5 tips for dealing with conflicts of interest

Recognising that there’ll always be conflicts of interest in a boardroom is useful, says Julie Garland McLellan FAICD, a professional company director and advisor to boards. Here she shares some tips on how best to deal with them.

1. Establish a process

The best way to handle a conflict of interest is to already have a process in place to manage it. That means imagining any potential conflict that may happen and deciding how it should be handled, who should be involved in dealing with it.

2. Get the conflict of interest out into the open

For example with school boards, which are often made up largely of parents of current students, it can be difficult to deal with long-term issues that will affect students in years to come. ‘Do we raise the fees to build something that will help children in 10 years’ time when our children have gone, or do we keep fees low because we’re the ones paying them?’ Naming the conflict helps board members to acknowledge that their instinctive reaction is driven by their own personal preferences and it might not be the best in the long-term for the school. If you call it early, before people have started taking positions, and the chairman points out the need for looking ahead then you can start working on a strategy.  

3. Training is valuable

There’s no substitute for education. In training sessions directors have the opportunity to become familiar with the terms, learn how to deal with conflicts and run through some scenarios.

4. Declare your interests

I like people to ‘over-declare’ and that might include acknowledging that you know or have worked with someone who is the subject of a board decision. It means that if there’s a dispute later on, the board could choose to send the dispute to a committee so you don’t have to be involved.

5. Think about the conflicts of others

One of the best codes of conduct I’ve seen calls on directors to report to the board any real, perceived or potential future conflict of interest of theirs or any other member. Boards are full of ‘can-do’ people and they’ll think, ‘I can help with that’. And suddenly they’re off and running doing things, not thinking about the potential conflicts of interest. That’s when another director can say, ‘That’s great, however, we just need to discuss this while you’re not in the room’. Because most of the time people are not doing the wrong thing and this code makes it okay for someone else to point out the conflict.