As a board member you have to act in the best interests of the organisation. If there is any possible conflict of interest, you have to step aside. You can’t take advantage of your position on the board.

Conflicts of interest occur when a board member’s personal interest or loyalties could affect their ability to make a decision in the best interest of the organisation – remember as a board member your duty and responsibility is to the organisation as a whole.

Conflicts of interest include the following:

• When a board member could benefit financially or otherwise from the organisation, either directly or indirectly through someone they are connected or related to.
• When a board member’s duty to the organisation competes with a duty or loyalty they have to another organisation or person.

Common situations of conflict of interest:

• The board’s decision could lead to employing a board member or family member.
• Board members could gain financially from business, programmes or services provided to the organisation (eg if engaged as a consultant, co-owner of a catering company or other supplier used by the organisation).
• Information provided to the board in confidence might give an advantage to a board member’s business (for example when calling for tenders that the board member’s business might be interested in applying for).

Ways to deal with conflicts of interests:

• Keep a register of board members’ perceived, current or potential interests
• Declare interests at the beginning of meetings about any items on the agenda.
• When there is a conflict of interest, the affected member does not take part in discussion or decision-making. You have to notify your board colleagues when a conflict comes up, you then can’t speak about the motion and you may have to leave the room while the issue is being discussed.
• Boards should act conscientiously, be transparent and document their processes and decisions so if an issue is raised, you can explain why you all took the decision you did.
• RESOURCE
  • https://www.charities.govt.nz/im-a-registered-charity/officer-information/officer-kit/conflict-of-interest/

This includes having a clear concise agenda, sending out any papers in time for board members to read them; board members reading the papers; an effective meeting chair; relevant, robust and respectful debate; minutes that accurately record decisions and are finalised promptly; and board only sessions without the  CEO present.

The chair’s role includes ensuring the agenda and papers are prepared; promoting inclusive debate and appropriate tone during discussions; dealing effectively with dissent and conflict.

Factors contributing to poor meetings include:

• poor performance by the chair;
• absenteeism by members;
• conflict of interest matters not being appropriately dealt with;
• dominant chairs, board members or CEOs taking over meetings/making decisions without sufficient regard for other member’s views;
• disrespectful talk or behaviour towards other board members, not striving to work as a team;
• board members seeing themselves as representing particular stakeholder viewpoints rather than the organisation as a whole;
• Inappropriate agendas and papers (eg too detailed, not detailed enough; important information missing or buried; wrong ordering of agenda items).
• Not enough time for pre-reading or discussion.

Meetings from CommunityNet Aotearoa

https://community.net.nz/resources/community-resource-kit/6-1-meetings-introduction/

Signs that a board’s collective decision making is not as effective as it could be include:

• An inability to explain to members, staff or media why the board made a certain decision
• A feeling that decisions do not represent the best thinking of the board
• A sense the board is rehashing old issues
• Heated discussions based more on opinions and emotions than facts
• Long drawn-out discussions that lose track of the original topic
• Last minute introduction of ‘wildcard’ topics not on the agenda that divert time and attention
• A decision that the entire board agreed to but isn’t in reality supported by every board member.

Poor or lack of information, not allowing enough time for good deliberation, cutting of debate, individuals under pressure to make decisions, tiredness, and emotional debate will likely lead to poor decisions.

Getting good information, being clear on board responsibilities, setting agendas to have time for important discussions, taking a break if debate becomes heated or tabling the issue until further investigation is done, will help avoid poor decisions the organisation may regret.

(based on ‘What CEOs Really Think of their Boards by Jeffrey  Sonnenfeld; Melanie Kusin and Elise Walton, Harvard Business Review, April 2013).

• Don’t see risk in personal terms – healthy change or growth may require a level of innovation and risk.
• Do the homework and stay plugged in – and don’t rely too heavily on management for the knowledge you need – they may not be right.
• Diversity, different skills and perspectives are valuable on the board – including younger, digitally saavy members.
• Board members should hold each other to account and police their own behaviour in meetings, rather than leave it entirely to the chair.
• More energetic constructive debate would be welcome – to do this focus on teamwork skills and be aware of the way groups, including boards, behave as social entities (social group dynamics).
• After board meeting decisions are made, disagreeing individual board members should not then try to overturn or shape decisions by ‘just having a word’ with the Chair or CEO.
• Ask probing questions so board meetings can review and critique proposals properly as a team, rather than individual members staunchly advocate for a particular position. Think of the decision process as ‘intelligent stress testing’ rather than leaving it as ‘sounds like a great idea.’ That process makes it more likely a decision owned by the board who will then have the CEO’s back when challenges arise.
• CEO succession planning – remember to consider your own organisation’s internal rising talent.
• Strong partnerships between Boards and CEOs are invaluable to the organisation, where there is mutual respect, energetic commitment to the organisation’s success and strong bonds of trust.

To help manage the amount of business a board has to deal with, you could consider setting up sub-committees for example a risk committee, investment committee, audit committee, fund raising committee, nomination, governance or human resources committee.

Sub-committees can help:

– give more detailed attention to a specific area that a full board meeting hasn’t got time to consider

– share the workload amongst members

– address potential conflict of interest eg executive remuneration

– streamline full board meetings.

The full board remains responsible for the work of sub-committees. Clear terms of reference and a regular review of progress are important.

Cautionary tales…reprinted from Charities Services Annual Review 2017/18. Department of Internal Affairs, pg 13

“This year, Charities Services completed a number of investigations including looking into the activities of two registered charities where we received complaints that those in senior management and officer positions were receiving substantial personal benefits. The complaints alleged that charity funds were being used on excessive salaries, private club memberships, improper use of vehicles, expensive annual dinners, additional leave and unnecessary international travel. We recognised that both charities had a history of success and provided a benefit to those they were set up to support. What concerned us was that after looking into their activities, there appeared to have been a culture of complacency developed toward the existing management and governance processes. Neither organisation was able to provide adequate records to support and justify the use of charity funds for travel, leave, entertainment and memberships. In both cases we established that management and governance processes were either not being followed or did not exist. We acknowledge that it is appropriate for a charity to reward high performing staff with salaries and bonuses at a competitive market rate, however the officers of a charity must ensure that decisions are well documented, and that contracts and agreements are up-to-date. In these cases, the absence of good records made it difficult to determine if the officers were considering their fiduciary duties when governing the charities. Commendably, both charities cooperated with us throughout the investigations, responding to requests for information and engaging with us effectively to talk about our concerns. As a result, both charities went through major review processes to improve internal policies and processes to ensure management and governance practices improved. At the conclusion of both investigations, we determined that the spending itself did not represent a misuse of charity funds but that the shortcomings in the management and governance may have constituted gross mismanagement which is considered serious wrongdoing under the Charities Act. We issued both charities with ‘Letters of Expectations’ outlining our findings and reminded them of our expectations that officers put their fiduciary duties at the forefront of their decision making. These case studies are good examples of a graduated use of our regulatory responses. While at the far end of the scale is deregistration, our first position is always to engage and work with charities to help them achieve and maintain compliance with the Charities Act.”