Double Duty Dilemma: Juggling Competing Roles as Non-Profit Director
How Board Members Can Ethically Manage Conflicting Responsibilities
While all boards need to be vigilant for conflicts of interest, circumstances with some non-profits can more easily lead to problems. These include scenarios where directors hold multiple roles in the sector, including:
Organizational Memberships: Boards often include individuals who are executives or directors at member organizations. This dual role can create situations where decisions made at the board level could significantly impact these directors’ primary organizations.
Professional Associations: Individuals who work within the sector and serve on the board of a professional association bring an intimate understanding of the industry's challenges and opportunities. However, their professional involvements must not influence their decisions and responsibilities towards the association.
Grant-Giving Entities: In organizations that distribute grants, prizes, or opportunities, board members might stand to benefit from the board's decisions, either directly or indirectly.
If the membership at large believes that the members who sit on the board of directors are gaining an unfair advantage, there won’t be much trust in the board’s leadership. Training, clear policies and an ethical board culture will minimize potential conflicts and demonstrate that the board is acting in the best interests of all members.
Navigating Potential Conflicts of Interest
To navigate these potential hazards, non-profits must implement robust policies and practices that uphold the highest ethical standards. It should be clear to all members that the board’s actions are in the organization's best interest and not unduly influenced by external affiliations. Here are several steps to help your board members avoid problems:
1. Address the Issue in Director Orientation & Training
New directors must receive in-depth training on fiduciary responsibilities, including the avoidance of conflicts of interest. This training should include role-play scenarios typical of your sector to help directors understand the nuanced nature of conflicts.
If you have directors who hold other roles in the sector, or may receive some other benefit from the organization, address this issue thoroughly:
Acknowledge the difficulty of ‘wearing two hats’ and clarify how the board will support them through training, policies and communications with members.
Prepare them to respond appropriately if they are asked, or even pressured, by an employer, colleague or friend to reveal or act on confidential information.
Conflicts of interest in non-profit boards arise more often from a lack of understanding than from malicious intent. Effective training, underpinned by clear policies and an ethical board culture, is crucial to help directors avoid errors that will damage their own reputations as well as the board’s.
2. Clear Board Policies
Establish and enforce clear standards for handling confidential information that minimizes possibilities for breaches. For example:
Define "confidential information" explicitly. Most boards use the broad definition of any non-public information gained through board involvement rather than trying to categorize different types of information.
Implement a straightforward process for reporting potential conflicts of interest or breaches of confidentiality.
Require directors to annually re-read and sign a board policy that addresses ethics, confidentiality and conflicts of interest.
Set a policy for how directors can receive and store confidential information, including who can access that information. This is not about casting doubts on the integrity of directors, their families or colleagues; it is about establishing a fair standard for all of your members and protecting your organization.
3. Cultivating an Ethical Board Culture
Leadership at both the board and organizational levels must show a genuine commitment to fairness and transparency. This commitment should manifest in strict and deliberate adherence to established policies, including:
how or if directors participate in discussions and/or decisions where they have a real or potential conflict of interest,
how the board approaches issues where all directors have a potential conflict of interest, and
responding appropriately if a director breaches confidentiality.
Recognize that the appearance of a conflict can be just as damaging as an actual conflict and prioritize the avoidance of both to maintain trust. When the board is diligent about preventing and managing conflicts of interest, it supports an ethical culture and responsibility to members.
4. Transparent Communication with Members:
Help your voting members understand the obligations held by directors, and how that affects directors’ ability to discuss or act on confidential information. If the members are well-informed about conflicts of interest and the board, the less likely it is that directors will be pressured to act inappropriately. Demonstrating a commitment to transparency and fairness helps build and sustain trust for the board among all members.
Managing multiple responsibilities is complex, but with careful policy and diligent practice, it is possible to navigate these responsibilities without compromising ethical standards.
The second article in the Step-by-Step Governance Review series will be published next week. Make sure you don’t miss it by subscribing to the pay-walled content of The Non-Profit Board. Get a 30% discount on the annual rate if you subscribe by October 31, 2024.