Industry bodies are important advocacy bodies. They represent members interests and promote, lobby and advocate for a better outcome for their members and industry. Typically then, the Committee or Board are made up of industry people so that they can align the strategy of the organisation with direct experience and practical knowledge.
This is important. What is also important for from a governance perspective is to also have one or more independent directors. This helps with addressing any skill gaps as well as the most common source of headache- managing conflicts of interest.
All “industry” directors have conflicts of interest. Whether it is a business that they personally own and operate in the industry, is employed within the industry or has history or ongoing connections within industry. Conflicts are not bad but just need to be appropriately managed.
Having a strong, independent Chairman is important to assist in ensuring governance processes are maintained and directors are adhering to their duties of good faith and managing their conflicts appropriately.
Where a director has a personal interest in a matter or has a relative or friend with an interest in a matter, then the director needs to be absent for discussion and decision making. What is interesting is when there is more than one industry member is conflicted and a quorum cannot be reached as a result of the lack of directors being able to continue to sit around the board table. This is where a case can be made for more than one independent director on the board.
It is important when dealing with conflicts of interest that the individual is taken out of the equation and everyone director who is in a conflicted position is treated the same way. That is, they leave the room, are not a party to the discussion and their version of the meetings minutes are redacted for that item.
There could be considered different levels of conflict- ranging from the “minor” to direct and blatantly obvious and impacting. All conflicts should have the same attention and seriousness attached to it and be treated in the same manner with the same process.
This allows the board to have a clean, simple and effective way to manage conflicts of interest and gives stakeholders and funding bodies confidence that the affairs of the organisation are handled with integrity, and in a legally correct and transparent manner.
For more information on governance and best practice, please contact Joanna Andrew or visit our Governance page.