Issue No. 325 of Your Weekly Staff Meeting recommends the latest resource from ECFA on conflicts of interest. It’s all about elephants and gorillas! And this reminder: subscribe here for Drucker Mondays, as 52 guest writers share their favorite quotes and commentary from the new book, A Year With Peter Drucker.
16 Minutes With the Elephant in the Room
Would your nonprofit board, church board—and their leaders—invest 16 minutes to address the elephant in the room—or the 800-pound gorilla?
I’m talking conflicts of interest today and, literally in 16 minutes, a new DVD from ECFA sheds immeasurable light on a ticklish subject most often addressed in the dark, or at least the boardroom hallway.
“Addressing Board and Organizational Conflicts of Interest: Avoiding Trouble, Trouble, Trouble With Related-Party Transactions” is the hot topic in the new ECFA Governance Toolbox Series No. 3.
Here’s the definition—and a quick gut-check tool:
“A conflict of interest occurs when a person who is responsible for promoting the interest of the ministry, is involved, at the same time, in a competing personal interest.”
One way to discern conflicts of interest is to use what Michael Batts calls the “front-page test.” He cautions: “I advise clients to use the ‘front-page test’ as a filter for deciding whether to enter into any transaction that could have a ‘negative spin’ possibility [the appearance of a conflict of interest]. That is, the board should ask the question, ‘Could this transaction or decision be reported by the media in a way that could cause embarrassment or damage to the organization or its leaders?’ If the answer is ‘yes,’ it may be best to avoid the proposed action.”
“A blind man on a galloping horse at midnight could see a related-party transaction problem. But we often can’t see the problem ourselves. The intensely focused task of leading ministries can make us blind to the obvious and blind to our blindness.”
And speaking of gorillas, Busby notes the research by Christopher F. Chabris and Daniel Simons in their fascinating book, The Invisible Gorilla: And Other Ways Our Intuitions Deceive Us. (Spoiler alert! If you have not yet viewed the “basketball passing” video, click here now—before you read further.)
ECFA’s Conflicts of Interest Toolbox includes:
--one 16-minute video
--12 copies of the 20-page Read-and-Engage Viewing Guide
--one Facilitator Guide (with supplementary online resources)—and three facilitation options (30-45 minutes, 1 hour, or a board retreat guide)
The DVD and viewing guide address three critical questions:
1. What is a conflict of interest?
2. What are the options when boards are faced with potential conflicts of interest and related-party transactions?
3. Is it ever appropriate to enter into a business transaction with an insider—and, if so, what policies should guide that action? (Note: An “insider” is a board member, key staff, or someone else with substantial influence over the organization.)
Before you ignore the elephant in the room (or the invisible gorilla), order these materials today and learn about:
• The 3 Paths for Related-Party Tests
• The 4 Steps for “Insider” Related Party Transactions
• The 7 Questions to Ask Before You Approve a Related-Party Transaction (share the Discernment Worksheet with your board and staff)
ECFA reminds leaders that 2 Corinthians 8:20-21 sets the standard for reputational risk—and the two audiences you serve: “We don’t want anyone suspecting us of taking one penny of this money for ourselves. We’re being as careful in our reputation with the public as in our reputation with God.” (MSG)
You’ll appreciate the “In-the-Trenches Board Interviews” video segment, “There’s an Elephant in the Room—But Let’s Just Keep the Peace!” Four fictitious board members share their humorous responses to conflicts of interest issues. (For the four viewpoints, read this ECFA governance blog.)
Trust me—the video and resources will provide a very appropriate poke-in-the-ribs to keep your conflicts of interest radar tuned in. Busby notes, “Trusted ministries do not borrow trouble with related-party transactions. These transactions are minimized to avoid even the slightest appearance of impropriety.”
The toolbox highlights four related-party scenarios. Board members and senior staff are asked to respond to each issue: “Is the ministry borrowing trouble?” The scenarios: when an organization purchases insurance from a board member; board approval of a lower-than-market interest rate loan for the top leader; and a policy that authorizes selected staff to use organizational time and resources to author books and media. How would you respond—is your ministry borrowing trouble?
“The only bad question is the one you had, but didn’t ask,” warns John Pellowe. His governance book is highlighted in the Toolbox. “You must be diligent as a director. Make sure that you ask any questions that are on your mind. As the saying goes, the only bad question is the one you had, but didn’t ask. You may think that since you have a banker on your board, you do not need to ask any financial questions because someone else is looking after that. It is your duty to ask these questions anyway. Do not rely on someone else to do your thinking.”
To order from ECFA click on this title: ECFA Governance Toolbox Series No. 3: Addressing Board and Organizational Conflicts of Interest—Avoiding Trouble, Trouble, Trouble With Related–Party Transactions.
Your Weekly Staff Meeting Questions:
1. The viewing guide quotes Best Practices for Effective Boards: “In the long run, only integrity matters. In fact without integrity, there will be no long run.” Could an inadequate response to conflicts of interest in your organization be the sad obstacle to a long run?
#2. Has your team viewed the video mentioned above? (There is a short scene in the ECFA Governance Toolbox Series No. 3 DVD that will also surprise you!) Do you agree now that “we are blind to the obvious and blind to our blindness?”
Note: I had the privilege of writing the script and materials for this ECFA Toolbox. Having worked with over 100 nonprofit and church boards, I’ve observed that it’s a huge blind spot for many. I urge you to use these materials ASAP—and avoid trouble, trouble, trouble! And…check out Toolbox Series No. 1: Recruiting Board Members, and Toolbox Series No. 2: Balancing Board Roles (The 3 Hats). Click here.
Zealots for Research - Insights from Mastering the Management Buckets: 20 Critical Competencies for Leading Your Business or Nonprofit
As we cycle through the 20 buckets, here is an insight from Chapter 2, the Customer Bucket, in Mastering the Management Buckets.
Right at the top—in the Customer Bucket core competency—is this: “We are zealots for researching and understanding our markets.”
So if your customer research is more anecdote than actuality, take a fascinating side trip through The Invisible Gorilla: And Other Ways Our Intuitions Deceive Us, by Christopher F. Chabris and Daniel Simons. The book addresses six everyday illusions:
• The illusion of attention
• The illusion of memory
• The illusion of confidence
• The illusion of knowledge
• The illusion of cause
• The illusion of potential
Warning! This hard-to-put-down book will be hard on you—if you’ve based your customer research on the wrong hypotheses, incorrect associations (versus cause), and “change blindness blindness.” I’ll read this book again—maybe three times!
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Plus...check out John's post this week on the ECFA governance blog, "A Board Prayer: The Least Words, The Least Intensity, The Least Volume!"