Depositphotos_84014512_s-2015Ah, Conflicts of Interest.  Every CIL and SILC should have a policy and procedure and a Code of Ethics that describes what is a conflict of interest and how will the organization deal with it?

We recommend that some very practical elements be part of the policy: a definition (if the individual or someone in the individual’s immediate circle will benefit) including revealing the conflict and abstaining from voting or making a decision related to the conflict.

It isn’t against ethical boundaries for a conflict to exist. We are all stakeholders in CILs, so board members and staff members might also be consumers, for example. What needs to happen, though, is that the conflict is revealed to the board and/or management, and the persons recuse themselves from any decision that would benefit them or someone close to them.

One of the most common but most problematic conflicts is the hiring of a family member or domestic partner or best friend. When it comes to hiring a person who is close to you, that is clearly a conflict because the person benefits financially, with a paycheck. We see it most often with founders who set up the CIL more like a family business than a Disability Community.

When a family member or other person close to the person hiring, applies for a job, then, ideally the person they are related to cannot make the actual hiring decision and cannot supervise the individual, evaluate their performance, decide on their rate of pay or pay raises, decide if their relative or someone else gets to go to a conference, etc. etc.

When the executive director hires a relative (or partner, best friend, etc.) they have crossed this ethical line.  The difficulty is what to do about it after the fact. It is not typically a cause for dismissal that you have a relative working at the Center. In fact one could argue that, once the two parties are aware that they have a conflict, the two might need to decide which of them will resign in order to restore a sound code of ethics. However, the people who have gotten into this situation probably will not see the need to take the high road and remove one of them from the conflict. Unfortunately this is a more common occurrence in non profits than you might expect, and the purpose of a conflict of interest policy and procedure, and a code of ethics for board and staff, is to prevent the misuse of power and money to benefit oneself. In many states, though, it is not a legitimate cause for dismissal from employment since it is an old decision and unrelated to the employee’s job performance.

One possible but very messy answer is that the board should inform the executive director that they perceive this as a conflict, and that any decisions related to the employee who is a family member must be reviewed by the board or a designated board member to assure that all employees are treated fairly and to eliminate the conflict of interest. All the things listed above would need to be signed off by the board member rather than the family member, including any checks made out to the family member for any reason. This is messy because it brings the board into a day-to-day supervisory role, which is not good management. But then good management would have prevented this situation in the first place.

This is similar to the role the board takes in supervising the activities of the Executive Director. It isn’t good practice for the Executive Director to sign her own checks, either for payroll or for reimbursement of expenses or any other reason. A board member should review these checks and the related documentation (including actual receipts in addition to a general credit card statements) and verify before signing. This should be part of the separation of duties policies in financial management. The same principles can be applied to the family member.

The only solution I see is to encourage the board to take on the role of supervising the family member to remove the conflict. They must understand their responsibility in assuring that conflicts of interest are handled in a transparent fashion and that the person with the conflict is not involved in direct supervision or payment to their family member.

When there is misuse of funds, the board is typically not attending to these issues of transparency and ethical conduct. It is their responsibility to step up and manage this situation.

Does your organization have a strong policy requiring this kind of transparency? Do the board and staff members sign a code of ethics that addresses these concerns?

Paula

A Look at Conflict of Interest

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