Conflict of Interest Policy for Trustees of the College

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Volume: Governance
Chapter: Conflict of Interest Policy for Trustees of the College
Approved By: Board of Trustees
History: Issued: September 23, 2011
Related Policies: Conflict of Interest Policy for Faculty
  Conflict of Interest Policy for Staff
Additional References: Bylaws
Responsible Officials: Office of the Treasurer
Office of the General Counsel and Secretary of the College

• Policy Statement
• Contacts
• Definitions
• Procedures
• Records of Proceedings
• Compensation
• Annual Statements
• Periodic Reviews
• Use of Outside Experts

Policy Statements

The purpose of this Conflict of Interest Policy for Trustees of the College is to protect the College’s interest when it is contemplating entering into a transaction or arrangement that might benefit the private interest of a Trustee or might result in a possible excess benefit transaction and to ensure that Trustees are attentive to situations when their personal interests might conflict with the College’s interests. This Policy is intended to supplement, but not replace, any applicable state and federal laws governing conflict of interest applicable to nonprofit and charitable organizations.

Contacts

Direct any questions about this Policy to the Office of the Treasurer or the Office of the General Counsel and Secretary of the College.

• Office of the Treasurer: (909) 621-8116
• Office of the General Counsel and Secretary: (909) 607-8966

Definitions

• Interested Person: Any Trustee who has a direct or indirect financial interest, as defined below, or a non-financial interest that impairs or might reasonably appear to impair such Trustee’s independent, unbiased judgment in the discharge of his or her responsibilities to the College is an interested person.
• Family: An individual’s spouse, ancestors, spouse’s ancestors, siblings (whole or half blood), descendants (natural or adopted), and spouses of siblings and descendants.
• Financial Interest:  A Trustee has a financial interest if the person has, directly or indirectly, through business, investment, or family.

1. An ownership interest or investment interest in any entity with which the College has a transaction or arrangement,
2. A compensation arrangement with the College, or with any entity or individual with which the College has a transaction or arrangement, or
3. A potential ownership or investment in, or compensation arrangement with, any entity or individual with which the College is negotiating a transaction or arrangement.

In the case of an interest through a Trustee’s family, other than the Trustee’s spouse or children, the duty to disclose set forth in Section IV below shall apply only if the Trustee is aware of the ownership or investment interest.  The Trustee, in such case, does not have an affirmative duty to investigate such family ownership.  In the case of an interest through a Trustee’s spouse or children, the duty to disclose set forth in Section IV below shall apply only if the Trustee is aware of the ownership or investment interest after reasonable inquiry.

Compensation includes direct and indirect remuneration as well as gifts or favors that are not insubstantial.

A financial interest is not necessarily a conflict of interest. Pursuant to Section IV, a person who has a financial interest may have a conflict of interest only if the Board of Trustees or an authorized committee of the Board determines that a conflict exists.

Procedures

Duty to Disclose

In connection with any actual or possible conflict of interest involving a proposed transaction or arrangement with the College, an interested person shall disclose the existence of the financial interest or other interest to the Chair of the Board of Trustees or, if the interested person is the Chair of the Board of Trustees, to the Chair of the Board Affairs Committee (who becomes the “Acting Chair” for the purposes of this Policy). The interested person shall be given the opportunity to disclose all material facts related to the proposed transaction or arrangement with the College.

Preliminary Determination by the Chair of the Board of Trustees

The Chair or Acting Chair of the Board shall review the information presented by the interested person and any other material facts related to the proposed transaction or arrangement and shall consult with the Chair of the Audit Committee regarding the proposed transaction or arrangement. In circumstances in which the interested person is the Chair of the Audit Committee, the Vice Chair of the Audit Committee shall serve as Acting Chair of the Audit Committee for the purposes of this Policy.
After such review and consultation, the Chair or Acting Chair of the Board shall make a determination with respect to whether a potentially material conflict of interest exists and, if so, whether it is in the best interests of the College to pursue the transaction or arrangement.
For the purpose of this Section IV, a transaction or arrangement shall be considered as material if it is material from the perspective of the interested person, or if it is material from the perspective of the College.
If a potentially material conflict does not exist, then the College may approve the transaction or arrangement pursuant to the same practice or procedure as it would follow for any other similar transaction or arrangement; provided, however, that the Chair or Acting Chair of the Board shall report the interested person’s disclosure and his or her determination of non-materiality to the Treasurer. The Treasurer shall include a summary report of all such disclosures in the annual conflict of interest disclosure report to the Audit Committee.
If a potentially material conflict does exist and it is in the best interests of the College to pursue the transaction or arrangement, then the Chair or Acting Chair of the Board shall normally refer the matter to the Audit Committee to determine materiality; provided, however, that, after consultation with the Chair of the Audit Committee, the Chair or Acting Chair of the Board may alternatively refer the matter to an ad hoc committee of the Board to review the matter if, in the determination of the Chair or Acting Chair of the Board, review by such ad hoc committee is more appropriate under the circumstances. In the event that the Chair or Acting Chair of the Board establishes an ad hoc committee, such committee shall include at least five Regular Trustees and shall include at least one member of the Audit Committee and one member of the Board Affairs Committee.

Review by the Audit Committee or Ad Hoc Committee Appointed by the Chair of the Board

The Audit Committee or ad hoc committee (the “Committee”) charged with reviewing the potential conflict of interest shall review the disclosure by the interested person and all material facts related to the proposed transaction or arrangement. The interested person shall also be given an opportunity to present any relevant information to the Committee considering the potential conflict of interest. At the conclusion of any such presentation, the interested person shall leave the meeting while a determination of a conflict of interest and materiality are discussed and voted upon by the Committee. 
If a material conflict of interest does not exist, then the College may approve the transaction or arrangement pursuant to the same practice or procedure as it would follow for any other similar transaction or arrangement; provided, however, that the Chair of the Committee shall report the interested person’s disclosure and the Committee’s determination of non-materiality to the Treasurer. The Treasurer shall include a summary report of all such disclosures in the annual conflict of interest disclosure report to the Audit Committee.
If a material conflict of interest exists, the College will then follow the procedures set forth in Section IV(D), below.

Procedures for Addressing the Conflict of Interest

1. A proposed transaction or arrangement with the College involving a conflict of interest must be authorized pursuant to the procedures set forth below prior to consummating the transaction or arrangement or any part thereof.
2. In circumstances in which it is reasonably practicable to obtain prior authorization of the Board of Trustees, the Board of Trustees shall follow the following procedures:
   1. The interested person may make a presentation at the Board of Trustees meeting regarding the proposed transaction or arrangement, but after the presentation, s/he will leave the meeting during the discussion of, and vote on, the transaction or arrangement involving the possible conflict of interest.
   2. The Chair of the Board of Trustees shall, if appropriate, appoint a disinterested person or committee to investigate alternatives to the proposed transaction or arrangement.
   3. After exercising due diligence, the Board of Trustees shall determine whether the College can obtain with reasonable efforts a more advantageous transaction or arrangement from a person or entity that would not give rise to a conflict of interest.
   4. If a more advantageous transaction or arrangement is not reasonably possible under circumstances not producing a conflict of interest, the Board of Trustees shall determine by majority vote of the disinterested Trustees whether the transaction or arrangement is in the College’s best interest, for its own benefit, and whether it is fair and reasonable. In conformity with the above determination, the Board of Trustees shall make its determination as to whether to enter into the transaction or arrangement. 
3. In circumstances in which it is not reasonably practicable to obtain prior authorization of the Board of Trustees, the Committee authorized to determine whether a conflict of interest exists pursuant to Sections IV(B) and (C) above shall follow the following procedures:
   1. The Committee shall review and authorize the proposed transaction or arrangement pursuant to the procedures set forth in Section IV(D)(2) above;
   2. As part of this procedure, the Committee shall have considered and concluded that it was not reasonably practical to obtain approval of the Board of Trustees prior to entering into the transaction or arrangement; and
   3. The Committee shall present the transaction or arrangement for review by the Board of Trustees at its next meeting. The Board of Trustees shall consider in good faith that the conditions of sub-paragraphs (a) and (b) of this Section IV(D)(3) were satisfied and, if so, shall ratify the transaction or arrangement by a vote of the majority of disinterested Trustees in office without counting the vote of the interested person. 

Violations of the Conflict of Interest Policy

1. If the Board of Trustees has reasonable cause to believe that a Trustee has failed to disclose actual or possible conflicts of interest, it shall inform the Trustee of the basis for such belief and afford the member an opportunity to explain the alleged failure to disclose.
2. If, after considering the Trustee’s response and making further investigation as warranted under the circumstances, the Board of Trustees determines the member has failed to disclose an actual or possible conflict of interest, it shall take appropriate disciplinary and corrective action, including, without limitation, removal from the Board.

Records of Proceedings

The minutes of the Board of Trustees and any committee of the Board with delegated powers under this Policy shall contain:

1. The names of the persons who disclosed or otherwise were found to have a financial or other interest in connection with an actual or possible conflict of interest, the nature of the financial or other interest, any action taken to determine whether a conflict of interest was present, and the Board of Trustees’ or committee’s decision as to whether a conflict of interest in fact existed.
2. The names of the persons who were present for discussions and votes relating to the transaction or arrangement, the content of the discussion, including any alternatives to the proposed transaction or arrangement, and a record of any votes taken in connection with the proceedings.

Compensation

1. A Trustee who receives compensation, directly or indirectly, from the College for services is precluded from voting on matters pertaining to that Trustee’s compensation.
2. A Trustee member of any committee of the Board whose jurisdiction includes compensation matters and who receives compensation, directly or indirectly, from the College for services is precluded from voting on matters pertaining to that Trustee’s compensation.
3. No Trustee member of the Board or of any committee of the Board whose jurisdiction includes compensation and who receives compensation, directly or indirectly, from the College, either individually or collectively, is prohibited from providing information to any committee regarding compensation.

Annual Statements

Each Trustee shall annually sign a statement which affirms such person:

1. Has received a copy of this Conflict of Interest Policy;
2. Has read and understands the Policy;
3. Has agreed to comply with the Policy;and,
4. Understands that the College is charitable and, in order to maintain its federal tax exemption, it must engage primarily in activities which accomplish one or more of its tax-exempt purposes.

Periodic Reviews

To ensure that the College operates in a manner consistent with its charitable purposes and does not engage in activities that could jeopardize its tax-exempt status, periodic reviews should be conducted. The periodic reviews shall, at a minimum, include the following subjects:

1. Whether compensation arrangements and benefits are reasonable, based on competent survey information, and the result of arm’s length bargaining.
2. Whether partnerships, joint ventures, and arrangements with management organizations conform to the College’s written policies, are properly recorded, reflect reasonable investment or payment for goods and services, further charitable purposes, and do not result in inurement, impermissible private benefit, or in an excess benefit transaction.

Use of Outside Experts

When conducting the periodic reviews as provided for in Section VIII, the College may, but need not, use outside advisors. If outside experts are used, their use shall not relieve the Board of Trustees of its responsibility for ensuring periodic reviews are conducted.