One of the more straightforward-sounding standards we steward at Charities Review Council is our conflict of interest standard. In short, the standard reads as follows:
A board’s deliberations should be independent and free of bias from board members or key employees who may have a personal interest in the outcome.
Sounds pretty simple—basically, don’t make decisions that put your financial interests in the place of your organizations. Most conflicts of interest that arise in nonprofits are relatively minor issues, like a board member refraining from recommending a contractor who happens to be a personal friend.
high-profile case involving Tyrone Freeman, the former president of California’s biggest union local highlights the importance of a strong conflict of interest policy. Freeman steered tens of thousands of dollars from the Service Employees International Union Local 6434 to the affiliated organization he led, California United Homecare Workers.
This certainly isn’t a typical case, and generally we don’t look for punitive stories to cover in this blog, but this situation is one that could easily have been averted with stricter conflict of interest policies in place.
If you serve on a board, you aren’t likely to run into this extreme of a situation. But without a conflict of interest policy in place, you could unknowingly put your organization at legal risk.