Conflicts of Interest: An Inevitable Aspect of Modern Board Life

In the complex ecosystem of contemporary governance, the phrase “conflict of interest” often carries a negative connotation. However, the reality is far more nuanced: conflicts are not necessarily indicators of malfeasance; they are simply an unavoidable function of experienced, well-networked directors.

A director is valued precisely because of their external expertise, industry knowledge, and connections. These same assets, by necessity, create potential overlaps with the company they serve, generating conflicts. The challenge for modern boards is not to eliminate conflicts—which would require hiring inexperienced directors—but to establish robust, transparent, and auditable systems to manage them effectively.

The Inevitability of Conflict

In a world where directors often hold multiple board positions, serve as consultants, and maintain passive or active investments, a potential conflict arises when a director’s personal interest, or their duty to another entity, could potentially influence their decision-making for the current company.

For companies and NFPs or Schools, failing to manage conflicts correctly can lead to severe reputational damage, regulatory penalties (from ASIC or ACNC), and the invalidation of major board decisions. The governance imperative, therefore, is to shift the focus from fear to framework.

Best Practice Management: Transparency and Control

Effective management of conflicts is a hallmark of good corporate governance. It requires clear policies and a system of constant vigilance.

1. Maintain a Formal Register

The foundation of conflict management is the Interests Register. This feature is a critical governance asset that goes beyond simply listing directorships. It must capture any interest that could reasonably be perceived to influence a vote or discussion. Best practice dictates that this register should be:

  • Comprehensive: Detailed records of investments, substantial shareholdings in related entities, appointments on other boards, and material family interests.
  • Up-to-Date: Directors must be obligated to update the register in real-time as circumstances change, not just at annual reviews.
  • Accessible: The register must be easily available for review by the Board Secretary, Chair, and internal auditors.

2. Establish a Rigorous Disclosure Protocol

The responsibility for disclosure lies with the individual director, but the process must be enforced by the Board Secretary and the Chair.

  • Standing Disclosures: Interests that are continuous (e.g., holding a directorship at a competitor) must be declared annually and documented.
  • Meeting Disclosures: At the start of every board meeting, the Chair must explicitly ask directors to declare any relevant interests related to the current agenda items.
  • Exclusion Protocol: Where a material conflict exists, the director must be excused from both the discussion and the vote on that specific matter, and the removal must be documented in the minutes.

3. Ensure Continuous Education

Governance standards, particularly around related party transactions, are dynamic. Boards must ensure directors receive continuous professional development on their fiduciary duties and the legal implications of poorly managed conflicts under the Corporations Act.

The Role of the Board Portal

Managing an Interests Register using spreadsheets or shared drives is inefficient and creates audit risk. This is where a secure, integrated platform becomes a necessity.

Athena Board includes a dedicated Interests Register feature that elevates this process from an administrative burden to an integrated governance control. This functionality ensures:

  • Integrated Management: The register is permanently stored within the secure environment of the board portal.
  • Automated Declarations: Directors can log new interests instantly using a structured form, ensuring all necessary details are captured consistently.
  • Seamless Audit Trail: Every change, update, and declaration is logged and dated, providing an immaculate, tamper-proof record for regulators and auditors.
  • Meeting Pre-Checks: The Board Secretary can quickly cross-reference the agenda with the digital register before the meeting, proactively identifying potential conflicts and briefing the Chair.
  • Interest Register: The Interest register can be made available to all board members for consideration and discussion.

By leveraging integrated tools like the Athena Board Interests Register, companies can move beyond the anxiety of potential conflicts and focus on the strategic value that diverse, experienced directors bring to the table. Managing conflicts is not about eliminating experience; it is about providing the technical scaffolding required for highly skilled professionals to govern with integrity and full legal compliance.

Athena Board can help, contact us at sales@athenaboard.com