Conflicts of interest

Conflicts of interest exist in all organisations. A conflict of interest is any situation where a personal interest could, or could appear to, prevent an individual from making a decision only in the organisation’s best interests. Remember, directors and trustees are under a legal obligation to act in the best interests of the organisation.

Examples of conflicts of interest might be if a board member (or a person connected to them, such as a close relative, business partner or company):

• receives payment from the organisation for goods or services, or as an employee;
• makes a loan to or receives a loan from the organisation;
• owns a business that enters into a contract with the organisation;
• uses the organisation’s services; and
• enters into some other financial transaction with the organisation.

The Code for Sports Governance also defines how such conflicts can occur. They can arise where there is a conflict between the interests of the organisation and those of a director, staff member or other volunteer, or those of another body with which the individual is involved.

Sports bodies, in particular membership organisations, often face situations that could be described as conflicts of loyalty. These conflicts arise because, although the affected board member does not stand to gain any personal benefit, their other interests could influence their decision making.

For example, a board member’s loyalty to the organisation could conflict with:

• loyalty to the club, region or constituent group that voted them onto the board;
• their membership of a section of the sport, for example, being a member of the women’s section of a club;
• an associated organisation, which may have nominated them;
• another sports body of which they are a board member or employee; and
• a member of their family or another connected person or organisation.

To manage conflicts of interest in a transparent and systematic way, sports organisations should develop a policy that sets out how potential conflicts will be identified and handled.

Preventing conflicts of interest from affecting decision making is a legal requirement and, having identified a conflict of interest, board members of an organisation must consider the issue so that any potential effect on decision making is eliminated. It is also a matter of ethical leadership as would be expected by stakeholders. How a board prevents the conflict from affecting decision making will depend on the circumstances.

If your sports organisation is a registered charity, you will want to follow The Charity Commission’s Essential Trustee guide (CC3) advice on conflicts of interest.

Even if your organisation is not a registered charity, the above guidance is still good practice. There are more general suggestions for managing conflicts of interest as well which we will outline below.

Register of interests and conflict of interest policy

An important task in managing conflicts of interest is to identify and record them. It is not unusual for an organisation to require board members, all staff and senior volunteers to register their interests. This has the benefit of reinforcing the importance of related conflicts of interest policies and reminding staff and volunteers of their duties and responsibilities. The declaration should be updated annually or whenever the circumstances of an individual change. Remember, it is a legal duty to declare any conflicts of interest, so updating the register of interests is the responsibility of the individual.

The board members’ register of interests can be made available to members and stakeholders as evidence of transparency in decision making. The conflicts of interest policy and requirement for declaration will often be referenced in the Articles of Association but even if not, there should still be a policy and process in place to manage conflicts of interest.

There is no definitive list of possible connections that could be interpreted as potential conflicts of interest for board members, however the following influences are common:

• current employment and any previous employment in which the individual might continue to have a financial interest
• appointments (voluntary or otherwise), including trusteeships, directorships, sports body roles, local authority membership or tribunals
• membership of any professional bodies, special interest groups or mutual support organisations
• investments in unlisted companies, partnerships and other forms of business, major shareholdings
• gifts or hospitality offered by external bodies in the last 12 months; and whether this was declined or accepted

The register of interests alone does not prevent close connections and conflicts from potentially influencing decisions. How you prevent a conflict of interest from affecting a decision will depend on the circumstances and the seriousness of the conflict of interest.

At board and committee meetings, the agenda should include an item that allows participants to declare conflicts of interest. The chair may highlight the need to do so as relevant to the agenda, and participants are expected to use their judgement based on the content of the meeting, likely discussions and impact of decisions when deciding whether to declare a conflict. The the secretary or governance lead may also raise the issue if they think that a board member has forgotten to do so themselves.

The most effective means of managing conflicts is to ask the conflicted board member to leave the room while discussions take place and decisions are made. If the person with a conflict of interest remains in the room for discussion, it is possible that they can still influence others through non-verbal cues or failure to refrain from participating in the discussion.

Even with a conflict of interest policy, a register of interests and an item on all agendas, it is still imperative that board members fulfil their legal duties by declaring any conflicts of interest in meetings. If the non-conflicted board members can demonstrate that a conflict involves no material benefit and poses a low risk to decision making in the best interests of the organisation, they may permit the affected board member to participate. For the most serious conflicts of interest – for example, the potential awarding of lucrative contracts to a company in which a board member has an interest and will benefit personally – it may mean obtaining permission from the relevant regulator, deciding not to proceed with a proposal or even resigning from the board if the conflict is considered to be of sufficient size and is insuperable.

It should be noted, of course, that conflicts of interest are an almost inevitable consequence of having a board. Particularly if a board member is appointed for their specific skills, experience, influence or gravitas, this may bring with it the potential for conflicts of interest. It is not necessary to avoid them entirely, but rather to ensure that they are managed appropriately so that there can be no doubts as to the motivations behind a decision.

In circumstances where a conflict of loyalty may exist, it is still appropriate for board members to be open with each other about the potential influence on decisions. For example, a board member elected by a regional constituent group might not declare their affiliation as a conflict of interest but, as discussions unfold, reminders from the chair about such associations can help keep the debate focused on board members’ duties to the organisation as a whole. The organisation might also choose to include these situations in its conflict of interest policy to highlight board members’ duties and maintain transparency in decision making.

Gift and hospitality log

At any level in sport there will always be a risk that an individual may be induced by a gift, hospitality or bribe. To mitigate this reputational and strategic risk, all senior staff and board members should declare any association with relevant organisations, such as sponsors, funders, event organisers or internal stakeholders. A gifts and hospitality log does not prevent, for example, an individual being the guest of a partner at a sporting event or awards ceremony, but by being open and transparent about the exchange, stakeholders are able to identify if such a connection has any material influence on decisions. The log can be presented at each board meeting and should be available to stakeholders. It is good practice to set a value limit above which gifts cannot be accepted or must be logged. It is also a good idea to detail which offers of gifts or hospitality have been declined.

Managing conflicts of interest is important to the integrity of your sports organisation, and if done well, can enhance stakeholder trust and confidence.