Conflicts of interest: Bridging the gap between theory and practice
Conflict of interest discussions in the private club world tend to focus on the tax-exempt private club. However, all nonprofit private clubs, whether tax-exempt or taxable, should identify and resolve conflicts of interest to ensure the best in club governance.
Private club conflicts of interest are often more subtle, multi-faceted or more unusual than the merely financial. Since so many private club interactions are non-financial in nature, conflicts may occur in the gray areas of board governance. There are four perspectives found in the ethics codes of various professions that can be used to test board independence:
- Peer standards
- Public disclosure
- Reasonable person
- Best interest
Regardless of a club’s conflict of interest policy or decision-making framework, it is imperative for a board to have a clear, consistent route for resolving conflicts. The board or governance committee should understand how it would investigate issues and document their resolution.
While most clubs will have board members provide an annual conflict of interest statement, others remind their board and committee members prior to every meeting that they’re responsible for doing the right thing. Ultimately, clubs must do what is in the best interest of the membership as a whole.