Conflicts of Interest

Overview

The second in a series of 4 articles focusing on governance in the not for profit sector.

The content is based on information from resources provided by the Governance Institute of Australia 

Conflicts of interest in not-for-profit organisations

Directors have a duty under common law and under the Corporations Act to act in the best interests of the not-for-profit (NFP) organisation that they serve. Directors should not seek to benefit from the NFP, and should not be influenced by their wider interests when making decisions affecting the NFP.

Conflicts of interest arise when the interests of directors (or those of their families, friends or other organisations with which they are involved) are incompatible or in competition with the interests of the NFP. Such situations present a risk, real or perceived, that directors may make decisions based on these external influences, rather than the best interests of the NFP.

Effective boards make good decisions by comparing the range of options available to them. If directors allow factors such as their own interests to influence their decision-making, they may make decisions that are not in the NFP’s best interests or contrary to law …

Conflicts of interest will arise — they are part of governing an organisation. The important aspect is identifying and managing them effectively. It is considered good governance for a NFP to ensure appropriate mechanisms are in place for disclosing and managing conflicts of interest.

Source
Good Governance Guides
Governance Institute of Australia

For more information and resources on governance for your organisation go to GOVERNANCE