Chapter 7: Managing conflicts of interest

The failure of an officer to disclose a conflict of interest can cause harm to the organisation and have legal consequences for the officer.

There are resources to help you identify a conflict of interest, including a guidance note and a compliance update.

A conflict of interest may involve:

• an officer’s direct personal interest
• an interest belonging to an officer’s relative or friend
• an interest belonging to another organisation that the officer is involved in
• or a perception that one of these applies.

Officers should consider how a situation or decision may be perceived by members, and act appropriately. It’s important to remember that a conflict can exist even if the officer feels their decision making isn't being influenced by the relationship, it must still be declared.

Good governance is also focused on protecting the appearance of proper decision making. 

External trust in the organisation’s processes is essential so members and other officers can see decisions as legitimate. 

Officers should consider how a situation or decision may be perceived by members, and act appropriately. 

It’s important to remember that a conflict can exist even if the officer feels their decision making isn't being influenced by the relationship, it must still be declared.

Conflicts of interests must be carefully managed through disclosure procedures and other governance controls. The duties of officers under the Fair Work (Registered Organisations) Act 2009 (the RO Act) are designed to help organisations manage conflicts of interest, which you can read more about in chapter 6: Officers’ duties.

Many officers haven't been in corporate decision-making positions before and may require support and education. Identifying conflicts should be part of your officer induction process.

You can then build processes that lead to a culture where disclosures are easy and a matter of habit:

• have a clear policy that explains what a conflict is, how to disclose it and why it's important. Include restrictions on the person’s behaviour as a result of the conflict.
• have a standing item at meetings and make sure senior leaders are seen to share their interests. Make sure you ask around the meeting as some people are nervous to speak-up in groups.
• create a form that makes disclosing interests easy and self-explanatory, rather than leaving it to an officer to guess what must be included.
• share the interests that have been made as standing disclosures where relevant or encourage officers to reiterate them on the day if relevant.
• provide practical (anonymised) examples of conflicts that need to be disclosed that have arisen in your organisation.
• have transparency over other people’s disclosures: this teaches what must be disclosed and builds pressure to make disclosures.
• have a standard form that is sent around ahead of big decisions being made (especially financial ones) that jogs officers’ minds on shares, super, property, trusts, businesses, friends or relatives that might have interests tied to the decision.
• collect any NIL disclosures.
• encourage and welcome questions, some people aren’t sure when their interest is big enough or important enough.
• have a conflict champion who can sit down with an officer and answer questions, explain the decision-making restrictions and record keeping requirements.
• remind officers these protocols are for the protection of members and effective decision making, having a conflicted officer involved in the decision could cause the decision to be questioned or overturned.
• send routine reminders: when officers change their personal interests, telling their organisation isn’t always front-of-mind.
• have a standard form as part of your new officer induction to capture standing disclosures from day one.
• consider personal reminders to officers with financial duties, such as the Committee of Management, letting them know you have the following list of interests disclosed and asking do they want to update them
• have a person who's responsible for monitoring and updating conflict of interest registers.

There are many ways for organisations to implement systems and processes around conflicts of interest and related parties.

Good governance processes and policies don’t stop when it's identified that someone has an interest. 

Your conflict policy should contain:

• steps on how conflicts are recorded
• how you record when someone has left a meeting or excused themselves from decision making because of a conflict
• when decision makers are reminded about the conflict
• how information about the conflict is kept up to date.

The RO Act prohibits officers with material personal interests from being present during any discussions that are actually or potentially affected by their interest. An officer with a conflict of interest can be involved in decision-making in limited circumstances following a resolution by the Committee of Management.

Best practice entails the officer excluded from decisions that affect their interest, but sometimes the Committee of Management will want the officer involved. In this case the committee should take every step possible to ensure transparency. 

The committee has to know the details of the interest and decide to let the officer stay.

If the committee decides to let a conflicted officer stay, you must keep records of: 

• what exactly they're allowed to do
• what they aren't allowed to do, such as debate but not vote
• whether the restrictions were complied with  
• what the committee knew about the interest when they made their decision. 

Conflicts of interest are sometimes inevitable, but how they're managed can define their impact. The following practices can help protect your organisation and its officers from the effects of conflicts of interest:

• enforce a conflict of interest policy that sets expectations about disclosures and how potential conflicts of interest will be managed
• keep detailed records about disclosures in a register of interests
• promote a culture of disclosure where officers are actively encouraged and reminded to make disclosures.