A non-profit organization is a type of business structure with very specific needs. Legally speaking, they are subject to unique laws, and often exist to promote a certain charitable purpose. As such, it is common for conflicts of interest to arise in any non-profit organization. In its broadest sense, a conflict of interest may be defined as a situation in which a party has a duty to promote one interest, but then begins promoting another interest.
Business conflicts of interest can be challenging for any type of organization. However, for non-profit organizations, conflicts of interests are of particular concern because of the nature of such groups. Many non-profit organizations deal heavily with donations and charitable giving, and so a conflict of interest would be problematic for the group.
In the context of a non-profit organization, a conflict of interest usually implies that an employee or director has breached their duty to promote the best interests of the non-profit. This usually happens because the employee has an interest in a competing organization or with a donor.
Some examples of conflicts of interest in a non-profit organization may include:
- Key employees of the organization being financially interested in a donor company
- Nonprofit organization employees being temporarily “loaned” to other companies
- Organization employees accepting improper gifts from outside donors or vendors
- Employees acting as insiders in a different company
- Employees with a conflict of interest being represented by the same attorney
- Organizational fund raisers offering financial advice to donor parties
There may be other kinds of conflicts of interests, especially when it comes to temporary contract arrangements with third party actors. For instance, many non-profits sponsor events or undertake small projects with local businesses. In such cases, it’s important to form agreements that are free from conflicts of interests.
To begin with, every nonprofit organization needs to have a policy stating what should occur in the event that there’s a conflict of interest. This is usually stated in the organizations bylaws. Alternatively, the non profit can create a distinct policy that is separate from the bylaws dealing strictly with conflicts of interests.
If a conflict does arise, it may be appropriate to take legal action. This can result in a lawsuit for monetary damages. Or, it may require the organization to take action, such as terminating a person who has violated laws due to the conflict of interest.
Conflicts of interest can be problematic, but there are several steps that can be taken to minimize their occurrence. You may wish to hire an experienced business lawyer in your area if you need assistance with any legal issues that involve conflicts of interest. Your attorney can provide you with the legal representation and advice that will be needed to resolve the legal conflict.