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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BOB KING
Greenhouse 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.
4. www.linkedin.com/in/bobking84
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
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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.
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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
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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
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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.
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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.
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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
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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.
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Conflict
No
Conflict
Appearance
of Conflict
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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.
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Conflict
No
Conflict
Appearance
of Conflict
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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.
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Conflict
No
Conflict
Appearance
of Conflict
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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.
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Conflict
No
Conflict
Appearance
of Conflict
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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.
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Conflict
No
Conflict
Appearance
of Conflict
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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.
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Conflict
No
Conflict
Appearance
of Conflict
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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.
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Conflict
No
Conflict
Appearance
of Conflict
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Conflicts Procedure
1. Identify the conflict (or appearance of conflict)
2. Notify superiors of the conflict
3. Recuse yourself from the conflict – avoid making
business decisions while clouded by conflict
4. 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.
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Best Practices
1. 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.
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