Conflict of Interest

Not-for-profit board of directors have a legal responsibility to avoid conflict of interest. According to the Government of Canada, if they fail to do so they may be liable for their actions or omissions if they do not discharge their duties properly.

Board of Director Liability

Directors are exposed to liabilities under federal and provincial statutes. These laws specify penalties and offences for inappropriate acts and omissions by directors, including conflicts of interest. This liability also applies to someone who acts as a director, but who has not been formally appointed (de facto).

A director can be held personally liable for their own actions or omissions, as well as jointly with other directors.

Legally, these are considered “strict liability offences”, meaning it is immaterial whether the director intended to violate the law, or not. A director can only defend themselves through “due diligence”.

Due diligence proves to the court the director took reasonable steps to ensure they complied with the law.
Non-compliance can lead to fines, repayment of debt, and imprisonment.

Laws may describe limitation periods for liability, so resignation does not automatically exclude a director from risk.

Laws Governing Conflict of Interest

The framework for governance of not-for-profit corporations falls under the Canada Not-for-profit Corporations Act (NFP Act). One of the primary aims of this Act is to prevent conflicts of interest between corporations, directors, and officers, detailed in section 141.

However, every province also has its own provincial legislation and statutory obligations. It is very important each organization addresses conflict of interest legislation for their area.

What Constitutes Conflict of Interest?

Directors are legally bound to act in the organization’s best interests. They must put aside their own interests and those of family, friends, political parties, creditors, donors, members and other stakeholders when making decisions.

They cannot use the organization’s property or information for the advantage of another person, themselves, or their companies. Otherwise, they could be liable for all profits and benefits gained from their use.

Directors must react to any situation that could raise doubts. Sometimes conflicts of interest are unavoidable and other times they are subtle.

However, directors must disclose the nature and value of all and any personal interests that could conflict with those of the organization to protect them.

Due diligence is a director’s only legal protection.

When to Report a Conflict of Interest?

Many organizations ask directors to complete a conflict of interest statement when they join the board. Directors should disclose any conflicts of interest after that time as soon as they are aware of it and no later than the next board of director’s meeting.

Organizations may also have specific requirements within their internal documents. Directors should review the articles of incorporation, by-laws, code of ethics, governance standards, conflict of interest policy, and best practices to ensure compliance.

Many corporations also specify that directors must disclose any interest in a contract with the organization, even if they were not directly involved with it. This allows the board to decide whether they will refuse or accept the contract.

If the director does not disclose their conflict of interest, they may be liable for profits and benefits received from the contract or the courts may cancel the contract.

Failing to report a conflict of interest can also severely damage director and organizational reputation.

How to Report a Conflict of Interest

Any director who finds themselves in a situation that could raise doubts must disclose the conflict of interest to the organization. They can do this in one of two ways:

  • Verbally at a board meeting with it noted in the minutes.
  • Written notification sent to the board of directors requiring a signature upon receipt. The conflict of interest is noted in the minutes of the next board meeting.

Post-Reporting

Whether a director can participate in discussions after they’ve declared a conflict of interest depends on the regulatory area. For instance, Quebec does not permit director participation in discussions after declaring a conflict of interest.

Even if the law allows a director to take part in discussions, they probably shouldn’t. The director should leave the room during a vote to avoid influencing others, unless the conflict affects their salary, insurance, indemnity, or working conditions.

Works Cited

Project Management Best Practices / Life Cycles

Project management focuses on planning and organizing a project and its resources. This includes identifying and managing the appropriate lifecycle, determining the project team, and providing proper guidance until project completion.

Project Management Value

Effective project management ensures an organization maintains its vision and reaches its goals. It also defines team member responsibilities, deliverables, and schedules for optimal efficiency and reduced risk.

Building a Productive Team

The size of your team and their roles depends on the scope of your project. Regardless of team size, a good project manager defines collaboration and communication needs.

For instance, it is important to know whether formal or informal meetings suit the project, how often team members will meet, and whether meetings will be held in-person, virtually, or both.

Other important considerations include how members will safely store, share, and update documents. The team must also understand the project workflow for decisions and approvals.

Project Life Cycles

A project life cycle is a systematic, controlled process from project start until end. It defines which deliverables the project must generate, who’s involved, and the controls and approval process as the life cycle progresses.

Typically, a project’s life cycle is divided into five distinct phases: conception and initiation, planning, execution, performance/monitoring, and project close.

Phase 1: Project Conception & Initiation

This phase defines the project at a very broad level. The organization researches feasibility and whether major stakeholders agree the project makes sense for their business and organizational vision.

If everyone deems it worthwhile, the organization prepares a project initiation document (PID). This document outlines the purpose and requirements of the project, stakeholders, and the business case.

Phase 2: Project Planning

The planning phase creates a road map for everyone to follow. It includes defining goals and the scope of the project, identifying potential risks, and developing a project management plan.

The project management plan identifies available resources, costs, and the timetable and milestones for the project. The project manager also defines key performance indicators to measure performance and progress, with the plan serving as a performance benchmark.

During the planning phase roles, responsibilities, and accountability are also established as well as communication protocols.

Phase 3: Project Execution

This phase usually starts with a team meeting where members learn their tasks, responsibilities, expected deliverables, and the resources at their disposal.

They follow the project management plan, under the watchful eye of the project manager. The project manager may call status meetings, update the project schedule, and modify plans, as needed.

Phase 4: Project Monitoring & Performance

Using the previously established key performance indicators (KPIs), the project manager assesses the project’s progress.

They look at whether the project is on schedule and budget to meet stakeholder objectives and the completion date. They also review whether team members are providing the deliverables expected and may adjust resources and schedules to keep the project on track.

Phase 5: Project Closure

Once a project is complete, the project manager usually calls a meeting called a “post mortem”. The principal reason for the meeting is to thank team members for their efforts and to evaluate the successes and failures of the project. These lessons can help the organization understand how they can improve future projects.

The project manager also pinpoints uncompleted tasks and ensures team members attend to them. They also collect project documents and deliverables for storage in a central location. Lastly, they prepare the final project report and financials for stakeholder review.