Conflicts of Interest: When You Sit on a Board and Hold an Executive Role
Many senior executives take a board seat while still working full time.
It is a smart move. It builds governance experience, widens your network and prepares you for a portfolio career later. But it also creates a problem that few people plan for: conflicts of interest.
Your employer and your board may do business together. Your board may compete with your employer’s customers. You may hear something at the board table that would help your day job, or the other way around. Even the time you spend on board work can become a conflict if it clashes with your executive duties.
Most conflicts are manageable. The ones that cause harm are the ones nobody declared, or the ones a director declared but then handled badly. A few simple habits make a big difference.
This article covers common conflicts, declaring them, stepping out of the room, employer policies, competitors and suppliers, and when to step down from the seat.
Common conflicts
A conflict of interest arises when your personal interests, or your duties to another organisation, could affect, or look like they affect, your judgement as a director.
For executives with a board seat, the most common conflicts are:
Commercial dealings. Your employer supplies, buys from or partners with the organisation whose board you sit on.
Competition. Your employer and the board organisation compete for customers, funding, staff or contracts.
Information. You learn something at one table that would be useful at the other.
Funding and sponsorship. Your employer sponsors or donates to the organisation.
People. The board is hiring someone you know, or your employer wants to hire one of its staff.
Time. A board crisis lands in the same week as a major deadline at work.
Personal financial interests. Shares, loans or family links to a party dealing with the board.
Some are actual conflicts. Others are perceived or potential. All of them need attention, because perception alone can damage trust.
Declaring
The core rule is simple: declare early and declare often.
At appointment. Before you join, list your roles and interests. Most boards ask you to complete a declaration form. Include your employer, any other boards, major shareholdings and close family links that might matter.
At each meeting. Most boards start with a standing item for declaring conflicts. Check the agenda in advance and declare anything relevant to that meeting’s items.
When things change. If you change jobs, your employer starts a new contract with the organisation or a new interest arises, tell the chair straight away. Do not wait for the next meeting.
Example declaration: “I need to declare a conflict on item 6. My employer is one of the tenderers for the IT services contract. I will not take part in the discussion or the vote, and I will leave the room for that item.”
Keep it short and factual. The chair and the company secretary will record it in the conflicts register and the minutes.
Stepping out of the room
Declaring is the first step. Managing the conflict is the second.
Depending on the board’s policy and the seriousness of the conflict, the board may decide that you:
Can stay and take part, with the conflict noted
Can stay for discussion but not vote
Must leave the room for both discussion and vote
Should not receive the board papers for that item
When in doubt, step out. It is easier to be over-careful than to explain later why you stayed.
Also check board papers. If you receive material on a matter where you are conflicted, tell the company secretary. Do not read it or share it.
Practical tip: If a conflict will come up often, agree a standing arrangement with the chair. For example, you may not receive papers on any contract involving your employer.
Employer policies
Most larger employers have policies on outside roles. Check yours before you accept a board seat.
Common requirements include:
Approval from your CEO, board or a set committee
Disclosure of fees and time commitment
Limits on the number of outside boards
Bans on boards that compete with or supply the employer
Rules on using work time or resources for board work
Get approval in writing. Keep a copy of the request and response. If your role changes, check whether the approval still stands.
Also be clear about the information barrier. What you learn at work stays at work, and what you learn on the board stays on the board. Your employer may not always expect this, so set it out at the start.
See building a board career while employed for more on getting employer support.
Competitors and suppliers
Some situations are hard to manage well and may be best avoided.
Direct competitors. Sitting on the board of a direct competitor to your employer is usually not workable. Most employers will not approve it, and most boards will not want it.
Major suppliers or customers. If your employer is a major supplier or customer of the board organisation, conflicts may come up at most meetings. That can make you less useful as a director.
Bidders for the same work. If your employer and the board organisation often bid for the same contracts or funding, think carefully before accepting.
Funding relationships. If your employer is a key funder or sponsor, ask whether you can be truly independent in board decisions about that relationship.
A useful test: if a conflict would arise at more than one or two meetings a year, discuss it openly with the chair before you join.
How search consultants see conflicts
When I worked in executive search, conflicts were one of the first things we checked when putting forward an executive for a board role. A great candidate with a serious conflict could not be appointed, no matter how strong the CV.
The candidates who handled this well listed their interests early, before the shortlist. They had already spoken to their employer and could show written approval. They could explain how they would manage the conflicts that remained.
The ones who caused problems either did not see the conflict or hoped it would not come up. It always did.
Time as a conflict
Time is often forgotten. Your employer pays for your time, and the board relies on it too.
Agree with your employer how board meetings and committee work fit around your role.
Do board reading outside work hours where you can.
Have a plan for board crises, such as a CEO departure or a major incident, which can take many extra hours.
If your executive role grows, check whether your board load is still realistic. See how many boards is too many.
When to step down from the seat
Sometimes the right answer is to leave the board. Consider stepping down when:
A conflict has become ongoing and affects most board business
Your employer moves into competition with the board organisation
You take a new job that creates a serious conflict
Your employer withdraws approval
You can no longer give the time the role needs
Talk to the chair first. Plan a clean handover and give enough notice for the board to find a replacement. Handled well, stepping down protects your reputation and the organisation. See leaving a board well.
A quick self-check
Have you listed every interest that could conflict with your board role?
Do you have written approval from your employer?
Do you know your board’s conflicts policy and process?
Would a conflict arise at more than one or two meetings a year?
Your next step
Write a one-page list of your roles and interests this week. Check it against each board you sit on or are targeting, then talk to your employer and the chair about any conflict you find.
If you want help with your board CV, my board resume writing helps senior leaders present their board and executive roles clearly, with conflicts considered from the start.
If you are weighing up a board seat alongside your executive role, book a complimentary Clarity Session.
