Conflicts Of Interest

Introduction

Committee members are said to be in a fiduciary relationship with their club, meaning that they undertake to act for the club and, in doing so, place the club’s interests before their own. At times however, a committee member’s personal interests may intersect with this responsibility. This is what is known as a ‘conflict of interest’, and needs to be dealt with appropriately to ensure the reputation of the club is not put at risk.

It is important to note that conflicts of interest are not uncommon and do not necessarily represent a problem. In fact, conflicts of interest are bound to arise as it is generally considered beneficial for committee members to have numerous family, social and business relationships within their local community.

However, conflicts that are not managed appropriately can cause damage to the club's reputation and, in more serious cases, lead to breaches of the law.

Clubs that demonstrate they can handle conflicts of interests appropriately will foster confidence amongst members, volunteers and sponsors, who are able to trust that the committee will always seek to advance the club's interests over their own.

Associations Incorporation Act requirements

As highlighted in Racing Queensland’s guidance material regarding the recent law changes for incorporated associations, new provisions have been included in the Associations Incorporation Act 1981 (Qld) (the ‘Act’) which clarify the expectations placed on committee members when dealing with conflicts of interest.

It should be noted that these requirements are the minimum standard of conduct expected of committee members when dealing with conflicts of interest, and it may be that a committee member’s fiduciary obligations to the club require them to take further action.

Disclosure of material personal interests

The Act requires a committee member who has a material personal interest in a matter being considered at a committee meeting to disclose this fact to the committee as soon as they become aware of it. Additionally, the committee member must disclose the interest at the next general meeting of the association.

Such a disclosure must give details of:

1. the nature and extent of the committee member’s personal interest; and
2. how the committee member’s personal interest relates to the activities of the association.

Once disclosed at a committee meeting, the material personal interest must also be recorded in the minutes of the relevant committee meeting.

It is considered best practice for the chairperson of any committee meeting to invite committee members to declare any conflicts they may have at the beginning of the meeting.

Many associations will also maintain a ‘register of interests’ which outlines the nature and extent of any interest that may give rise to a conflict in the future. This can assist in ensuring appropriate oversight and transparency regarding conflicts as well as erase the need for committee members to raise potential conflicts at the beginning of each meeting.

What is a material personal interest?

A 'material personal interest' is an interest that has the capacity to influence the vote of the committee member upon the decision to be made.

A committee member should ask themselves – would a reasonable person believe that they might be influenced by the personal interest when making decisions on behalf of the association?

Further, a material personal interest need not be the committee member’s own interest – rather, it may be an interest that arises because of the committee member’s connection to a family member, friend or other organisation.

Take remedial action

The Act requires a committee member who has a material personal interest in a matter being considered at a committee meeting to:

1. absent themselves from the meeting while the matter is being considered; and
2. refrain from voting on the matter.

There may also be circumstances in which the actions required of a committee member go beyond these requirements. For example, a conflict between a committee member’s duties to the association and personal interests may occur so often or be to such an extent that it is no longer appropriate for the committee member to remain on the committee.

Importantly, wherever remedial action is taken to manage a conflict it should be recorded in the minutes of the committee meeting.

Actual, potential, or perceived conflicts of interest

To safeguard the club's reputation, it is important that clubs consider not just actual conflicts of interest, but also potential or perceived conflicts.

While potential or perceived conflicts of interest can be tricky to identify, the basic rule is to apply the "front page" test to the situation - how would this look on the front page of tomorrow's newspaper?

If in doubt about whether something could be a conflict of interest, it is best to err on the side of caution and disclose it. This will help to promote a culture of accountability and instil confidence among the club’s stakeholders that the committee always acts in the club's best interests.

Clubs are encouraged to implement a Conflicts Of Interest Policy, which can be helpful in ensuring that committee members and other officers of the club are able to identify, disclose and manage conflicts of interest to protect the club's reputation and appropriately manage risk.

Circumstances where conflicts may arise

Committee members should be able to properly identify conflicts of interest as and when they arise, so they can be swiftly and appropriately managed.

The below provides some examples of the more common circumstances where a conflict of interest may arise.

Direct financial interests

A direct financial conflict occurs where a committee member stands to benefit financially as a result of a decision or action to be taken by the committee. An example of this may include where the committee member’s business offers to provide services to the association. In such a circumstance, the committee member should disclose the material personal interest at the relevant committee meeting and take remedial action (i.e. remove themselves from the meeting while the matter is being consider and refrain from voting).

Indirect financial interests

An indirect financial conflict may arise where a particular family member, friend or other organisation in which the committee member is interested stands to benefit financially as a result of a decision or action to be taken by the committee. For example, a committee member’s sibling may be involved with a business that is bidding to secure a contract to build the club’s new grandstand. Such an interest should be disclosed, and appropriate remedial action taken.

Non-financial or personal conflicts

A non-financial or personal conflict is any situation where a committee member may not stand to benefit financially by a decision or action to be taken by the committee, but is affected in some other way that makes the committee member biased or appear to be biased. A non-financial might arise simply because a committee wants to do a favour for a friend, or it may arise due to a committee member’s religious or political beliefs. Non-financial or personal conflicts are not always material, so it is important that the seriousness of the conflict is considered before deciding upon the appropriate course of action.

Conflict of loyalties

A conflict of loyalty arises where a committee member owes a duty to more than one organisation at the same time. It is not uncommon for committee members of associations to sit on the committee of more than one association simultaneously. Where those associations are competing for the same local community grant, this conflict of interest should be declared, and appropriate remedial action taken.

For any questions about identifying and/or managing conflicts of interest, please contact RQ’s Partnerships & Development Team at clubdevelopment@racingqueensland.com.au.