How best to avoid a con­flict of in­ter­est

Kapi-Mana News - - OPINION -

Areader ‘‘S’’ asks about an al­leged con­flict of in­ter­est sit­u­a­tion on a board. She is in busi­ness and is also on a board to as­sist small businesses.

She asks if there is a pos­si­bil­ity that she may ben­e­fit from a mat­ter be­ing dis­cussed, should she have to stand aside and not be in­volved in the dis­cus­sion?

Con­flicts on boards arise all the time, but they don’t have to be a big is­sue – so long as you know how to deal with them.

In S’s case she is on the board of a na­tional or­gan­i­sa­tion set up to as­sist small busi­ness own­ers around New Zealand.

S runs a small busi­ness. At a meet­ing of the or­gan­i­sa­tion, a pro­posal is tabled that will sig­nif­i­cantly ben­e­fit small businesses in her area.

Does S have a con­flict of in­ter­est in this sit­u­a­tion and is she able to par­tic­i­pate in the dis­cus­sion and vote on the mat­ter?

First of all, it is nec­es­sary to con­sider what the or­gan­i­sa­tion’s rules say.

Check to see how in­ter­est’’ is de­fined.

Of­ten, the rules in­clude a pro­vi­sion that a rep­re­sen­ta­tive will not have a con­flict where that rep­re­sen­ta­tive’s in­ter­est is not dif­fer­ent from the in­ter­ests of other mem­bers.

If S’s or­gan­i­sa­tion has a sim­i­lar pro­vi­sion, she would not have a con­flict of in­ter­est, pro­vided her in­ter­est was no dif­fer­ent to other

‘‘con­flict of small busi­ness own­ers.

How­ever, if there was no such pro­vi­sion in the rules, it is likely that she would have a con­flict of in­ter­est sit­ting on a na­tional board that was mak­ing de­ci­sions for S’s re­gion.

That is be­cause she could favour one re­gion over an­other. It would be best if she stepped aside from the dis­cus­sion on the project in her re­gion.

It is good prac­tice for the rules of an or­gan­i­sa­tion to re­quire rep­re­sen­ta­tives to dis­close their in­ter­est and the ex­tent of the in­ter­est to the board.

It is also com­mon to pro­hibit any rep­re­sen­ta­tive from par­tic­i­pat­ing in the dis­cus­sion, or voting on, a mat­ter in which they are ‘‘in­ter­ested’’.

Depend­ing on how the rules are drafted, a rep­re­sen­ta­tive may be:

Able to par­tic­i­pate in the dis­cus­sion about the mat­ter in which they are in­ter­ested and able to vote.

Able to par­tic­i­pate in the dis­cus­sion about the mat­ter, but un­able to vote.

Re­quired to leave the meet­ing while the mat­ter is dis­cussed and un­able to vote.

What is best for your or­gan­i­sa­tion will de­pend on its in­di­vid­ual cir­cum­stances.

Get ad­vice if you’re not sure what con­flict of in­ter­est pro­vi­sions are best to in­clude in the rules of your or­gan­i­sa­tion.

If S was on a lo­cal board to pro­mote busi­ness in the one re­gion, she would not have a con­flict any dif­fer­ent to all of the other board mem­bers (over a pro­posal to pro­mote busi­ness in the re­gion).

Each is in­ter­ested in the same way be­cause their only in­ter­est on the board is their re­gion.

If all board mem­bers had to stand aside, the board could not con­duct its busi­ness at all.

All board mem­bers would al­ways be con­flicted and that would not be a sen­si­ble out­come.

If you are un­cer­tain if a con­flict of in­ter­est has arisen, it is best to take a con­ser­va­tive ap­proach and err on the side of cau­tion.

In that sit­u­a­tion, make sure the con­flict (or pos­si­ble con­flict) is dis­closed to the board and fol­low the pro­ce­dure set out in the or­gan­i­sa­tion’s rules.

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