1. DEALING WITH CONFLICTS OF INTEREST Presented by Sue Radwan, CAE, SMP, ARM Partners in Policy Governance® Grand Ledge, Michigan

2. Learning Objectives 1.Participants will have a clear understanding of how conflicts of interest play out in Board work. 1.Assuring policies address the exposure both internally and at the board level. 2.Assuring board members appropriately declare conflicts of interest.

3. Board Integrity and Fiduciary Duties Focus is on trusteeship and/or stewardship Care Loyalty Obedience

4. US IRS Goes Further ■In US, the IRS goes further, asking on tax returns (IRS990) Focus is on transparency for benefit of donors

5. What have you experienced regarding conflicts of interest?

6. Focus on Fiduciary Duties ■Duty of Care Take an active interest ■Prepare ■Show up ■Participate ■Vote ■Exercise diligence in decision-making Are we informed about the issues surrounding this concern? –Have we considered the available data? –Are we in alignment with the values of the ownership? Was the process we used appropriate? –Did we involve the right people? –Did we empower the right people? –Have we met our standards for transparency?

7. Duty of Loyalty – Holding Primary Concern for the Organization itself Discussion: What can pull your loyalty from the organization?

8. Conflicts of Interest ■Legal definitions vary. –Was anybody involved in the decision-making process that had a personal or business financial gain at stake? –Is there an actual or potential interest (usually financial) that may influence or appear to influence the conduct of their official duties? Even when this conflict is not illegal, it may create doubts or suspicions concerning the integrity or fairness of decisions made, and over time recurring conflicts may increase the level of distrust and cynicism.

9. When you have a conflict of interest… ■What practices do you use to prevent conflicts of interest?

10. Confidentiality ■Confidentiality is an extension of Duty of Loyalty –What policies do you have regarding confidentiality? –Confidentiality is a lifetime commitment. How do you balance confidentiality and transparency?

11. Duty of Obedience ■Obey laws, bylaws, Board policies –CEO often becomes the protector of lawfulness, but this doesn’t relieve the board from knowing the laws. –Live within your bylaws. In membership organizations, bylaws have higher authority than board policy because the members voted to approve bylaws. –Live within the parameters of your Board policies.

12. Policy Governance Discipline Requires Checking On Performance to Policy ■Regular self-monitoring by the Board help the Board to notice the concerns and address “abuses”.

13. Conflicts of Interest Exposure is at multiple levels ■Board member exposures? ■Staff exposures? ■Board exposures?

14. Conflicts of Interest Policy Addresses… Ethics ValuesIntegrity

15. Typical Conflicts of Interest Treatment in Policy for PG boards… ■Asset Protection: Make any purchase: (a) wherein normally prudent protection has not been given against conflict of interest; (b) of over $_________ without having obtained comparative prices and quality; (c) of over $__________ without a stringent method of assuring the balance of long term quality and cost. Orders shall not be split to avoid these criteria. ■Global Governance Connection: The purpose of the board, on behalf of [identify the ownership here], is to see to it that [name of organization here] (a) achieves appropriate results for appropriate persons at an appropriate cost, and (b) avoids unacceptable actions and situations.

16. Typical Treatment in Policy cont’ BOARD CODE OF CONDUCT The board commits itself and its members to ethical, businesslike, and lawful conduct, including proper use of authority and appropriate decorum when acting as board members. 1.Members must have loyalty to the ownership, unconflicted by loyalties to staff, other organizations, and any personal interest as a consumer. 2.Members must avoid conflict of interest with respect to their fiduciary responsibility. A.There will be no self-dealing or business by a member with the organization. Members will annually disclose their involvements with other organizations, with vendors, or any associations which might be or might reasonably be seen as being a conflict. B.When the board is to decide upon an issue, about which a member has an unavoidable conflict of interest, that member shall absent herself or himself without comment from not only the vote, but also from the deliberation. C.Board members will not use their board position to obtain employment in the organization for themselves, family members, or close associates. Should a board member apply for employment, he or she must first resign from the board.

17. Case Study – Do you have a conflict of interest? On today’s board meeting agenda, there is a item regarding advocacy regarding raising the minimum wage in your state/province. Identify if there is a conflict of interest for you as a board member. Why or why not? ■Your son holds a job that pays minimum wage. ■You are the CEO of an organization that employs many workers at minimum wage. ■You serve on a board that governs workforce development. Many of the people the organization is training get hired at minimum wage.

18. Case Study: Is there a built in conflict of interest? ■Your organization is structured as an umbrella organization over several regional agencies. One board seat is preserved for a representative of the collective of regional agencies. According to the bylaws, the board is required to vote on dues increases for the regional agencies. Does that individual have a conflict of interest regarding the increasing the dues? ■Your organization was “spawned” by a government agency. In its infancy, that agency required that a member of the government have an ex officio voting seat on the board. A critical function of your organization is lobbying for funding with state government. Does the “government representative” have a conflict of interest? –Does it matter if the ex officio position is voting or non-voting?

19. Case Study – Do you have a conflict of interest? ■You serve on two boards that involve Children’s Health. Your first board is a direct service provider of Children’s Health services. The second board is an association of Children’s Health service providers. How do you know when you have a conflict of interest in the work of the association?