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Conflicts of Interest

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“Looking at the agenda, does anyone see that they may have a potential conflict of interest?”

As president of a nonprofit board of directors, I routinely ask that question at the beginning of each board meeting. Rarely does anyone speak up, and we go on about our business. We also have a conflict of interest policy and each board member must sign an annual acknowledgement that they have received and read a copy. When it comes to conflict of interest, our board is on top of things, right?

Not necessarily. At a recent meeting of leaders of some of our Spokes member organizations, the topic of conflict of interest came up. These leaders were concerned that their board members did not have a very sound understanding of what constitutes a conflict of interest. That prompted me to do a little research and guess what? I learned that my own concept of conflict of interest, while not wrong, was far too narrow.

Duality of Interests

First of all, the concept of conflict of interest relates to more than direct financial gain. Let’s imagine a board needs to hire a general contractor for some job. Let’s also imagine that one of the board members happens to be a general contractor. We probably all would say that board member should recuse him or herself from the discussion and decision on what contractor to hire for the job. On the other hand, what about a board member who also serves on the board of another nonprofit in the same community. Is that a problem? Could be!

Two considerations can help us to a broader, more complete understanding of conflict of interest. First, we need to think in terms of ethics rather than legality. An action can be strictly legal yet not necessarily the right or good thing to do. Second, we need to remember that among the three “duties” that board members owe to their organization is the Duty of Loyalty—essentially, that they will put the organization’s welfare first.

As the National Council of Nonprofits puts it, “Conflicts can be nuanced and have more to do with a “duality of interests” than a financial conflict.”

What now?

Based on my new understanding, I want to go back and re-read our conflict of interest policy. Are we following it? Does it reflect this broader concept? Does it say anything about how we will manage conflicts of interest that do come up? What should we consider adding or changing? My hunch is there will be work to do.

Want to educate yourself and/or your board on this topic? Here are some excellent resources to share.

Conflicts of Interest | National Council of Nonprofits

Charity Conflicts of Interest: A Guide – Non Profit News …

Nonprofit Conflict of Interest: A 3-Dimensional View – Blue …

Risk Assessment for Nonprofits

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Last week, we covered the types of insurance your nonprofit should consider. But how exactly do you choose what types of policies you will need for your organization? Doing a careful risk assessment is a good starting place.

What is a risk assessment? Ready.gov provides a simple definition: “A risk assessment is a process to identify potential hazards and analyze what could happen if a hazard occurs.”

A risk assessment contains multiple stages of identifying and prioritizing risk. Nonprofit leaders are responsible for recognizing vulnerabilities and monitoring any risk that could affect their organization.

There are many ways to accomplish a risk assessment based on the size of your organization. For smaller nonprofits, the best way to save money is for internal leadership teams—such as volunteers, boards, or staff—to conduct the assessment. Larger organizations might hire a risk professional or even employ one in-house.

BoardEffect provides a simple risk assessment template that any small nonprofit could use as a practical guide. Essential steps include:

  • Identify risks in categories such as governance, external, financial, or operational.
  • Analyze risks and score each for likelihood and impact.
  • Prioritize and determine how much risk your organization is willing to accept.
  • Determine which risks are acceptable and decide what you will need to take action on.
  • Ensure that risk controls are in place.
  • Monitor and review identified risks and update controls as needed.

Once your organization has recognized and prioritized risks you’ll have a much simpler experience selecting the types and amounts of insurance appropriate for your organization.

Additional resources:

Nonprofit Leadership During Crisis

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A crisis can tell you a lot about your organization. If your nonprofit is functioning at healthy levels, you are able to build upon these strong foundations to weather storms and continue to further the mission. On the other hand, a crisis can often bring up fundamental issues within an organization that need to be dealt with. Here are some areas to take a closer look into to ensure that your organization is set up to withstand and come out of a crisis situation thriving.

It is a Team Effort 

When determining the health of an organization, one needs to look no further than the leadership of the Executive Director or CEO and the Board of Directors. These individuals should be cultivating a productive culture centered around the nonprofit’s core values and mission. Each individual must have a clear understanding of the mission and display commitment through making unique contributions to its success. 

When crises emerge, these individuals must remember why they are here. Their actions always need to take into account the good of the whole. It is vital to be able to do the right thing even when it is hard. When there is this kind of leadership at the top of the organization, the rest of the staff and volunteers will organically follow their example.

Focused and organized

As a board member or Executive Director/CEO, if you are committed to this type of leadership, you will be able to carry out your mission in a focused and organized way. This will allow you to be able to move through any potential fear surrounding a crisis, see challenges as opportunities, be creative and collaborative and continue serving your mission.

Executive Director/CEO relationship with the Board of Directors:

It is essential as an Executive Director to be able to facilitate discussions that are organized and clear to ensure that a nonprofit is always moving toward mission based action. Everyone must be rowing in the same direction. Miscommunications and disagreements must be handled swiftly and moved past in a safe space where the leaders can work collaboratively. Here are some key focuses for an Executive Director when fostering this relationship with the board of directors. 

  1. Accountability. As the Executive Director, you must be clear about your own commitments and accomplishments and how they further the mission. This will give you the ability to follow up on board commitments and accountability. 
  2. Communication. You are the one who is in the day to day operations and will be able to have a clear insight into what is happening within the organization. It is important to understand the best way to communicate with each board member to keep them informed and on the same track and avoid miscommunications.
  3. Appreciation. Board members are volunteers who make efforts to support the mission and you. Showing appreciation goes a long way to build these relationships and continue to move productively forward together. 
  4. Outreach Efforts. Effective communication about your organization’s impact needs to reach your community to garner continuous support. Know your board and understand how each person can individually support these efforts. 

The Board President

As a Board President, or Chair, you must be one of the most dedicated individuals to the mission of a nonprofit. You must be able to provide clarity if the leadership team ever veers off mission and hold them accountable to doing what they have committed to doing. Here are some focuses that will lead to effectiveness as a Board President.

  1. Culture. You need to be able to partner with the Executive Director to always guide the leadership team with the core values and mission. Part of your role is to hold each individual on the team accountable to operate with these in mind. 
  2. Responsibility. You have a huge impact on the health of your board. It is important to understand the different capacities and capabilities of the board and how they can best serve the organization. Don’t let board members waste energy on efforts that don’t make sense. When issues arise, ask the right questions in order to be able to deal with the issues and move on. Board members should be able to depend on your consistency, honesty, communication and organization.
  3. Productivity. Make sure that efforts are always moving forward and that the team is being proactive and adjusting efforts when it makes sense. If something seems to be stuck, deal with it as quickly as possible so it won’t get in the way of the nonprofit’s momentum. 
  4. Strategic.  We cannot stress enough how important it is that efforts are always supporting the mission. You need to continually be able to take a step back and see how each effort fits into the big picture of accomplishing and growing the mission.

Understanding the Basics of Board Roles

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It is probably fair to say that nonprofit board members desire to do a good job supporting their nonprofit and its leader. That includes board members who only attend a meeting periodically as well as the ones that try to assist in every way possible including guiding staff in their tasks (which is the job of the Executive Director!).  It’s easy to feel upset with board members who fail to carry out their roles properly as this can cause frustration to nonprofit leaders who don’t feel properly supported.

Certainly new and even returning board members are doing what they believe is best to assist the nonprofit organization. Community volunteers who join a board bring their own areas of expertise to the board table in hopes they can make a valuable contribution; however, the majority have never received formal training in board governance. And what a board member doesn’t know can be hurtful to relationships with staff and possibly even harmful to the nonprofit in some situations.

Listed below are fundamental areas where board members may need training so they can fully understand their responsibilities in guiding the nonprofit as well as its working relationship with the staff.   

  • Boards Govern: One of the most important keys for meaningful direction is to remember that the role of the board of directors is to govern, not manage, the nonprofit. Managing is the role of the nonprofit Executive Director (ED) or Chief Operating Officer (CEO). To govern means to carry out responsibilities as the legal guardian of the nonprofit organization. Each board member is accountable for the financial and organizational well-being of the nonprofit. They work with the nonprofit leader to adapt a strategic plan, budget, and other ruling policies and procedures. Once these guidelines are established, it is the role of the ED/CEO to put the plans into action by developing specific programs and activities needed to meet the stated goals.  
  • Boards Function as a Collective: Many board members do not realize that a board functions as one collective body to govern the nonprofit. No individual board member, including board officers, has the authority to act alone on behalf of the nonprofit. Board committees are a part of the team as well, and should not take action on behalf of the nonprofit without specific board approval. To maintain accountability, a board of directors should develop clear policies pertaining to the actions of board members which (1) define their scope of authority, and (2) offer a comprehensive guide for making board decisions. Providing structure to address routine as well as unexpected issues and concerns helps the board to function more cohesively.
  • Boards Determine Why: The board clearly defines the nonprofit’s mission and provides guidance as to what the nonprofit needs to do to best serve their clients. The ED/CEO and staff then develop procedures and initiate activities, programs or other methods to reach the client base. All board actions and activities should focus on promoting and supporting these specific mission goals.
  • Boards Determine Outcome: Determining outcomes that give the nonprofit credibility and success in the community is a crucial concern for the board. Every nonprofit needs to show some type of outcome in how effectively it communicates its mission and principles to the public. Outputs are the way the organization measures what it accomplishes within a given period of time. For instance, how many people are housed, how many vaccinations are provided, and so on. Results from the nonprofit’s programs and activities are evaluated by the board to assess how well these outputs measure characteristics such as attitudes, behaviors, or circumstances, as well as the effectiveness of the current programs and activities in general.
  • Boards Set Policy: Policies supplement the nonprofit’s articles of incorporation and bylaws by establishing a set of rules and procedures, such as the Board Member Agreement, Code of Conduct, Conflict of Interest, Document Retention and Destruction, Gift Acceptance, Nondiscrimination, and Whistleblower policies. Some nonprofits might need additional policies depending on their mission. Once in place, the ED/CEO and staff initiate procedures to ensure these policies are followed by the board and in all areas of the nonprofit organization.

Training a nonprofit’s board members is time and effort well spent. The more they understand the complexities of board and staff roles, and the more insight and governing expertise they acquire, the better prepared they will be to act skillfully as guardians of the nonprofit and supporters of its leaders. Spokes offers its full-day Board Academy as well as individual trainings for specific boards upon request. Give us a call to discuss your board training needs.  

Additional Resources:

What is the Meaning of Board Governance?

https://boardmanagement.com/blog/meaning-board-governance/

The Difference Between Governance and Management

The Difference Between Governance and Management

Sexual Harassment Training: What Do You Need to Know?

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In recent years, the issue of sexual harassment has received more media attention than any other ethics and compliance issue. New mandatory training requirements on preventing sexual harassment in the workplace have also recently been implemented by the State of California. Nonprofit leaders and staff need to make sure they learn what these updated policies are, and that the organization has adequate safeguards and responsive reporting tools in place so employees can feel protected and supported in the workplace.

What Constitutes Sexual Harassment in the Workplace?

Overall, sexual harassment is unwelcome conduct of a sexual nature that is persistent or offensive and interferes with an employee’s job performance or creates an intimidating, hostile or offensive work environment. Sexual harassment is defined by the federal Equal Employment Opportunity Commission as:

“unwelcome sexual advances, requests for sexual favors, and other verbal or physical conduct of a sexual nature when, for example: (a) submission to such conduct is made either explicitly or implicitly a term or condition of an individual’s employment,

(b) submission to or rejection of such conduct by an individual is used as the basis for employment decisions affecting such individual, or (c) such conduct has the purpose or effect of unreasonably interfering with an individual’s work performance or creating an intimidating, hostile or offensive working environment.”

The above is a general summary of the more detailed definition; however, the different types and degrees of sexual harassment behaviors need to be understood as well. For instance, sexual harassment can be physical, psychological, or a combination of both. And while any one incident may not be considered harassment on its own, when several incidents occur or the offensive behavior becomes persistent, that can result in sexual harassment. The expanded training requirements for sexual harassment prevention likely will result in a longer list of actions that a nonprofit leader needs to become fully informed about and prepared to execute.

Who Must Understand this Issue?

Everyone in the workplace needs to understand the issue of sexual harassment and other types of discrimination and harassment. The #MeToo Movement has brought much-needed attention to this issue by empowering people suffering from sexual harassment to speak out and report these behaviors. It is crucial that employers recognize their responsibility to protect their employees (as well as the organization’s good standing in the community) by implementing a set of procedures that allows employees to report sexual harassment with confidence and without fear of retribution or recrimination.

Employees should report any concerns about sexual harassment or inappropriate sexual conduct to the Human Resources (HR) director or a supervisor or manager as soon as possible. It is the responsibility of the HR director, manager or supervisor to take immediate and fair action when they have any knowledge of sexual harassment whether or not there has been a written or formal complaint.

After an investigation of a complaint, employees who are found to have violated the sexual harassment policy are subject to appropriate discipline. This can range from the mandatory minimum discipline of a written reprimand to termination of employment. In some cases, the person may also be subject to civil damages or criminal penalties.

Who Needs to Be Trained? 

In prior years, only supervisors in an organization with 50 or more staff were legally required to take sexual harassment training. However, in 2018, California’s legislature passed SB 1343, which expanded the classification of employees who are required to receive training on sexual harassment. By January 1, 2020, employers with at least five employees must provide: (1) at least two hours of sexual harassment prevention training to all supervisory employees, and (2) at least one hour of sexual harassment prevention training to all non-supervisory employees in California within six months of their hire. The training must be provided once every two years.

Employers must provide sexual harassment prevention training to temporary or seasonal employees within 30 calendar days after their hire date or within 100 hours worked if the employee is contracted to work for less than six months. In the case of a temporary employee employed by a temporary services employer (as defined by the California Labor Code) to perform services for clients, the training must be provided by the temporary services employer, not the client.

Employers who provide the required trainings after January 1, 2019, are not required to comply with the January 1, 2020 deadline.

As a nonprofit employer, it’s imperative to understand the significance and scope of this ruling. Now more than ever it’s essential for employers to create a workplace culture where everyone feels safe and respected. Employers need to become aware of contemporary and emerging issues faced by people of all backgrounds, and seek the training necessary for themselves and their staff to prevent, recognize or address any potential sexual harassment issues that may arise.

Spokes Sexual Harassment Training Workshop

Spokes is presenting a Preventing Sexual Harassment and Discrimination workshop on Tuesday, September 17, at the Spokes office in San Luis Obispo. Find out how to prevent abusive conduct, sexual harassment and discrimination with this high-energy and interactive course. Fully compliant with California AB 1825, proof of attendance and a certification of completion will be provided at the end of successful completion of the course. Click here to sign up online.

Additional Resources:

Sexual Harassment in the Nonprofit Workplace

U.S. Equal Employment Opportunity Commission: Facts about Sexual Harassment 

Sexual Orientation Discrimination: Your Rights

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