Business and non-profit board members, employees and managers create conflicts of interest policies to ensure that they do not take personal benefits while working for the organization. For example, board members with side businesses can offer their services on rent to the member organization. It creates a conflict – does the member of the board keep himself hired because it is in the best interests of the organization, or is in his own best interest? Most contracts and corporate policies involve the struggle of interest statement to restrict any activity which can cause conflicts. A basic confrontation of interest policy should be clarified as to what is the eligibility of conflict and what steps will your organization take to analyze the conflict. You must also make a conflict disclosure form to fill the staff.
Beginning Your Conflict of Interest Policy
Find sample policies.
If they do not have a conflict of interest policy or adequate, then the non-profits could lose their non-profits. The IRS used to publish a sample policy. However, you can still get copies on the internet which are based on the IRS sample. You should find one and use it as a guide because you prepare your own draft.
State the purpose of the policy.
Before you come into the policy statement itself, you should clarify the purpose of adopting it. Generally, you will adopt a conflict of interest policy to maintain integrity and protect organization’s interests.
For example, you can write the following: “Our organization attempts to maintain the highest standards of honesty, and it is important that people are confident of our commitment. Accordingly, any form of conflict should be avoided. To maintain our integrity and reliability, we have adopted the following policy. “
If you are a non-profit person, then you can write something like this: “The purpose of this policy is to protect the tax-exempt status of the organization while considering the transaction or arrangement that benefits any officer, director or employee Could. This policy is for supplementary, but does not replace any applicable state and federal laws governing the conflict of interests applicable to non-profit organizations. “
Identify who has a duty to disclose.
Be clear about who is involved in the policy. For example, you can write a disclosure policy for your board of directors and a different one for your employees.
You can call this person “interested person” during the policy.
Alternatively, you can define “interested person” in your definition section.
You need to clearly define some of the conditions used in your document so that there is no doubt about what you are mentioning. Provide definitions of all major words including the following:
“Interested person”: You can define it as follows: “A member of a committee with powers delegated by any Chief Officer, Director, or a Governing Board, which has direct or indirect financial interest, as defined below. “
“Financial Interest”: You’ll probably define it roughly. For example, “A person has a financial interest if they have direct or indirect, any potential or real ownership, compensation arrangements, or investment in any entity with which the organization has a transaction or arrangement. . “
“Immediate family member”: often means husband or wife and partner, and children. You can define it more widely.
Explaining How Conflicts Are Managed
Create the duty to disclose.
State is the duty of interested persons to disclose the conflict of interest. Identify who should disclose their potential conflict to whom they should be.
The sample language can read: “An interested person will disclose the existence of financial interest and will disclose all material facts to the directors. In an effort to assist in the disclosure, each member will fulfill a conflict-of-interest form as a warrant of circumstances, and not less than a yearly. “
Modify this language according to your objectives. You want someone to report potential conflict to another person.
Explain how a disclosure statement should be filed.
You must tell the persons covered for entering the annual disclosure details. Remind them to disclose any conflicts that arise during the year. Give them a time limit (like 30 days).
You can write: “Everyone covered by this policy will have to enter an annual disclosure, whose executive vice president will review. As soon as any covered person learns about the potential conflict, they should immediately disclose the circumstances for the EVP within 30 days and should re-use it or herself until the matter is reviewed. “
Describe how the organization decides if a conflict exists.
Disclosing employees or board members is part of the struggle. You also need to tell that if there is a conflict, then he will decide.
For example, if there is a difference between a member of a board, they can present it to other members of the board. After the presentation, they leave and the board votes whether there is a conflict of interest.
If an employee reports the conflict, then a person (such as President or Vice President) in the management can review to see if the conflict is important. If so, then they can refer to this matter to the board of directors, who will decide if the presence of conflict or dispute exists or not. They can then ask the employee to withdraw from the activity.
Outline the steps for managing a conflict.
Once the conflict is over, your organization should take some steps to protect itself. For example, a non-profit person should do the following:
The Board should determine whether they can obtain more beneficial arrangements or transactions with appropriate effort. If they can not, then the disappointed director will decide whether the transaction or arrangement is in the interest of the organization, for its benefit, and is fair and justified.
You can also appoint a harsh person to check the options of the chairman of the board.
Set out the penalties for an employee failing to comply.
An employee or board member can not disclose potential conflict. Accordingly, you may have to punish them. You should take care of your policy that the board has the power to discipline the person.
You can write: “If the committee believes that someone has failed to disclose potential or actual conflicts, then he will inform the member. The member has a chance to explain the failure to reveal the committee. If the committee still has reason to believe that conflict is present, then it will take corrective action. “
Craft policies for determining compensation.
Sometimes conflicts occur when you are setting the salary for the members of the organization. You need to define clear policies that can vote on the salary of the discussion. For example, you want the following policies:
Members of the governing board who receive direct or indirect compensation, they can not vote on matters related to their compensation.
Members of committees whose committee handles matters of indemnity, can not vote on issues related to their compensation.
No one bans the voting member who receives direct or indirect compensation from any committee providing information about the compensation.
Completing the Policy
Set out policies for recording the board’s proceedings.
For potential conflicts, you must adequately document the response to the board. In your policy, include the following recordkeeping requirements:
One requirement is that the person’s name, the nature of interest, and what action was taken to determine whether the actual conflict was present in minutes with a disclosed interest. Also note the decision of the board whether any conflict was present.
A requirement that reflects the name of someone present to discuss or vote on any transaction or arrangement, content of discussion and proposed options. Record votes taken.
Explain how you will periodically review your policy.
IRS requires non-profits to review its conflict of interest policy from time to time. Accordingly, you should tell when and how you will do it. Your periodic review should include the following:
Is your compensation arrangement based on the hand length bargain, is reasonable, and based on reliable survey information
Does the system with joint ventures, partnerships, and management organizations comply with your written policies and is properly recorded
Do these joint ventures reflect the proper investment or payment for goods and services and resulting as a result of the resulting personal benefit or additional profit transaction
Provide further guidance on public activities.
When your employees talk to the public, then they should clarify that they are speaking to the organization or from their side. It can reduce any confusion about where the organization stands on issues.
For example, you can include the following: “To avoid confusions, members who address the public should clarify whether they are speaking as private individuals or speaking to the organization. Occasionally the organization is asked to speak publicly on issues, or to delegate to the representatives of state boards. The request will arrive in the administrative office and will be reviewed by the Executive Vice President. If appropriate, EVP will send information to the President. “
Show your policy to a lawyer.
This article describes the basic conflict of interest policy. Your organization may require additional or different information. You should consult an attorney who is familiar with your organization.
If you do not have any lawyer yet, you can get a referral by contacting your local or state bar association.
Call and schedule a consultation. Ask how much the lawyer charges.
Creating a Disclosure Form
Find sample disclosure forms.
The affected employees and board members should disclose the potential conflicts annually. This annual disclosure does not replace their on-going duty to disclose any conflict arising throughout the year. You should draft a format as a template that you can use for all covered people.
Ask other businesses or non-profits if they have a form that you can see. Use it as a guide when your own formatting.
Format your document.
Set one inch margin on all sides and use 8.5×11 papers. Choose a font size and style that is easy to read. Ariel or Times 12 points are generally acceptable.
You can keep the title of your form “Interest Diffusion of Interest Disclosure Form”.
Explain the purpose of the form.
You can provide a paragraph of information, reminding you of the importance of revealing potential conflicts of interest. Keep this information at the top so that the reader can not remember it.
For example, you can write: “When your obligations are likely to be compromised with other material interests or relationships, then the potential or actual conflict of interest arises, especially when those interests are not disclosed. You should disclose any business, personal, or volunteer affiliation that can lead to real or explicit conflicts. “
Provide space for identifying information.
You must provide blank lines for date, person’s name and their status.
Ask a series of questions.
Setting up your form can be easiest as a questionnaire. You can ask the person who fills it to answer “yes” or “no”. If they “yes.” If you answer, give a line to give more information to the person. You can ask the following questions:
Do you serve as an officer of an organization with a relation or does business with us?
Have you ever worked as a director of a business in which our organization invests?
Do you have a family relationship with someone who has a prominent relationship with our business? These family relationships include: spouses, parents, children, grandparents, grand children, grandfathers and siblings. Any child, grandchild, grandfather or sibling’s spouse is also considered to be a family affair.
Have you ever participated in the indemnity relationship, employment agreement, investment opportunity, or other arrangements, directly or indirectly, with a third party vendor who has been doing business with us, which can benefit you personally?
Have you ever received any direct or indirect loan, gift, payment, rebate, fees, or free services from any organization or person with us?
Do you share ownership of a business that does business with us? Ownership means voting power in the corporation, beneficial interest in the trust, or the benefit of interest in the partnership.
Insert a signature block.
Provide lines for the person’s signature, printed name and date. After signing them, you should store the form for at least one year.
Remember that this is confidential information that you should not share with others. Protect the form as you give other confidential staff information.