy is published starting on page 25 of http://www.irs.gov/pub/irs-pdf/i1023.pdf
A brief and explicit policy, which is reported to have passed muster with the IRS when it reviewed the organization's Form 1023, was posted to NonprofitNetworking (a Yahoo group for people interested in nonprofits in and around Seattle, Washington):
"We, the Directors of the Center for Wise Democracy, resolve that no member of the Board of Directors shall participate in any discussion or vote on any matter in which he or she or a member of his or her immediate family has potential conflict of interest due to having material economic involvement regarding the matter being discussed. When such a situation presents itself, the director must announce his or her potential conflict, disqualify himself or herself, and be excused from the meeting until discussion is over on the matter involved. The President of the meeting is expected to make inquiry if such conflict appears to exist and the board member has not made it known." (The Center for Wise Democracy website is http://www.wisedemocracy.org)
by Kevin Slator, Research Associate at the Charities Review Council of Minnesota
"Our web site has a link to our own conflict of interest policy. The last portion of the policy is a questionnaire on which directors annually disclose potential conflicts of interest."
The Minnesota Charities Review Council's website is called "The Smart Givers Network." It is designed to help both donors and nonprofits that seek support for their work from the public. It includes a sample conflict of interest policy in a Microsoft Word document at http://www.smartgivers.org/uploads/conflictofinterest.doc (this MSWord document downloads automatically when the link is visited).
by Delena Wilkerson, Executive Director of the Nonprofit Financial Center in Chicago, Illinois (http://www.nfconline.org/)
"I have a sample to offer. We strongly urge nonprofits to develop conflicts of interest policies which all board members, staff, consultants and volunteers must sign. Here is what NFC's says:"
Nonprofit Financial Center — Conflict of Interest Statement
For Officers, Directors, Committee Members, Staff Members, Institute Faculty and certain Consultants
No member of the NFC Board of Directors, or any of its Committees, shall derive any personal profit or gain, directly or indirectly, by reason of his or her participation with the Nonprofit Financial Center. Each individual shall disclose to the Nonprofit Financial Center any personal interest which he or she may have in any matter pending before the NFC and shall refrain from participation in any decision on such matter.
Any member of the NFC Board, any Committee or Staff who is an officer, board member, a committee member or staff member of a borrower organization or a loan applicant agency shall identify his or her affiliation with such agency or agencies; further, in connection with any credit policy committee or board action specifically directed to that agency, he/she shall not participate in the decision affecting that agency and the decision must be made and/or ratified by the full board.
Any member of the NFC Board, any Committee, Staff of Institute Faculty shall refrain from obtaining any list of NFC clients for personal or private solicitation purposes at any time during the term of their affiliation.
At this time, I am a Board member, a committee member, or an employee of the following organizations:
Now this is to certify that I, except as described below, am not now nor at any time during the past year have been:
1) A participant, directly or indirectly, in any arrangement, agreement, investment, or other activity with any vendor, supplier, or other party doing business with the NFC which has resulted or could result in personal benefit to me.
2) A recipient, directly or indirectly, of any salary payments or loans or gifts of any kind or any free service or discounts or other fees from or on behalf of any person or organization engaged in any transaction with the NFC.
Any exceptions to 1 or 2 above are stated below with a full description of the transactions and of the interest, whether direct or indirect, which I have (or have had during the past year) in the persons or organizations having transactions with the NFC.
Printed name: ______
Nonprofit Financial Center