Resolving Conflicts of Interest on your Board of Directors
Most members serving on your church’s board of directors do so because they want to serve their local church and feel as though they have valuable experience and/or insight that can help them serve the church well while finding satisfaction through their service. This type of self-interest is not inherently bad—it can help directors feel more invested in the roles of service they are playing. However, there are times when self-interest can become at odds with the church’s goals and what may be in the best interest of the church. For example, the church is looking to hire a general contractor whom it trusts to help the church through its new building campaign and it just so happens to be the case that one of the board members is a general contractor; can the church hire the director as its general contractor?
Sooner or later, your board will face these kinds of challenges. How should the church respond? We recommend that the church implement a conflict of interest policy that addresses this type of issue. A policy governing conflicts of interests is perhaps the most important policy a nonprofit board can adopt and a policy that the IRS routinely asks about during the process of applying for tax-exempt recognition as well as additional required filings. Even if your organization is not subject to these filings, it is considered good governance for all nonprofit organizations to have a conflict of interest policy. A conflict of interest policy should (a) require those with to disclose the conflict or potential conflict to the Board of Directors, and (b) prohibit interested board members from voting on any matter that gives rise to a conflict between their personal interests and the nonprofit’s interests.