Conflict of Interest, Conflict of Commitment, and Related-Party Transactions

Introduction

The institutional statements on conflict of interest are set forth in Article XVI of the Bylaws of Bethel University and Article III, Section 3.12 of the Bylaws of Bethel University Foundation. This policy further explains the implementation of the corporate statements and is applicable to the University Trustees, Foundation Governors, and employees of both entities. This includes all faculty, staff, and administrative members of the community.

Fairness in decision making is more likely to occur in an impartial environment. Conflicts of interest and related-party transactions are often confused. However, they are clearly different concepts.

The potential for a conflict of interest arises in situations in which a person is responsible for promoting one interest at the same time he or she is involved in a competing interest. If this person exercises the competing interest over the fiduciary interest, he or she is guilty of conflict of interest. Always avoid conflicts of interest.

A conflict of commitment refers to an individual’s distribution of time and energy between institutional responsibilities and external professional activities. A conflict of commitment arises when such activities interfere with institutional responsibilities. Community members, including faculty, staff, and administration, have a professional responsibility to avoid placing themselves or others in situations which could lead to a conflict of commitment.

Related-party transactions occur between two or more parties with interlinking relationships. These transactions should be disclosed to the governing board and evaluated to ensure they are made on a sound economic basis. The organization should pursue any related-party transactions that are clearly advantageous to the organization but should avoid those that represent conflicts of interest.

Undertake transactions with related parties only in the following situations:

•   The audited financial statements of the organization fully disclose material related-party transactions.
•   Related parties are excluded from the discussion and approval of related-party transactions.
•   There are competitive bids or comparable valuations.
•   The organizations’ boards approve the transaction as one that is in the best interest of the organization.

POLICY

1. Reason for Statement

As ministries initiated and sustained by God, Bethel University and Bethel University Foundation (the organizations) have a mandate to conduct all of their affairs decently and above reproach both in the sight of God and society. That accountability includes a commitment to operate with the highest level of integrity and to avoid conflicts of interest.

As nonprofit, tax-exempt entities, the organizations depend on charitable contributions from the public. Maintenance of its tax-exempt status is important both for its continued financial stability and for the receipt of contributions and public support. Therefore, federal and state regulatory agencies view the operations of the organizations as a public trust, accountable to both governmental authorities and members of the public.

Among the organizations and their Boards, officers, and employees (including faculty, exempt, and nonexempt staff), there exists a fiduciary duty, which carries with it a broad duty of loyalty. The Boards, officers, and employees are responsible for administering the affairs of the organizations honestly and prudently, and for exercising their best care, skill, and judgment for the benefit of the mission of the organizations. Those persons shall exercise the utmost good faith in all transactions involved in their duties, and they shall not use their positions with the organizations or knowledge gained there from for their personal benefit. The interests of the organizations must have the first priority, and all purchases of goods and services must be affected on a basis that secures for the organization’s full competitive advantages as to product, service, and price.

2. Persons Concerned

This statement is directed to Trustees, Governors, officers, and employees who influence the actions of the organizations or their Boards or make commitments on their behalf. For example, this would include all who make purchasing decisions, all other persons who might be described as “management personnel,” and all who have proprietary information concerning the organizations.

3. Interpretation of this Statement of Policy

The areas of conflicting interest listed in Section 4 and the relations in those areas which may give rise to conflict, as listed in Section 5 and 6, are not exhaustive. Conceivably, conflicts might arise in other areas or through other relations. It is assumed that the Trustees, Governors, officers, and employees will recognize such areas and relation by analogy.

The fact that one of the interests described in Section 5 or 6 exists does not necessarily mean that a conflict exists, or that the conflict, if it exists, is material enough to be of practical importance, or if material, that upon full disclosure of all relevant facts and circumstances that it is necessarily averse to the interests of the organizations. However, it is the policy of the Boards that the existence of any of the interests described in Section 5 or 6 shall be disclosed before any transaction is consummated. It shall be the continuing responsibility of Trustees, Governors, officers, and employees to scrutinize their transactions with outside business interests and relationships for potential conflicts and to immediately make such disclosures.

Since such conflicts may be difficult to recognize, Trustees, Governors, officers, and employees should discuss potential conflicts with their supervisor (board chair, department chair, dean, vice president, or provost). They should abstain from voting on such potential conflicts and should withdraw from any relevant discussion. Community members have a professional responsibility to avoid placing themselves or others in situations of conflict of interest. In situations in which a supervisor believes a conflict exists and which an employee disputes, and which cannot be resolved, grievance procedures exist for resolution. Even the appearance of a conflict may be damaging to the organization and should be avoided whenever possible.

If a Trustee or Governor believes a conflict exists, he or she should disclose this to the President of the University or the Executive Director of the Foundation (or if he/she is the one with the conflict, then to the respective Chair of the Board), who shall bring these matters to the attention of the Board. The Board shall then determine whether a conflict exists and is material, and in the presence of an existing material conflict, whether the contemplated transaction may be authorized as just, fair, and reasonable as to the organization. Decisions on these matters are within the sole discretion of the Board. The Board’s first concern must be the welfare of the organization and the advancement of its purposes.

4. Areas in Which Conflicts May Arise

Conflicts of interest may arise in the relations of Trustees, Governors, officers, and employees with third parties, including, but not limited to:

4.1 Persons or entities supplying goods and services to the organizations.

4.2 Persons or entities from which the organizations lease property and equipment.

4.3 Persons or entities with whom the organizations are dealing or planning to deal in connection with the gift, purchase, or sale of real estate, securities, or other property.

4.4 Persons or entities paying honoraria or royalties for products or for services delivered by the organizations for their agents or employees.

4.5 Other ministries or nonprofit organizations.

4.6 Donors and others supporting the organizations.

4.7 Agencies, organizations, and associations that affect the operations of the organizations.

5. Nature of Conflicting Interest

A conflicting interest may be defined as an interest, direct or indirect, between any person or entity mentioned in Section 4, and a Trustee, Governor, officer, or employee, which might affect, or might reasonably be thought by others to affect, the judgment or conduct of the individual. Such an interest may arise through examples such as the following:

5.1 Owning stock or holding debt or other proprietary interests in any third party dealing with the organizations. Note: owning stock in a publicly held company through a mutual fund company, or directly, if less than .5% of the outstanding shares of the public company, shall not be considered a conflict.

5.2 Holding office, serving on the Boards, participating in management, or being otherwise employed (or formerly employed) in any third party dealing with the organizations.

5.3 Receiving remuneration for services with respect to individual transactions involving the organizations.

5.4 Using the organizations’ personnel, equipment, supplies, or goodwill for other than organization-approved activities, programs, and purposes.

5.5 Receiving personal gifts or loans from third parties dealing with the organizations. Receipt of any gift is disapproved except a gift of nominal value (less than fifty dollars), which could not be refused without discourtesy. No personal gift of money should ever be accepted.

5.6 Obtaining an interest in real estate, securities, or other property that the organizations might consider buying or leasing.

5.7 Expending staff time during the organizations’ normal business hours for personal affairs or for other organizations, civic or otherwise, to the detriment of work performance for the organizations.

5.8 Taking on paid responsibilities outside the organization which because of time demands will reduce one’s effectiveness at Bethel.

5.9 Making use of confidential information from within the organization for personal gain.

6. Indirect Interests

As noted above, conflicting interests may be indirect. A Trustee, Governor, officer, or employee will be considered to have an indirect interest in another entity or transaction if any of the following also have an interest:

6.1 A family member of a Trustee, Governor, officer, or employee. (Family member is defined for these purposes as all persons related by blood, adoption, or marriage.)

6.2 An estate or trust of which the Trustee, Governor, officer, or employee or member of his or her family is a beneficiary, personal representative, or trustee.

6.3 A company of which a member of the family of the Trustee, Governor, officer, or employee is an officer, director, or employee, or in which the individual has material ownership or other proprietary interests.

7. Other Potential Conflict Situations

7.1 Influencing personnel decisions:

•   Teaching, supervising and/or participating in decisions affecting an immediate family member
•   Casting a vote in committee deliberations regarding proposals or actions which lead to a direct personal benefit, as in awarding of faculty development funds.

7.2 Receiving personal remuneration:

•   While consulting or teaching for pay outside the institution, representing oneself as an official representative of the institutions when actually 

acting as an independent contractor of services.

•   Trustees, Governors, faculty, officers, and management employees serving as consultants for outside organizations may receive compensation without conflict of interest.
• The institution encourages consulting by individuals in areas related to their academic or administrative fields of expertise.
• When the outside work contributes to the individual’s professional growth.
• When the institution’s standing is enhanced by these outside contacts and services.
• And most importantly when the consulting work can be done without interfering with regular institutional duties.
• Faculty and administrators should undertake consulting work during the academic year only after receiving approval from their department head or supervisor.
• When adopting one’s own book or other teaching aids in order to gain royalties or profits as personal income.
• The institution encourages faculty authors and supports faculty freedom to select materials for classroom use. However, a faculty member who adopts a text he or she has written for a class may face a conflict of interest if receiving royalties or other compensation from sales.
• If an author has sole responsibility for a textbook adoption decision of this sort, he or she should review text selections with the department chair.
• When teaching during the contract year at another academic institution, business, or agency without prior written approval of the administration; Accepting an adjunct teaching position elsewhere during the academic year involves a commitment of time which is likely to compete with responsibilities at Bethel. As with any extended commitment (such as serving as a consultant, intensive and continued participation in a research project, or interim pastorate), instructors must secure permission from the provost or appropriate academic dean before taking on such an assignment.
• When entertaining or being entertained in connection with institutional business beyond what is reasonable and appropriate.

7.3 Using institutional resources:

•   When using without permission the institution’s name, facilities, or equipment for personal purposes leading to remuneration for private gain, e.g. for the production of copyrightable or patentable materials.
•   When making personal use of institutional resources to support political candidates or causes even though not for remuneration.
•   When purchasing major equipment, instruments, or supplies for teaching or research from a private firm with which the employee is affiliated or receives personal benefits or rewards.
•   When disclosing confidential information or research gained within the institution to external entities for personal gain.

7.4 Influencing business relationships:

•  When influencing institutional business decisions in ways leading to personal gain or inappropriate advantage to anyone.

8. Annual Certification

Annual Certification of this policy is required from Trustees, Governors, and officers. The Office of People and Culture will provide these certificates to the appropriate persons to obtain their signatures annually.

Examples

Example 1: The CEO and several employees are members of the board. When the resolution on salary and fringe-benefit adjustments comes to the board, should those affected by the resolution discuss and vote on the matter? No. The CEO and employees not only should avoid discussing and voting on such matters, they also should absent themselves from the meeting to avoid even the appearance of a conflict of interest.

Example 2: A nonprofit board considers a significant loan to a company in which a board member has a material ownership interest. Should this loan even be considered? Yes, but only if allowed under its bylaws, allowed under state laws, and it is in the best interest of the nonprofit organization

Example 3: An organization purchases insurance coverage through a firm owned by a board member. This would constitute a conflict of interest unless the purchase is in the best interests of the organization. The interested board member should not be present at the meeting when the decision is made. If the purchase passes these tests, it does not constitute a conflict of interest but qualifies as a related-party transaction.

Example 4: A non-profit receives a significant endowment gift. The organization board establishes investment policy guidelines and appoints a subcommittee of the board to carry out the routine investing of the funds.

An investment broker who sells mutual funds chairs the organization’s investment committee. His firm pays him commissions on his mutual fund sales. The broker recommends that the committee purchase certain mutual funds from his firm.

This is a conflict of interest, even if the broker fully discloses the fees that would be paid to his firm and the commissions he would receive—and even if the fees are comparable to what other brokers would charge. This biased environment makes it nearly impossible to achieve fairness in decision making.

9. Required Action

If any individual believes she/he has detected a conflict-of-interest situation, the activity should be disclosed to the appropriate supervisory level above the individual involved in the potential conflict transaction. The supervisory personnel should then discuss the situation with the involved individual recommending the individual complete the Questionnaire following to assist in determining the nature of the situation. It should then be discussed with the appropriate persons as set forth in Section 3 of the Policy.

The questionnaire should also be proactively used by any covered person to determine if any conflict may exist regarding anticipated transaction.

Bethel University and Bethel University Foundation Conflict of Interest/Related Party Questionnaire

A conflict of interest may relate to you, your spouse, family members, business interests, and/or associates. Conflicts of interest may arise when one party has the ability to influence the management or operating policies of the other, to the extent that one of the transacting parties might be prevented from fully pursuing the interests of Bethel University and Bethel University Foundation rather than his/her own separate or related-party interests. The following is intended to assist in identifying such interests:

If you answer "yes" to any of the above questions, you must disclose any personal (or family) financial interest relevant to the issue and a written statement specifying how any concern about a conflict of interest will be resolved. The financial disclosure and resolution statement will then be reviewed as specified in section 3 above.