Success By Association - March/April 2017 - 14

conflictpolicy

Polish Up Your Conflictof-Interest Policy
Jonathan T. Howe, Esq.

D

o you have the right policy in place to manage
conflicts-of-interest that may arise on your board
and compromise good governance? If you need a
refresher on what constitutes a conflict and what you
need in your policy, read on.
What is a conflict of interest? Many association directors
and committee members need to ask this question. A basic
definition is a situation in which a person or an organization is
involved in multiple interests.
A conflict may arise when someone with fiduciary
responsibility is in a situation where his or her own selfinterest might conflict with the organization's interest. For
example, when a board member wishes to provide a service to
the association, the member's fiduciary duty poses a conflict
with his or her sales opportunity.
The Internal Revenue Service asks exempt organizations
to report on the Form 990 whether they have a conflict-ofinterest policy in place and what the process is for handling
a conflict. In addition, most state nonprofit corporation acts
include a specific provision detailing how a board of directors
is to address such a situation.
Conflict-of-interest policies generally have two basic elements:
a requirement that board or committee members disclose
conflicts or potential conflicts, and a prohibition on members
voting on any matter in which they have a conflict or potential
conflict.
If the board wishes to go forward with a transaction with a
conflicted member, it must determine whether the transaction
is in the best interest of the organization, not the director or
committee member.
Boards should have a comprehensive written policy defining
"conflict" and stating to whom the policy applies. Employees
should be included, along with directors and committee
members. The policy should specify the process by which the
board will address a conflict.
Many organizations, at the outset of a board or committee
meeting, will have the chair ask members to declare whether
they have a conflict or potential conflict with any item on the
agenda. Many boards also require members to sign a conflictof-interest statement at the beginning of each new year. In
signing, the member acknowledges that he or she has read,
understands, and will abide by the organization's conflict-ofinterest policy.

14

success || march/april 2017

"If the board wishes to go
forward with a transaction
with a conflicted member, it
must determine whether the
transaction is in the best interest
of the organization, not the
director or committee member."
Your association counsel can advise you on whether your
conflict policy and procedures for handling conflicts comply
with state law and meet other organizational needs and
requirements. z
Reprinted with permission. Originally published by ASAE:
The Center for Association Leadership (July/August 2016),
Washington, DC.

Jonathan T. Howe, Esq. is president of Howe
& Hutton, Ltd., in Chicago. He can be reached
at Howe & Hutton, Ltd, 20 N. Wacker Drive,
Suite 4200, Chicago, IL 60606; 312.263.3001;
or jth@howehutton.com.



Table of Contents for the Digital Edition of Success By Association - March/April 2017

President’s Message
Event Calendar
Change, One Person at a Time
What I Learned as an Employment Attorney: Non-Legal Advice to Get You Out of Legal Hot Water
Is Your Hiring Filter in the Way?
Freedom Comes From Rules
Cost/Benefit of an Organization Retreat
Polish Up Your Confict-of-Interest Policy
Legislative Reception a Success!
Getting the Leadership Basics Right
Member Updates
Should They Stay or Should They Go? (With Apologies to the Clash)
Young Leader Profile
Advertiser Index
Buyers’ Guide
Advertiser Showcase
Executive Director’s Message
Success By Association - March/April 2017 - cover1
Success By Association - March/April 2017 - cover2
Success By Association - March/April 2017 - 3
Success By Association - March/April 2017 - President’s Message
Success By Association - March/April 2017 - Event Calendar
Success By Association - March/April 2017 - 6
Success By Association - March/April 2017 - Change, One Person at a Time
Success By Association - March/April 2017 - What I Learned as an Employment Attorney: Non-Legal Advice to Get You Out of Legal Hot Water
Success By Association - March/April 2017 - 9
Success By Association - March/April 2017 - Is Your Hiring Filter in the Way?
Success By Association - March/April 2017 - Freedom Comes From Rules
Success By Association - March/April 2017 - Cost/Benefit of an Organization Retreat
Success By Association - March/April 2017 - 13
Success By Association - March/April 2017 - Polish Up Your Confict-of-Interest Policy
Success By Association - March/April 2017 - 15
Success By Association - March/April 2017 - Legislative Reception a Success!
Success By Association - March/April 2017 - 17
Success By Association - March/April 2017 - 18
Success By Association - March/April 2017 - 19
Success By Association - March/April 2017 - Getting the Leadership Basics Right
Success By Association - March/April 2017 - 21
Success By Association - March/April 2017 - Member Updates
Success By Association - March/April 2017 - 23
Success By Association - March/April 2017 - Should They Stay or Should They Go? (With Apologies to the Clash)
Success By Association - March/April 2017 - 25
Success By Association - March/April 2017 - Young Leader Profile
Success By Association - March/April 2017 - Advertiser Index
Success By Association - March/April 2017 - Buyers’ Guide
Success By Association - March/April 2017 - Advertiser Showcase
Success By Association - March/April 2017 - Executive Director’s Message
Success By Association - March/April 2017 - cover3
Success By Association - March/April 2017 - cover4
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