I am a member of a board of directors of a sport organization – my daughter is an athlete member of this organization. I sometimes hear people say that I am in a “conflict of interest position” and should not participate in some decisions the Board makes. Am I? And if so what should I do about it?
All directors of incorporated organizations have important legal responsibilities. They act in a ‘fiduciary’ role – a legal term not unlike ‘trustee’ or ‘steward’. In fact the origin of this word is fides, or Latin for “faith”. The members of an organization have faith that the board and directors can be entrusted with the well being of the organization as a whole.
In my travels working in the sport community I am often asked to give an overview of directors’ legal responsibilities. This week alone I have made two such presentations. I sometimes joke that volunteering to serve on a board is a bit like signing up to be married: the contract is similar in terms of the promises we make!! And it is a serious contract that the laws of the land will uphold, and one not to be taken lightly.
Here is the essential legal background on a director’s fiduciary duty:
In my experience, it is the duty of loyalty that is the most difficult to fulfill in the sport context. While legally, a sport organization is no different than any other incorporated organization, there are some unique things in sport that make the director’s job more challenging. Chief among these are that:
I have also observed that sport (more so than many other non-profit sectors) is characterized by a ‘culture of doing’ and as a result many volunteers in sport are also involved in multiple roles, thus wearing many hats at the same time.
As a result of this environment, directors in sport organizations are often conflicted. To quote a publication we wrote for Volunteer Canada, “Directors are required to put the interests of the organization first. These interests will always take precedence over any other interest, including a director’s personal interest. As well, directors who are involved in more than one organization may find that they cannot be loyal to both.
To say that someone is in a conflict of interest position is not the same as criticizing them or judging them unfit for the role. The test for conflict of interest or bias is an objective test meaning that it has little to do with the actual person involved. Bias or conflict of interest is not determined by what the person accused of bias or conflict might think, or what the person alleging bias or conflict might think, but what a reasonable third party looking at the situation might perceive. An allegation of conflict of interest is not a condemnation of a person, but rather a rightful concern with how a situation appears to those outside.
When I raise the concern of conflict of interest with a director or with a board, the usual response is one along the lines of: “Don’t be concerned, I would never behave in a biased fashion” or “I can multi-task and manage all these portfolios without getting my priorities confused”. Such responses are reflective of a lack of understanding of what conflict of interest really means.
I do not advocate eliminating conflict of interest from sport because that would be virtually impossible. I do advocate strongly that organizations and individual directors be aware of the issue and take proactive steps to manage it. Here are a couple of good yet relatively simple practices that organizations can consider:
Lastly, I would counsel any volunteer who is coaching at the competitive level to not coach their own children. This is a recipe for trouble. Many sport organizations have policies that prohibit this and such policies are wise. This caution does not apply to house league activity, which is recreational in nature and would not occur at all without the amazing help of parent-coaches.
Managing conflicts of interest, being educated about directors’ duties, and being transparent about directors’ affiliations and interests are not only good risk management but also good business practices.
Originally published: Imagine Canada - Risk Management Expert Column (October 2009)