A trustee board with a conflict of interest

The client

The Board was made up of four trustees, two from the company and two from the members; all employed by the same manufacturing company.

The problem

Trustees having a conflict of interest, real or perceived, is nothing new. Here senior management were involved in discussions with the major shareholder about the potential sale of their London office and the subsequent weakening of the employer covenant.

The solution

Having joined the Board as Chair, we sat down with our co-trustees to set out the importance of understanding potential conflicts of interest and how conflicts of duty can arise. We then considered who suffers from such a conflict and the implications for the individual trustees.   Having considered this, with the assistance of the scheme legal advisers, we developed a conflict of interest protocol which provided guidance to trustees about what action they should take if they felt they either were, or could become, conflicted.

Most of this was achieved in a training session before the start of a trustee meeting. The protocol also indicates the potential actions which may be appropriate, such as stepping out of the meeting for the agenda item, remaining but not participating and the last resort of standing down – recognising that this is not a complete solution.

In this particular case, the conflicted trustee participated in the meeting by providing information to the Trustees but stepped out of the meeting for the rest of this agenda item.

The result

By ensuring that the declaration of any potential or actual conflicts of interest was always the first topic on the trustees meeting agenda, the importance of this issue is reinforced at each trustee meeting.  Having a professional trustee on the Board does not affect the conflicts which the other trustees may have but does help by providing a sounding board to them. By keeping the conflicts protocol under regular review there is no chance that conflicts become a governance issue that is ignored.

Conflicts, actual and potential, will always remain but by actively managing these, the Trustees are clear about what they are, and how they can be best managed.