Is it a conflict of interest for employees to sit on the governing body of an incorporated society?

Question Details: Can employees both be members of an incorporated society and sit on the governing body or have voting rights? Would this amount to a conflict of interest?

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Community Law Wellington & Hutt Valley

Yes, it is very likely to be a conflict for employees of an incorporated society to also sit on the governing body of the society. They should not do this. Employees can, however, exercise voting rights as members of the society.

Employees should not sit on the governing board of an incorporated society because they will face a conflict of interest in doing so. This is because there are situations in which the duty as a board member to act in the best interests of the society will conflict with a person's personal interest as an employee. For example, the governing body might have to set the salary or other benefits of employees. For more, see the section titled 'Can officers be paid?' of the Community Law Manual at www.communitylaw.org.nz.

Employees of incorporated societies can be voting members of the incorporated society. If you are a member and also an employee, you should generally declare your interest on any matters you are voting on. If necessary, you may also need to leave the room, depending on how the voting process is conducted. Sometimes, your interest in the matter will make it inappropriate for you to vote at all.

The rules of each incorporated society may provide further advice for how conflicts of interest are dealt with by that particular society. Rules of incorporated societies are available at www.societies.govt.nz.

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