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A strong conflict of interest policy is one of the most effective tools a board has. It strengthens trust, clarity, and decision-making integrity by clearly outlining expectations around disclosure and recusal. As a result, board members are empowered to participate confidently, knowing that decisions are being made transparently and in alignment with the organization’s mission. Rather than slowing governance down, a well-structured conflict of interest policy enables faster, more decisive action by removing ambiguity from sensitive situations.
For corporate secretaries, governance professionals, and C-level executives responsible for board oversight, an effective conflict of interest policy serves as a foundation for operational excellence. It ensures consistency in how potential conflicts are identified and managed, protects the organization’s reputation, and reinforces a culture of accountability at every level of leadership. In practice, it transforms compliance from a reactive obligation into a proactive governance strength.
Establish a board built on transparency and decision-making integrity with this guide to creating an effective conflict of interest policy.
What is a Conflict of Interest Policy?
A conflict of interest occurs when an individual’s obligation to the organization’s board is at odds with his or her own financial interest. The IRS requires that a clear conflict of interest policy be in place to prevent impropriety, and because tax-exempt status is in jeopardy if such policies are not clear and followed to preserve a company’s stated charitable purpose if it is a tax-exempt organization.
A conflict of interest policy offers context that helps members avoid any appearance of impropriety: it outlines governance risks, the possibility of reputational damage, and the legal exposure that needs to be handled. Informal workarounds or a policy that is inconsistently enforced will create a culture that could eventually jeopardize important decisions made by your board.
Important considerations include:
- Do the board members’ family connections put them at odds with the mission or work you’re trying to do in some way?
- Where is the board member employed? Could that change their judgment on certain decisions?
- Does the board member have investments or other connections to potential vendors? Are they fully disclosed?
These and other context-specific conflicts of interest need to be considered so that the board can bring an unbiased perspective to its decision-making.
Conflict of Interest Policy Template
Template
Conflict of Interest Policy
Copy Policy
Legal notice: This template is a starting point only. Conflict of interest requirements vary by organization type, jurisdiction, and industry. Have legal counsel review before adopting.
Full Policy
Disclosure Form
Annual Certification
Article [Number] of the Bylaws of [Organization Name]
Section 1. Purpose
The purpose of this Conflict of Interest Policy is to protect the interests of [Organization Name] (the "Organization") when it is contemplating entering into a transaction or arrangement that might benefit the private interest of an officer, director, or key employee, or might result in a possible excess benefit transaction. This policy is intended to supplement, but not replace, any applicable state and federal laws governing conflicts of interest applicable to nonprofit and for-profit corporations.
Section 2. Definitions
2.1 Interested Person. Any director, principal officer, or member of a committee with governing board-delegated powers who has a direct or indirect financial interest, as defined below, is an interested person.
2.2 Financial Interest. A person has a financial interest if the person has, directly or indirectly, through business, investment, or family:
- An ownership or investment interest in any entity with which the Organization has a transaction or arrangement;
- A compensation arrangement with the Organization or with any entity or individual with which the Organization has a transaction or arrangement; or
- A potential ownership or investment interest in, or compensation arrangement with, any entity or individual with which the Organization is negotiating a transaction or arrangement.
Compensation includes direct and indirect remuneration as well as gifts or favors that are not insubstantial. A financial interest is not necessarily a conflict of interest.
Section 3. Procedures
3.1 Duty to Disclose. In connection with any actual or possible conflict of interest, an interested person must disclose the existence of the financial interest and be given the opportunity to disclose all material facts to the directors and members of committees with governing board-delegated powers considering the proposed transaction or arrangement.
3.2 Determining Whether a Conflict of Interest Exists. After disclosure of the financial interest and all material facts, and after any discussion with the interested person, the interested person shall leave the governing board or committee meeting while the determination of whether a conflict of interest exists is discussed and voted upon. The remaining board or committee members shall decide if a conflict of interest exists.
3.3 Procedures for Addressing the Conflict of Interest.
- An interested person may make a presentation at the governing board or committee meeting, but after the presentation, they shall leave the meeting during the discussion of, and the vote on, the transaction or arrangement involving the possible conflict of interest.
- The chairperson of the governing board or committee shall, if appropriate, appoint a disinterested person or committee to investigate alternatives to the proposed transaction or arrangement.
- After exercising due diligence, the governing board or committee shall determine whether the Organization can obtain with reasonable efforts a more advantageous transaction or arrangement from a person or entity that would not give rise to a conflict of interest.
- If a more advantageous transaction or arrangement is not reasonably possible under circumstances not producing a conflict of interest, the governing board or committee shall determine by a majority vote of the disinterested directors whether the transaction or arrangement is in the Organization's best interest, for its own benefit, and whether it is fair and reasonable. In conformity with the above determination, it shall make its decision as to whether to enter into the transaction or arrangement.
3.4 Violations of the Conflict of Interest Policy. If the governing board or committee has reasonable cause to believe a member has failed to disclose actual or possible conflicts of interest, it shall inform the member of the basis for such belief and afford the member an opportunity to explain the alleged failure to disclose. If, after hearing the member's response and after making further investigation as warranted by the circumstances, the governing board or committee determines the member has failed to disclose an actual or possible conflict of interest, it shall take appropriate disciplinary and corrective action.
Section 4. Records of Proceedings
The minutes of the governing board and all committees with board-delegated powers shall contain:
- The names of the persons who disclosed or otherwise were found to have a financial interest in connection with an actual or possible conflict of interest;
- The nature of the financial interest;
- Any action taken to determine whether a conflict of interest was present; and
- The governing board's or committee's decision as to whether a conflict of interest in fact existed.
Section 5. Compensation
A voting member of the governing board who receives compensation, directly or indirectly, from the Organization for services is precluded from voting on matters pertaining to that member's compensation. A voting member of any committee whose jurisdiction includes compensation matters and who receives compensation, directly or indirectly, from the Organization for services is precluded from voting on matters pertaining to that member's compensation.
Section 6. Annual Statements
Each director, principal officer, and member of a committee with governing board-delegated powers shall annually sign a statement which affirms that such person:
- Has received a copy of this Conflict of Interest Policy;
- Has read and understands the policy;
- Has agreed to comply with the policy; and
- Understands that the Organization is a [nonprofit/for-profit] organization and that in order to maintain its [federal tax exemption / good standing] it must engage primarily in activities which accomplish one or more of its tax-exempt purposes.
Section 7. Periodic Reviews
To ensure the Organization operates in a manner consistent with its [charitable/organizational] purposes and does not engage in activities that could jeopardize its tax-exempt status, periodic reviews shall be conducted. The periodic reviews shall, at a minimum, include the following subjects:
- Whether compensation arrangements and benefits are reasonable, based on competent survey information, and the result of arm's length bargaining;
- Whether partnerships, joint ventures, and arrangements with management organizations conform to the Organization's written policies, are properly recorded, reflect reasonable investment or payments for goods and services, further the Organization's purposes, and do not result in inurement, impermissible private benefit, or in an excess benefit transaction.
Section 8. Use of Outside Experts
When conducting the periodic reviews as provided for in Section 7, the Organization may, but need not, use outside advisors. If outside experts are used, their use shall not relieve the governing board of its responsibility for ensuring periodic reviews are conducted.
Adopted by the Board of Directors of [Organization Name]
Date: [Date]
Board Chair Signature: ___________________________
Board Secretary Signature: ___________________________
Date: [Date]
Board Chair Signature: ___________________________
Board Secretary Signature: ___________________________
Conflict of Interest Disclosure Statement
Organization: [Organization Name]
To be completed by all directors, officers, and committee members with board-delegated authority.
Part I. Identifying Information
Name: ___________________________
Title / Role: ___________________________
Date: ___________________________
Part II. Disclosure of Financial Interests
Please disclose any financial interest you have — directly or indirectly — in any organization, entity, or individual with which [Organization Name] has or is contemplating a transaction or arrangement.
A financial interest includes ownership, investment, compensation arrangements, or gifts of more than nominal value, involving you, your family members, or entities in which you hold a significant interest.
Do you have any financial interest to disclose?
[ ] No — I have no financial interests to disclose at this time.
[ ] Yes — Please describe below:
[Describe the nature of the interest, the entity or individual involved, and your relationship to them]
Part III. Disclosure of Non-Financial Interests
Please disclose any non-financial relationships (personal, family, or organizational) that could reasonably be perceived as influencing your judgment in matters before the board or any committee.
[ ] No non-financial interests to disclose.
[ ] Yes — Please describe below:
[Describe the relationship and how it relates to Organization business]
Part IV. Recusal Commitment
I understand that if a matter comes before the board or any committee in which I have a disclosed or undisclosed conflict of interest, I am obligated to:
- Disclose the conflict immediately;
- Recuse myself from discussion and voting on the matter; and
- Leave the meeting room during board deliberation, if requested.
Part V. Certification
I certify that the information above is accurate and complete to the best of my knowledge, and that I will promptly update this disclosure if my circumstances change during the year.
Signature: ___________________________
Printed Name: ___________________________
Date: ___________________________
Annual Conflict of Interest Certification
Organization: [Organization Name]
Policy Effective Date: [Date]
Certification Period: [Year]
Acknowledgment
I, the undersigned, hereby certify and affirm the following:
- I have received and reviewed the Conflict of Interest Policy of [Organization Name] dated [Date].
- I understand the policy and my obligations under it.
- I agree to comply with the policy in full during my tenure as a director, officer, or committee member.
- I understand that the Organization's ability to operate in furtherance of its mission depends on the integrity and independence of its board and leadership, and that I have a personal obligation to act in the Organization's best interest at all times.
- I will promptly disclose any actual or potential conflict of interest that arises during the certification period, and I will recuse myself from related discussions and votes as required by the policy.
Disclosure Update
Since my last disclosure, have any new conflicts of interest or potential conflicts arisen?
[ ] No — my prior disclosure remains accurate and complete.
[ ] Yes — I am attaching an updated Disclosure Statement describing the new interest(s).
Certification
Signature: ___________________________
Printed Name: ___________________________
Title / Role: ___________________________
Date: ___________________________
For staff use: Received by _________________ on _________________ | Filed in governance records.
How to Roll Out Your Conflict of Interest Policy
As your board decides on what should be in your conflict of interest policy, you’ll need to follow clear communication guidelines to ensure everyone involved is well-informed, so they can make decisions about their own potential conflicts ahead of time and with transparency.
1. Confirm Scope and Owners
Every conflict of interest policy doesn’t apply to every person associated with the organization. By defining the scope of the policy and who is going to own the proceedings, you’ll be able to easily check in for updates and, down the line, the enforcement of the policy.
2. Customize the Policy to Your Organization and Board Cadence
A variety of features (definitions, disclosure thresholds, recusal rules, and approval paths) will be specific to the work of your organization and how much conflict would compromise a board member.
3. Approve the Policy Through the Right Governance Path
After a committee review and approval, bring the policy to full board approval, documenting that a sufficient vote brought it into effect.
4. Communicate Expectations and Train for Practical Use
Creating a one-pager or infographic could help existing and new board members understand when and how they need to disclose, and once they know they need to do so, how to move forward with that disclosure and how to recuse themselves from specific decisions in order to abide by the policy.
5. Collect Initial Disclosures and Document Decisions
Have the existing board put the policy into practice by offering their baseline disclosures. As needed, record recusals, mitigations, and approvals consistently to begin a strong track record for efficient and equitable enforcement.
6. Operationalize the Workflow
Begin putting disclosure documentation into the onboarding of new board members, as well as in periodic components of the meeting and transaction approval processes. By treating potential disclosures and recusals as part of the process, enforcement becomes a day-to-day reality and not a surprise.
7. Set a Review Cadence and Maintain an Audit Trail
Each year, confirm the policy and any needed changes, while retaining past versions and records of the policy’s impact in a central, secure board portal. When these documents are scattered between emails and file shares, something can slip through the cracks that can call past decisions into question, so make sure that dated documents are all kept together for a clear paper trail of strong decision-making.
Strengthen Your Governance Framework
Conflict of interest policies that have been reviewed, approved, and implemented keep the entire board and the organization protected. Organizations rely on their board accountability and the organization’s integrity for their financial solvency and their reputation.
OnBoard’s platform provides an efficient process for creating, updating, and sharing your policies, making your compliance documentation and disclosure records secure and available when needed. Having a single system of record further cements your reputation for transparency and unbiased decision-making.
Reach out today for a demo of how OnBoard can help as you get your conflict of interest policy into strong legal and ethical compliance.
Adopt AI Without Widening Risk
Speed decisions across the board by trimming prep time and surfacing context in one secure portal, with agendas from a prompt, on‑page briefs, and minutes drafts generated by AI inside your governance record.
Frequently Asked Questions
How often should conflict of interest policies be reviewed?
An annual review of conflict of interest policies is in the best interest of your organization. However, your organization may opt for a different cycle of review, particularly if you have crowded agendas and need a regular but slightly less frequent review of your policies.
What are the legal consequences of not having a policy?
Consequences of not having a conflict of interest policy include losing your IRS tax-exempt status, lawsuits, and personal liability for individual board members. While the specifics vary, the discovery of conflicts of interest among board members can be financially dangerous for the entire organization, as well as the board members in question.
How do you handle board member conflicts of interest?
Typically, board members will disclose existing potential conflicts of interest in a systematic way for transparency. When a decision involves the disclosed conflict, said board member will recuse themselves from both discussion and voting on the matter, showing that they are not influencing the decision.
What AI capabilities make board meetings better and easier to manage?
AI-powered software can quickly create transcripts and meeting notes, as well as more formally structured minutes. A human will take far less time reviewing these notes and editing them than they’d take compiling them in the first place, and that person can focus on the content of the meeting operations rather than on detailing every decision perfectly. AI-powered agenda building can also make it faster and easier to construct an excellent agenda.
About The Author
- Gina Guy is an implementation consultant who specializes in working with nonprofit organizations get the most from their board meetings. She loves helping customers ease their workloads through their use of OnBoard. A Purdue University graduate, Gina enjoys refinishing furniture, running, kayaking, and traveling in her spare time. She lives in Monticello, Indiana, with her husband.
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