What is the first step in addressing a conflict of interest?

What is the first step in addressing a conflict of interest?

• A. Make full and complete written disclosure of all relevant facts to the board.
• B. Obtain specific authorization from the board in writing before proceeding with any action.
• C. Record the authorization in the minutes of the board meeting.
• D. Even after full disclosure, avoid any actions which are—or may be perceived as—a conflict of interest.

Answer: (A)

Disclose the conflict in writing to the board with all relevant facts. Making a full, written disclosure first is essential because it surfaces potential self-dealing to the people charged with fiduciary duty, ensuring transparency and giving the board a clear basis to assess risk and decide how to proceed. Once the conflict is disclosed, the board can determine whether a formal authorization is required or other steps are needed; minutes can then reflect any action taken. Even after disclosure, actions that could be a conflict should be avoided unless the board explicitly authorizes them and documents that decision, but the critical starting point is the thorough written disclosure.

Disclose the conflict in writing to the board with all relevant facts. Making a full, written disclosure first is essential because it surfaces potential self-dealing to the people charged with fiduciary duty, ensuring transparency and giving the board a clear basis to assess risk and decide how to proceed. Once the conflict is disclosed, the board can determine whether a formal authorization is required or other steps are needed; minutes can then reflect any action taken. Even after disclosure, actions that could be a conflict should be avoided unless the board explicitly authorizes them and documents that decision, but the critical starting point is the thorough written disclosure.