Board Talk: Do trustees know how to avoid conflicts of interest?

Judith Rich and Ann Phillips discuss how boards can tackle problems that might arise

Board Talk
Board Talk

JR: All too often, effective and strong board members forget the conflict of interest that could arise as a consequence of their appointment as a trustee. For example, a local charity might need some restoration work done on its premises and one of the trustees offers to do the work through his company. It goes without saying that good practice would be to get at least two alternative estimates for the work. However, it can be tempting for the charity to accept the trustee's offer, especially if the work is discounted. The chair should ensure that the trustee concerned withdraws from all future discussions about the contract.

AP: Yes, it is easy for trustees to inadvertently forget about conflicts of interest when they think they are doing the best for their charity. Cases in which there is a simple transaction between trustees and a charity are easier to recognise and deal with. It is the much more subtle cases of personal benefit that trustees can have difficulty with. For example, if a major gallery is considering acquiring a work of art and a trustee is a collector of that particular artist, there will be a potential benefit to the trustee if the acquisition enhances the artist's reputation.

Judith Rich is a governance expert, fundraising consultant and a founding member of the Institute of FundraisingJR: I agree about the more formal issues and also the more subtle issues that can arise. But the whole question of conflicts of interest should be covered clearly in the induction of each trustee and repeated whenever trustee training takes place. From a legal point of view, are there any points that you would like included at such times?

AP: Yes - conflict management should be a key component of every trustee's induction. It is not only personal benefits that must be covered, but also conflicts that arise because a trustee owes a duty of loyalty to another organisation. The main message to give to trustees on induction is that the possibility of conflict is something that should be taken seriously. As a general rule they should follow the three Ds - declare, depart and document - to demonstrate conflicts have been managed properly.

JR: Do you think that more work should be done to improve the regulations and guidelines relating to conflicts of interest?

Ann Phillips is chair of the Charity Law Association and a partner at Stone King solicitors, specialising in charity lawAP: Yes, clearer guidance for trustees is certainly needed. At the very least it would be helpful if the Charity Commission's guidance, The Essential Trustee, had a separate section on conflict and its management. At present there is a short section dealing with personal conflict, but there is not one on conflict of loyalties. The commission's approach is that even the perception of a conflict must be avoided, something that arises from the duty to safeguard the reputation of your charity. All of that could helpfully be spelled out in The Essential Trustee.

JR: I suspect that one of the problems is that a new trustee has so much to take on board during induction that it can be difficult to remember all the elements of it. But I agree: formal advice from the Charity Commission could indicate the areas where pitfalls might occur. Even if a simple mention of any possible conflict was put at the beginning of every board agenda, this would be a step in the right direction. Your idea about the routine recording of such statements as part of the board minutes would ensure that every member of the board thinks about the content of the meeting in this particular regard.

AP: Absolutely - there is so much for a new trustee to take in, and it is especially difficult for someone taking on trusteeship for the first time. I always like to see declarations of conflict on the agenda after apologies because it keeps it in everyone's mind, even if nine times out of 10 there will be nothing to declare. Equally, I think it is helpful for trustees to understand that the expectation is that they should 'declare and depart'. It causes so much less embarrassment if this is the usual rule - to be waived only if there is a good reason.

JR: I could not agree more, and it also makes it simpler for the chair to control the meeting - especially if there is a suspicion that there might be problematical conflict.

Judith Rich is a governance expert, fundraising consultant and a founding member of the Institute of Fundraising

Ann Phillips is chair of the Charity Law Association and a partner at Stone King solicitors, specialising in charity law

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