Conflict of interest is a personal interest that might impair or reasonably appear to impair a board member’s independent, unbiased judgment in the discharge of his or her responsibilities to the institution. While financial conflicts, in which a board member gains or appears to gain from business conducted with the institution, may be the most common, a board should not confine its conflict of interest policy to financial conflicts. Instead, the policy should cover all kinds of interests that may:
Lead a board member to advance an initiative that is incompatible with the board member’s fiduciary duty to the institution, or
Entail steps by a board member to achieve personal gain, or gain to family, friends or associates, by apparent use of the board member’s role at the institution.
The application of the "front-page test" is often helpful in determining whether conflict—real or perceived—exists: If an activity were accurately described on the front page of the local newspaper, would an individual on the board appear to be in conflict? That is, would he or she appear to have given preference to self-interest rather than to the interest of the institution?
Using this same "front-page test," would the board be satisfied with the way it handled the conflict? Could the institution’s reputation be harmed if the conflict were made public?