Dear Tyler,

Please consider the following post for your website - from Norma Rae.

Dear Sir,

There seem to be many that do not understand why eliminating conflict of interest is so critical. There is some excellent material written by the Center for Sport and Law Inc. Here is a very good article that sums up why conflicts of interest are so damaging and why non profit organizations need to eliminate them:

Articles - Organizational Development
Coaches Plan - Spring 2009, Volume 16 Number 1
Conflict of Interest - The Sport Organization's 'Achilles Heel'

Many times in this column we have written about a dimension of fairness – a concept that is central to the integrity of sport and also central to how individuals ought to act and interact in sport. What does fairness mean in the context of athlete selection? How do we allocate AAP cards fairly? What fair treatment should a coach expect when subject to a discipline investigation? What is a fair contract for coaching employment?

The Oxford Dictionary defines “fair” as “just, unbiased, equitable, in accordance with the rules”. To expect fairness in personal conduct is a reasonable request. Athletes and coaches should be treated justly, equitably and without bias, and we should follow the rules. This is an expectation that no right-minded person would take issue with. If this standard is not met, we have recourse to remedies in the form of protests, appeals, the Sport Dispute Resolution Centre of Canada (SDRCC), even the courts.

Yet, let’s extend this concept of fairness further – to the organization as a whole. In addition to its duty to the individual member, a sport organization also has a duty to its collective members. The board of directors of an organization acts in a fiduciary role – a legal term not unlike trustee or steward. In fact the origin of this word is fides, or Latin for “faith”. The members have faith that the board and directors may be entrusted with the well-being of the organization as a whole. The board serves all the members, and in the non-profit world, they are also said to be guardians of a public trust.

This relationship of trust with the members in their collectivity is seldom put under the microscope and seldom challenged. Yet in my view it is as important as the contractual relationship that the organization has with each of its individual members. Having worked for over 15 years to help sport organizations be more successful, I have encountered breaches of this trust relationship too numerous to mention. In fact, I would suggest that many organizations are not succeeding because they have never understood the importance of this fiduciary role.

To quote Paul Jurbala in a recent communication, “To [build organizational capacity] we need leadership from funding agencies. Sport Canada, P/T ministries, and sport federations have been abdicating their responsibilities in this area. Massive screw-ups, bankruptcies and odious practices are swept under the rug. We need a second LTAD revolution”.

If readers are still confused where I am going with this – let me make it plain. Odious practices abound – and the greatest of them is the failure of directors and boards to understand their role and responsibility. This failure manifests itself in directors being so conflicted that they cannot make any meaningful contribution to the governance, capacity and effectiveness of the sport organization they purport to serve.

Here is the essential legal background. Being a director is in many ways like being called to serve a higher purpose – the responsibilities are significant. Directors have the following legal duties:

· The duty of diligence, meaning the duty to act reasonably, prudently, in good faith and with the best interests of the organization in mind,
· The duty of loyalty, meaning the duty to not use the position of director to further private interests, and
· The duty of obedience, meaning the duty to act within the laws and rules that govern the organization.

These duties are in legislation and also in common law. Individuals who step up to serve on a board are called to this high standard – yet many either don’t realize or don’t willingly accept it. It is the duty of loyalty, in particular, that is most difficult to fulfill. To quote an earlier publication of ours, “Directors are required to put the interests of the organization first. These interests will always take precedence over any other interest, including a director’s personal interest. As well, directors who are involved in more than one organization may find that they cannot be loyal to both.” ("Legal Liability and Risk Management: A Handbook for Directors", 2002, prepared for Volunteer Canada).

I do not think that I have ever encountered a governing board of a sport organization that was not troubled by conflict of interest to some degree. The sport community is small in Canada and it is not uncommon for sport leaders to hold more than one leadership position in Canadian sport. In fact, it is the norm. I am not advocating the elimination of conflict of interest, because that would be impossible – but I do advocate strongly that organizations must be aware of this particular odious practice, and must take firmer steps to manage it.

Here are some all too common examples of situations that are tainted by conflict of interest: 

· Parents of athletes who are members of a provincial or national team are also on the board of directors of an organization,
· Presidents or directors of provincial/territorial sport organizations are also directors of national organizations,
· Coaches of teams or at clubs are directors of a provincial board or a national board,
· Employees of provincial branches also sit as directors of a national organization,
· Individuals who have business dealings with a sport organization (such as a through a sponsorship or supplier contract) also sit on its board of directors.

These scenarios seem innocent enough until one realizes that the parent of an athlete should not participate in any debate or vote on a matter relating to high performance, teams or carding; directors of provincial organizations should not participate in any debate or vote on matters relating to provincial dues, fees or hosting opportunities; coaches should not participate in any debate or vote on matters that relate to team funding, athlete or coach selection or club incentives, etc.

The most curious conflict of interest situation I encountered was one where a director was also a coach who was the supervisor of a paid assistant coach who was also the athlete representative director on the board. This did not automatically create a conflict for the coach-director, but created a perpetual conflict for the athlete-director, who found himself permanently conflicted as a director and muzzled as a voice for athletes at the board table.

When I raise the concern of conflict of interest with a director or with a board, the usual response is one along the lines of: “Don’t be concerned, I would never behave in a biased fashion” or “I can multi-task and manage all these portfolios without getting my priorities confused”. These responses are reflective of a lack of understanding of what bias and conflict of interest mean. The test for bias is an objective test: it is not what the person accused of bias or conflict might think, or what the person alleging bias or conflict might think, but what a reasonable third party looking at the situation might reasonably perceive. An allegation of conflict of interest is not a condemnation of a person, it is a rightful concern with a situation.

Until more sport organizations understand the duties of directors and are prepared to take steps to ensure that directors are supported to meet these duties, not fail them, the quality of debate and decision-making at the board table will continue to be mediocre. There are some promising practices emerging among progressive organizations: Swimming Natation Canada promotes independence of directors by requiring that any elected director resign from other swimming related positions, and the Royal Canadian Golf Association has recently modernized its governance model and nominating procedures to ensure the best possible people are recruited, well in advance, to seek board positions.

One thing that every organization can do immediately is to change bylaws and nominating procedures to ensure that nominees for election to the board are recruited and screened in advance by a nominating committee. A nominating process done in advance with timelines, with a prohibition against last minute nominations, will go a long way to ensuring that conflicts are avoided. And to the good individual who may have a conflict but nonetheless wants to contribute to the good work of a sport association, I would suggest that there are many opportunities to do that – but they involve serving on the organization’s various committees, not on its board of directors.

We have written about this topic once before in this space (Spring 2006, Volume 12 Number 4): in that column we outlined the duties of a director in detail and cautioned those coaches who find themselves in a dual role. It is common in small sport clubs for the coach to also be a member of the Executive – I would suggest that these two roles are not compatible and such a coach will frequently find himself in a conflict situation.

Sport has come a long way in recent years – and sport organizations now find themselves dealing with more legal issues than ever before. Managing conflicts of interest, and being transparent about directors’ respective affiliations and interests, is not only good risk management but also good business practice. It certainly represents a big step towards fairness and accountability, two values that many sport organizations profess to hold dear.


 Norma RAE  

Posted with permission.

I would highly recommend visiting the Centre for Sport and Law website for a comprehensive archive of articles. There is a wide assortment of subjects most from a Canadian perspective.