Conflicts of Interest
As members of the board or committee of an association, each board member needs to be aware that they are acting as a "fiduciary" of the association. A "fiduciary" is a person appointed to act at all times in the best interests of the association.As such, board members should avoid situations in which there is a real and sensible possibility of conflict arising between the board members' personal interests and the interests of the association.
Such a conflict of interest might arise when negotiating a contractual arrangement between the association and another organisation owned or managed by a board member. Under the contract the board member may be deriving income and personal profit. Hence, the board member could not be taken to be acting in the best interests of both the association and the organisation at the same time when negotiating and performing the contract as he or she would have competing loyalties to both.
In these circumstances, the board member must declare the nature of the interest to the association so that the members of the association can consider whether or not to approve the arrangement. This requirement is also supported by the Associations Incorporation Act 1991.
If a board member fails to declare any such conflicts of interest, he or she will be liable to compensate the association for any profit the board member makes from the contract or for any other loss or damage caused to the association by reason of the conflict.
Following on from the rule against conflict of interest is the rule against board members misusing their position or special knowledge of the association's affairs for their own advantage without the association's fully informed consent. Failing to inform the association of the board member's action in such circumstances would require the board member to account to the association for any personal profit made, or loss or damage caused to the association, by the board member.
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