The extent to which issues relating to conflicts of interest and the appearance of conflicts have dominated the political landscape from the presidential campaign through the transition period provides an excellent, “real world” opportunity for the board’s governance committee to consider the sufficiency of its own policies and procedures. This may be particularly valuable since the daily headlines have no doubt served to heighten regulatory sensitivity to conflicts related concerns.
These headlines speak to conflicts issues arising in three different categories: First is the appropriate scope of a conflict review process; is it sufficient to focus only business, financial, investment and employment relationships involving officers and directors? Some health systems expand the scope of review to include family and intimate social relationships, and certain kinds of non-financial business relationships such as board or similar positions with competitors. Others apply rigorous attention to the disclosure process. Second is whether to address the organizational impact of relationships and arrangements that create the appearance, rather than the actuality, of conflict. As health systems can face reputational concerns from officer/director relationships that create the “appearance” of conflict, some boards obligate directors to use best efforts to avoid such relationships. Third is the extent to which boards adopt management plans to supervise conflicts of interest arrangements that have been approved by the board, often in connection with state “rebuttable presumption” laws. The effectiveness of conflicts management plans will receive renewed attention with the announcement of the President-Elect’s plan to disassociate himself from his business interests.
The board’s governance committee may wish to allow time at upcoming meetings to discuss the evolving treatment of conflicts related issues and whether the board’s own disclosure and review protocols are sufficient, especially given the continuing evolution of the health system and the complexity of the board agenda.