Case studies

A chief executive and some familial conflicts of interest

Governance | Neal Green | 1 Sep 2007

Neal Green of the Charity Commission responds to a chief executive with some queries about familial conflicts of interest.

Dear editor,

I have a couple of governance-related queries which I wonder if you can help me with?

A trustee's wife applies for a service delivery post in the charity of which her husband is a trustee and honorary officer. Potentially this could lead to a number of conflict of interest situations particularly when service issues are being discussed. Should he resign if and when his wife takes up appointment or should one just deal with situations as and when they arise through the conflict of interest policy?

A trustee applies for a role in a charity of which he is a trustee. Should he resign when he puts in his application or on appointment to the role?

Yours sincerely,

A chief executive trying to get the best staff for the charity

Dear chief executive,

There are two key legal principles here. Firstly, trustees have a duty not to profit from their trusteeship; secondly trustees are not allowed to put themselves in a position where their interest and their duty conflict (or appear to conflict)

• In the first scenario there is a potential trustee benefit because of the 'shared purse' principle (the trustee will benefit from any payment to his wife) as well as a conflict of interest. The trustee benefit would need authorisation from the Commission (or the court) unless it was permitted by a power in the governing document. The charity would have to persuade the Commission that the appointment is in the charity's interests. The conflict of interest would need to be managed by the trustee absenting himself from any discussion of, or voting on, any matter relating to the post for which his wife has applied.
• If the trustee's wife is appointed following a fair and rigorous recruitment process and the Commission has been persuaded to grant the charity the relevant power, the trustee may still have to resign if the scope of his wife's role meant that he was consequently no longer able to effectively carry out his duty as a trustee, or the conflict of interest was otherwise unmanageable. Obviously, if the Commission does not provide the necessary authorisation, the trustee will have to resign as soon as his wife takes up the appointment.
• If a trustee wanted to apply for a paid role within his own charity, then in order to avoid benefiting from his trusteeship he would have to resign as soon as he made the decision to apply for the job (submitting his application would be the latest point at which he could resign). If his application was unsuccessful, he could be reappointed as a trustee. He must have no involvement in setting the specification for the post or the recruitment process. The post would have to be recruited through fair and open competition. Even if this were the case, the charity trustees may be well advised to seek authorisation from the Commission to appoint to a remunerated post a trustee who has recently resigned. In particular the trustees may be concerned about the appearance of a conflict or an improper appointment. Trustees cannot avoid liability to repay unauthorised benefits simply by resigning.

For further information see Payment of Charity Trustees (CC11), which explains the law in more detail.

Neal Green is a senior policy adviser at the Charity Commission

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