Now don't get me wrong. Virtually every person who takes on the volunteer role as a member of a not-for-profit Board does so for the most altruistic of reasons. They might be supporters of the Mission; dedicated parents (in the case of schools); professionals looking to lend their particular expertise to the community; or even just friends of existing Board members who want to help out. From time to time you do find people who actively campaign to be on the Board to pursue a personal agenda, but these thankfully are few and far between. Having said all of that, there is no question that temptation often rears its ugly head once people are comfortably seated around the table. As an alternative to the "Lord's Prayer", perhaps all Board meetings should begin with the following group recital:
It is the fiduciary duty of all Board members to act honestly and in good faith; to be loyal to and act in the best interests of the corporation; to avoid any conflict of interest; and to subordinate every personal interest to those of the corporation.
One of the key aspects of a director's fiduciary duty is her or his obligation to "avoid acting in such a way that personal interests conflict with the interests" of the school. Even the best and most well-meaning of Board members fall off of this wagon! So, what are the four commandments to avoid conflict?
- Business conflict: Board members serve without renumeration including professional fees from the school; and, must not attempt in any way to influence the hiring, purchasing, or tendering process in order to favour themselves, family members or friends;
- Academic conflict: Board members must not attempt in any way to influence the academic content of the school's programme to favour or influence their own children; or the children of family members or friends;
- Disciplinary conflict: Board members must not interfere with or try to influence the school's disciplinary process with regard to their own children; or children of family members or friends; and,
- Admissions conflict: Board members must not attempt in any way to influence the admission of a student who is their own child; or that of a family member or friend.
Do Board members often break these rules? Constantly! They are only human after all.
How then can a Board member be certain to fulfill her/his fiduciary duty and avoid conflict of interest? Here are some FAQs:
Does a conflict of interest have to be a problem?
No. As long as you place the interest of the school ahead of your own.
What if I am the director of two different corporations who are dealing with one another? (i.e. the school and a supplier)?
No problem as long as you remain arm's length and neutral in the process.
What is the rule of thumb for determining a breach?
If you use your position to benefit yourself (friends, family, business, etc.) in any way that is not at least of equal benefit to the school, you are in breach of the conflict of interest guidelines.
Can I do a profitable business with the school?
Yes! As long as your hands are clean with regard to any discussions or decision-making. There is no conflict in submitting tender bids, or offering services at a competitive or better rate to the school so long as your relationship does not unduly influence the awarding of a contract.
Just be certain that you make a clear declaration when you suspect a conflict. Avoid participating in meetings or any discussions when decisions are being made.
These are the rules. They are pretty clear on paper but in practice they can become more than a little murky. In the next post we will look at some examples of how Boards get "stuck in the muck".
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