How serious is declaring and managing conflicts of interest among board leaders? It's a big deal: Missouri Ethics Commission fines former Rockwood School Board member $10,000! Instead of recusing himself, a board member was voting on construction contracts that directly benefitted him and his company. An audit of the books revealed that this board member voted for $2.7 million worth of projects, with some portions being awarded to his contracting company.
What steps should a board take to prevent such issues and protect its collective integrity?
Follow Legal Requirements
A conflict of interest arises, for example, when a board member has interest in a company that is paid to provide services to the school, when employees of the school perform duties for a company controlled by a board member, or when a board member accepts some form of gift(s) from a vendor to the school. The Sarbanes-Oxley legislation includes specific guidelines regarding these issues, and most states have rules and regulations regarding such reporting and management. Follow these requirements carefully, maintaining minutes that reflect strict adherence to them.
Set Board Policy
Your board's conflict of interest policy should require disclosure of any such conflict (even if it's just a possible conflict) and explicitly prohibit board leaders from voting on any motion or question in which a conflict may be present or arise. It's better to err on the side of recusal rather than forgiveness.
How will your board manage such a conflict? For U.S. schools, you must be able to clearly answer this question in order to accurately complete IRS Form 990. Any school board member who has a child or family member that is enrolled in a school governed by that board has an inherent conflict of interest that should be included in the declaration. Such a conflict should be managed wisely, especially with regard to their personal experience and areas of passion (e.g., athletics or arts).
Talk About It
Each board meeting agenda should include a brief professional development topic, including managing conflicts of interest. Other topics may include confidentiality, communication, compliance, governance, fundraising, and education trends. Actively engaging in such dialog will help prevent temptations that can compromise your board's quality and trust.