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:
- Directors have a duty to be diligent, meaning the duty to act reasonably, prudently, in good faith and with the best interests of the organization in mind,
- Directors have a duty to be loyal, meaning the duty to not use the position of director to further private interests, and
- Directors have a duty to be obedient, meaning the duty to act within the laws and rules that govern the organization.
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:
- The sport community is very small and almost everyone knows everyone else, meaning that everybody is connected in some way;
- The sport community is very structured and hierarchical, meaning that many volunteers are involved at different levels within one sport (for example, they may be a director of a club, convenor of a league, and director at the provincial or even national level of their sport, all at the same time); and
- Most volunteers are drawn to sport because of their children’s involvement, thus bringing a family dimension into the mix. Directors may find themselves making decisions that impact their children, and volunteer coaches may be accused of favouring their own kids in team selection matters.
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:
- Directors should acknowledge any potential conflicts by being transparent about their affiliations and interests. This should be done in writing.
- If a board is discussing or deciding a matter that may give rise to a perception of conflict, the Director should declare it and should abstain from voting. This should show in the meeting minutes.
- Sport organizations are encouraged to implement nominating procedures so that candidates for election to the board are recruited in advance. Such a process can reveal affiliations that might prove to be problematic later, and also gives candidates time to think carefully about their role and contribution (and about potential conflicts of interest).
- A director who is a parent of an athlete needs to exercise special caution. As a director, the parent may be in a position to make a decision that directly benefits their child (such as being named to a rep team, being targeted for ‘carding’ or other funding support, or being part of a team funded to participate in a competition). Such a director needs to be acutely aware of those situations where he or she might be perceived to have undue influence, and must act accordingly.
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)