How Close is the Interest?

One of the most difficult fiduciary duties for board members is the obligation to avoid conflicts of interest. This is particularly challenging for board members who are also registrants, as they have some sort of interest in almost every decision made by the regulator. A recent case involving board of education trustees provides useful guidance: London District Catholic School Board, Application, 2023 ONSC 1693 (CanLII).

Under municipal legislation, board of education trustees are required to declare any direct or indirect pecuniary interest. If a declaration of an interest is made, they cannot participate in any way in the decision. The challenge for this school board was that seven of the eight trustees (who are all elected to their positions) had immediate family members working for the board. After a seminar on conflict of interest, all seven of those trustees declared a conflict in respect of two upcoming decisions: approving the budget for the board, and ratifying a province-wide collective bargaining agreement negotiated with the union representing some of the board’s employees (including a child of one of the trustees). An application was made to the Court to determine if one of the exceptions to the prohibition against conflict of interest applied. That exception would apply where the conflict is “so remote or insignificant in its nature that it cannot reasonably be regarded as likely to influence the member”.

The Court noted that most people who run for election to the board have a significant interest in educational matters. “It therefore comes as no surprise that so many of the Trustees have family members that [sic] are educators.” The Court also noted the challenges in achieving board quorum in the circumstances. The Court further observed that the municipal legislation definition of “immediate family members” did not include siblings, so the trustee whose sibling was employed by the board was not conflicted. However, even with two board members entitled to vote, the situation was untenable: “Put simply, eight heads is [sic] better than two.”

The Court went on to find that the indirect pecuniary interests in the decisions to ratify the collective agreement and approve the budget were too remote to reasonably constitute a conflict of interest. The details in the documents were determined by others and the board’s role was simply to approve (or not) the high-level approach proposed.

The Court, however, issued several caveats, suggesting that there should be public disclosure of the relationships to ensure transparency, even though there was no actual conflict for these two decisions. The Court also said that its ruling only applied to those specific decisions in the circumstances set out in the evidence. A blanket ruling would remove the duty of “self-policing” expected of board trustees and prevent important means of accountability, such as a formal complaint by the public in future cases..

While this decision relates to specific legislation, the general approach of the Court can guide regulatory board members. It is recognized that board members who are registrants of the profession will have, in the broadest of terms, an interest in many board decisions. However, such interests can be too remote to constitute a conflict of interest if they affect the board member no more than any other member of the profession. Yet where there are circumstances which indicate that an individual board member has a more specific interest in the decision, there may well be a conflict. In any event, full public disclosure of even potential conflicts of interest is prudent. The trend towards maintaining conflict of interest “registers” for board members is consistent with the Court’s guidance.

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