last updated August 31, 2003
Internal procedures can usefully anticipate how the organization will deal with conflicts of interest. Conflicts of interest describe situations in which an individual who has responsibilities toward the organization (a director or board member) also has a personal financial interest in an activity of the organization. Conflicts of interest can create problems because the director or board member's decisions may favor his or her individual interests and not the interests of the organization. Even if interests coincide, conflicts of interest can destroy public confidence in the organization.
Certain steps can be taken early in the organization's existence to avoid and minimize potential conflicts of interest. First, the organization should develop a conflicts of interest policy that is consistent with local law. The Internet Nonprofit Center provides an example of such a policy, and has also collected responses to questions about conflicts. A conflicts policy should require directors and board members to disclose potential conflicts of interest (e.g., business ventures in which the individual or his or her family participates that are currently doing or may do business with the NGO) in advance of service to the organization; such a policy might also require directors and board members to refrain from participating in any decision in which they hold a financial interest. The policy may also provide for exceptions to the conflict rule, although these exceptions may also be defined by domestic laws and regulations. | 