Directors’ duties
Earlier this year I wrote about the need for charities to have robust conflict of interest and related party governance arrangements in place, in part to support recent ACNC reporting changes. However, it’s not just charities who need to be aware of and effectively manage potential, perceived or actual conflicts.
One of the fundamental duties for all directors is to carry out the role in good faith in the interests of the organisation, and for a proper purpose. As a director you may find you have a personal interest or obligation which may conflict with this fundamental duty.
But is having a conflict inherently a problem? Or can it be manageable if you have effective practices and culture in place to avoid the conflict affecting, potentially affecting, or being seen to affect, your directors’ duty and the best interests of the organisation(s)?
I believe having a positive organisational culture, a highly competent Chair and a safe boardroom environment that actively encourages disclosure is the first step to ensuring you are effectively managing conflicts of interest. The best processes in the world won’t stick in practice if your culture doesn’t support them.
Does your organisation actively promote disclosure and have frequent reminders built into its governance structures?
If you want to dive further into the fundamental duties of directors, I highly recommend ‘Directors’ Legal Responsibilities: A Handbook for Australian Boards’ by Professor Pamela Hanrahan, particularly chapter 5, or reach out to The Governance Guide at rachel@thegovernanceguide.com.au to learn more.
