Conflicts of Interest
Conflicts of interest can arise when a trustee’s personal interests or allegiances could influence their decision-making. They are common and it’s a normal part of being on a board/management committee that something like a conflict of interest may arise. If an organisation is a charity, then its Trustees have a legal duty to act only in the best interests of their charity, and managing conflicts effectively is crucial to maintaining trust and integrity. Trustees need to be aware of what a conflict is, and how to deal with it professionally and timeously.
OSCR provides clear guidance on identifying and handling conflicts of interest. Organisations that are not chartities can still gain important insights from the rules and guidances for charities and should consider implementing them.
A consistent approach
Trustees should follow a consistent approach:
- Identify and declare potential conflicts early
- Deal with conflicts appropriately (e.g., withdrawing from discussions or decision-making)
- Record conflicts transparently to ensure accountability
The SCIO regulations require that a SCIO constitution must set out how (potential) conflicts of interest must be managed. A good conflict of interest policy is key to resolving conflicts of interest to provide a systematic and consistent approach.
When things go wrong
When conflicts of interest are not properly managed, they can create serious problems for any organisation. Imagine a trustee who owns a business that supplies services to the charity. If they influence the decision to award their own business a contract, the charity might end up paying more than necessary or receiving lower-quality service, ultimately diverting funds away from its charitable purpose. This kind of biased decision-making undermines trust and may ultimately lead to an investigation.
Unchecked conflicts can also expose an organisation to financial and legal risks. Trustees are required to act solely in the charity’s best interests, and failing to declare or manage conflicts could damage public perception. If donors or beneficiaries sense that decisions are driven by personal interests rather than charitable purpose, the charity’s reputation could suffer, making it harder to raise funds and support its work. In some cases, a poorly handled conflict of interest can even lead to decisions being challenged by members, other trustees, the executive team, volunteers, funders or service users. This not only disrupts operations and takes up valuable management time but can create uncertainty among staff, volunteers, and beneficiaries. Transparency is key to avoiding these issues.
Further resources and links
SCVO Conflicts of interest resources
Argyll and Bute TSI - Conflict of Interest Policy
For further free, well-informed information, find your local Third Sector Interface (TSI) at the directory page here