CONFLICTS OF INTEREST AND EXECUTIVE COMPENSATION POLICY
Purpose
The Board of Directors shall monitor the transactions between NeighborImpact and insiders to ensure that any transaction between the corporation and an insider that is a conflict of interest is fair to the corporation and does not grant excessive benefit to the insider. The purposes of this policy are to ensure that directors and officers act loyally to NeighborImpact and that directors, officers and those who exercise substantial influence over the corporation do not use their influence to obtain benefits in excess of fair market value in transactions with the corporation. This policy seeks to ensure that the corporation observes state and federal taxation and funding laws concerning conflicts and excess benefits transactions.
SECTION 1: DEFINITIONS OF INSIDER AND CONFLICT OF INTEREST
For purposes of this policy, “insider” has the same meaning as “disqualified person” under the Internal Revenue Code, 26 USC §4958. The current IRS definition is explained in #1 through #5 below and will need to be updated if the IRS definition changes. In addition, the individuals and entities described in #6 and #7 below are also considered insiders.
1. An insider is any person who is in a position of authority over NeighborImpact or who exerts substantial influence over NeighborImpact, including directors, officers, the top management official, the top financial official, other key employees, the founders and major donors.
2. Family members of insiders are also insiders. Family members include the spouse or partner in a civil union recognized by state law; children, grandchildren, great-grandchildren, whole and half-blooded brothers and sisters, and spouses of any of these people; and any ancestors (parents, grandparents, etc.)
3. Corporations and limited liability companies in which an insider owns more than 35% of the voting power, partnerships in which the insider owns more than 35% of the profits and trusts or estates in which the insider owns more than 35% of the beneficial interest are insiders.
4. An insider of the Community Action Foundation of Central Oregon, Inc. is an insider of NeighborImpact.
5. An insider who becomes an insider by virtue of #1 through #4 above remains an insider for five years after his or her influence over this corporation ends.
6. An entity in which a director has a material interest or is a general partner, director, officer, top management official, top financial official or other key employee is an insider.
7. An insider is any other for-profit or nonprofit entity in which a director of this corporation is a director or officer and the entity and this corporation are parties to a transaction that is or should be considered by the boards of both corporations.
For purposes of this policy, a “conflict of interest” arises when an insider described above may benefit financially from a decision he or she could make in his or her capacity as an insider, including indirect benefits to family members or businesses with which the insider is closely associated. A conflict of interest arises in any such transaction between the corporation and an insider, except for (1) transactions in the normal course of operations that are available to the general public under similar terms and circumstances, and (2) expense reimbursements to an insider made pursuant to an accountable plan under IRS Reg. 1.62-2(c)(2).
SECTION 2: PROCEDURE
In order to ensure that transactions with insiders are fair to the corporation and comply with state and federal laws:
1. All insiders must promptly and fully disclose all material facts of every actual or potential conflict of interest to the Board of Directors at the time such conflict arises.
2. If the insider is a director, the director may not:
(a) Engage in a conflict of interest with NeighborImpact or any delegate agency;
(b) Receive compensation for serving on the Board or for providing services to NeighborImpact or any delegate agency;
(c) Be employed by, nor shall members of the director’s immediate family be employed by NeighborImpact or any delegate agency. Immediate family generally includes the spouse, parents and grandparents, children and grandchildren, brothers and sisters, mother-in-law and father-in-law, brothers-in-law and sisters-in-law, daughters-in-law and sons-in-law, and adopted and step family members.
If the director holds his or her position as a result of a public election or political appointment, that position carries with it the concurrent appointment to serve as a director of a Head Start agency, and the director has a conflict of interest as described in 2(b) or (c) above, the director may serve on the Board. NeighborImpact shall report the conflict to the Office of Head Start.
3. When the corporation engages in a transaction with an insider that constitutes a conflict of interest not disallowed by #2 above, the Board shall handle the transaction as follows:
(a) The Board shall exclude any insider that has a conflict of interest with respect to the transaction from all discussion and from voting on the transaction. The Board may ask questions of the insider prior to beginning its discussion.
(b) The Board shall gather appropriate data to ensure that the compensation for each insider is reasonable. In the case of employee compensation packages, the Board shall utilize reliable surveys of compensation for comparable positions or shall utilize data for at least three similarly situated employees in comparable positions. The Board shall not use the employee whose compensation is under consideration to collect comparability data.
(c) The Board shall document its decision by keeping written records that state the terms of the transaction and date approved, the directors present and who voted on it, the comparability data and how the data was obtained, and any actions taken with respect to directors who had a conflict of interest with respect to the transaction. The records must be prepared before the latter of the next Board meeting or 60 days after the final action is taken. Once prepared, the records must be reviewed and approved by the Board within a reasonable time.
4. When employee compensation packages are established each year, the Board shall identify those employees who are insiders. The Board shall monitor the compensation packages of insiders in accordance with the procedure in #3 above.
5. When the corporation provides an economic benefit to an insider for the insider’s services as an employee or an independent contractor, the corporation shall contemporaneously document the transaction as required by the IRS (generally on an original Form W-2, Form 1990, or Form 1099 or with a written employment contract).
SECTION 3: COMPLIANCE WITH THIS POLICY
In order to ensure compliance with this policy:
1. On an annual basis, the Secretary of the corporation or the Secretary’s designee shall develop and maintain a list of insiders who engage in or are reasonably likely to engage in transactions that constitute conflicts of interest with the corporation during the year.
2. The officers, directors and key employees shall each year disclose interests that could give rise to a conflict of interest under this policy. Such disclosure shall be made on a Disclosure and Acknowledgment form similar to the one attached to this policy and shall be filed with the Secretary or the Secretary’s designee.
3. The Secretary or the Secretary’s designee shall monitor and enforce compliance with this policy by reviewing the list of insiders and the Disclosure and Acknowledgment forms each year and by bringing potential or actual conflicts to the attention of the President of the Board. The President shall disclose conflicts to the Board as they arise and ensure that the procedures in this policy are followed.
4. The Secretary or the Secretary’s designee shall convey the list of insiders identified above to the Executive Director and shall instruct the Executive Director to notify the Board if the Executive Director or any employee plans to engage in a transaction with an insider that constitutes a conflict of interest, including payment or reimbursement for business or travel expenses of the insider and/or members of the insider’s family not made pursuant to an accountable plan under IRS Reg. 1.62-2(c)(2). If so, the Board shall monitor the transaction to ensure that it complies with the procedure in Section 2 above.