Conflicts of Interest
Introduction
A conflict of interest is where a board member might make the wrong decision due to the impact it will have on them personally, people close to them or other organizations that they are involved with. The word “trustee” is derived from the legal principle of holding assets “on trust” for somebody, i.e. you are making decisions on behalf of somebody else. The decision should be made entirely based on what is best for the beneficiaries.
Conflicts of interest can prevent an organization being maximally effective. Even the perception of a conflicts of interest can reduce impact. Therefore, conflicts of interest are an important topic for all boards. This page is governance advice not legal advice, and should be read by board members not ops teams.
Potential Conflicts of Interest - Inevitable
Potential conflict of interests are common because:
Board members often have relevant experience, derived from involvement in other organizations in the same space.
Organizations following the principles of effective altruism tend to recruit board members within the community to ensure value alignment.
People have a natural tendency to socialise with people who are similar to them and have similar values. It is common in the effective altruism community to see a blurring of personal and professional networks, which can be beneficial if handled in the right way.
However, potential conflicts of interest do not have to translate into actual conflicts of interest.
Actual Conflicts of Interest - Avoidable
The primary protection against conflicts of interest should be culture. Given the risks that conflicts of interest can pose to effectiveness and legal requirements in many countries, we also recommend that all organizations have a formal conflict of interest policy, which should set out the process for handling conflicts of interest:
Disclosure - Board members should list out every relevant interest they have. This should normally be done (a) when a board member is first appointed, (b) annually by the whole board, and (c) at the start of every meeting where there is potentially something relevant on the agenda.
Monitoring - All board members should be aware of the interests that other board members have and should flag when any issue is being discussed where someone may have a conflict of interest.
Recusal - Where a board member has a potential conflict of interest for an agenda item, that board member is expected to recuse themselves from the discussion. This means not receiving the materials and not being present during the discussion. In some cases, the potential conflict of interest will be sufficiently large or create sufficient reputational risk for the organization that it makes sense for the board member to resign.
The composition of the board (see separate article) can have a huge impact on the ability of an organization to navigate conflicts of interests better. We recommend aiming for a board that:
Has strong diversity, so that only a minority of the board is ever recused from a decision;
Includes people who do not work for EA-aligned organizations, whether these be people who earn-to-give or have direct impact in non-EA organizations;
Is able to stand up to the CEO (i.e. not too personal relationships)
Has strong emotional intelligence; and
Includes people with prior board experience.