28
March
2019

Fiduciary Duties & Conflict of Interest

On March 13, 2019, First Nations Child and Family Services Agency Executive Directors, Board of Directors and Human Resources personnel came together to further their learning on Conflict of Interests and best practices surrounding these potential situations. A total of 25 participants were in the training representing 12 of the 18 Delegated First Nations Child and Family Services Agencies in Saskatchewan.

This training was offered as a follow up to the Change Management Training that was delivered over three days in January.  SFNFCI partnered with MLT Aikins LLP to deliver this half-day of training.  It was recognized that during times of change, there are many opportunities for conflicts of interest to arise due to changing information, misinformation, miscommunication and staff or board turnover.

The learning began with a review of fiduciary obligations and who a fiduciary is. 

"A fiduciary is someone who is required to act for the benefit of another person on all matters within the scope of their relationship.  It is one of the highest duties that can be imposed by the law. The fiduciary has a duty of utmost good faith to act in the best interests of the beneficiary and to avoid conflict of interest." 

Once the role of a fiduciary was reviewed the definition of a conflict of interest was defined and examples of how they could arise were provided.

A conflict of interest is when "a personal interest sufficiently connected with one's professional duties that there is reasonable apprehension that the personal interest may influence the actual exercise of the professional duties."  Conflicts of Interest may arise when:

  1. The fiduciary may be tempted to place their private interests above their duty to act in the best interest of the beneficiary.

  2. Private interests are not restricted to monetary benefit or a benefit that accrues to the fiduciary personally.

  3. The benefit can be non-monetary and can flow to someone a fiduciary has a "material interest" in, e.g., a family member, a close friend, business associate, or a company the fiduciary is affiliated with.

After reviewing fiduciary obligations and further understanding what a conflict of interest situation is, participants explored why conflicts of interest matter at their agency or as a board of director for a First Nations Child and Family Services Agency.  Conflicts of interest matter because:

  1. Failing to properly handle conflicts of interest can expose one to personal liability for which indemnities and personal liability insurance are unlikely to provide protection.

  2. Failing to properly handle conflicts of interest can expose agencies/ entities/ governments to reputational damage, and could lead to uncertainty regarding the enforceability to contracts that were authorized without observing proper conflict of interest procedures.

  3. Knowing that another director is in a conflict of interest situation and consciously failing to raise a concern about a conflict could be considered a breach of a director's fiduciary duty.

  4. A breach of fiduciary duty exposes directors to personal liability (again, indemnities and directors and officers liability insurance are unlikely to provide coverage in such an instance.)

Participants had the opportunity to discuss perceived and real conflict of interest situations and the appropriate actions required and review legal outcomes from some Canadian case law examples.

The top three takeaway's from this training session was to:

  • Make sure bylaws and governance policies (especially polices for Conflict of Interest and Code of Conduct) are up-to-date and accurate and formally review annually.

  • Ensure good role clarity and segregation of duties exists between the Board of Directors and the Agency Executive Director.

  • Be aware of and declare a conflict of interest situations in writing and record in board meeting minutes in the event a situation has to be reviewed.

Tischa Mason, Executive DIrector

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