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Financial procedures proposal for Pacifica /
Conflict of interest policy
8-3-02


From: Susan Lee
Date: Sat Aug 3, 2002 9:25 am
Subject: integrity and competence

PLEASE FEEL FREE TO POST THIS EMAIL ON ANY PACIFICA LIST

My name is Susan Lee. I would like to introduce myself to those people I don't know and say hello to those I do. I am a producer at WBAI who does a personal finance show "You and Your Money" (I think it's the only personal finance show on the network; if this is wrong, please let me know so I can meet the other producers).

I did a 25 minute by-laws show on Friday, July 26 on how to up the chances for integrity and competence of non-profit boards. We have spent so much time talking about how we will stop a repeat of a takeover of Pacifica by external threats that we have not focused on how to run a Pacifica that is after all a $12 million plus annual operation with 5 radio stations, hundreds of staff, and assets worth hundreds of millions of dollars. I believe that just as we must protect Pacifica from external threats, we must guard it from breaches of integrity and from incompetence. Well intended people can with all good will create as many difficulties as malevolent ones. The very activists we want to protect us from external threats may not have focused on the financial side of life enough to be aware of what must be done in a fiscally and fiduciarily sound way.

My basic question here: what can we do to help our national board be fiscally and fiduciarily competent and to act with integrity?

I had two guests on the show: Our own, David Moore, who spoke eloquently about the need for openness, for elections and recall, for an ombudsperson and for a code of ethics. Since David has laid out his ideas in different venues, I don't think I need repeat them.

My second guest, Harvey Epstein, is a New York attorney who works with non-profits. Our discussion included several points that I believe are well worth considering and that I have not heard in the by-law discussion:

1) A conflict of interest policy. It is common for boards to include in their bylaws a conflict of interest policy. I do not believe that we have such a policy in our current by laws or in the models currently being discussed for our revised by laws. I believe that having a conflict of interest policy would be another step toward integrity and competence. I have attached the generic policy Harvey gave me.

2) Training for newly seated boards and/or board members in the rights and responsibilities of being on a board. It is very common for board members to be activists who may not be as aware of their fiduciary responsibilities as they must be in order to fulfill them properly. I have not heard that our board was given any such training when it was seated. Such a training could be done by teleconferencing and would be important to begin a process of education for the board members.

3) Such a training could also be given to candidates for any board seat so that they could be aware before they ran for the office of what winning that seat might entail.

4) Procedures for negotiations of contracts would be: 1) the appointment of a committee to carry out that negotiation; 2) the laying out of criteria for the negotiation before the negotiations begin. Negotiations are highly complex affairs and must be treated as such. I believe the committee should include people who are knowledgeable in the fields covered in the negotiation and who may not have an official capacity at Pacifica. It is not enough to hire an accountant or attorney who is in the field and to rely on that person to know what our point of view should be.

5)Procedures for hiring of attorneys, accountants. other professionals and/or vendors: 1) same as above; 2) the laying out of criteria for the selection process; and 3) the consideration of several different firms. Competitive bidding processes would be instituted where applicable. Consulting an attorney who specializes in one field who one of us knows when we need to find one who specializes in another field is not likely to produce the best results.

6)Oversight: once a contract has been signed and been put into effect, the board shall oversee that it is being carried out according to the agreed-upon terms and shall evaluate the results. So too with attorneys and accountants.

7)Both Harvey and David emphasized openness in our processes and underscored each other: Harvey emphasized that a board with one, even two or three, persons having the responsibilities is doomed to a myriad of problems.

Much as I would like the first 6 points to be considered for inclusion in the bylaws, I understand that the bylaws should be fairly lean. Therefore I propose that the first point, a conflict of interest policy, be included in the bylaws. Points 2 through 6 should be in a national board procedures policy.

I am interested in your responses to these points and appreciate your taking the time to read this email.

Susan Lee
"You and Your Money"

I am trying to have this show posted to Radioforall. If anyone from any of the other four stations wants a copy to use on their air, call me at 212 633 1516 or email me at SusanLee@compuserve.com

------------------

This conflict of interest policy has been adapted from a generic conflict of interest policy. It was not written with the Pacifica Foundation in mind (as you can tell from the examples). It has not been reviewed for the Pacifica Foundation by a nonprofit attorney which should happen before it is adopted.

CONFLICT OF INTEREST POLICY
Article I.   Explanation.

   This conflict of interest policy ("Policy") is designed to help directors, officers, advisors and employees of Pacifica Foundation ("The Foundation") identify situations that present potential Conflicts of Interest and to provide The Foundation with a procedure which, if observed, will allow The Foundation to enter into a transaction even though a director, officer or employee has or may have a Conflict of Interest with respect to the transaction.

Article II. Definitions.

   A "CONFLICT OF INTEREST" is any circumstance described in Article III of this Policy, or such similar circumstances.

   An "INTERESTED PERSON" is any person serving as a director, officer, member of the Board, employee, or member of a committee with Board-delegated powers of The Foundation.

   A "FAMILY MEMBER" is a spouse, ancestor, child, grandchild, great grandchild, brother, sister, or spouse of a child, grandchild, great grandchild, brother or sister of an Interested Person.

   A "FINANCIAL INTEREST" in an entity is a financial interest of any kind, which, in view of all the circumstances, would, or reasonably could, affect an Interested Personís or Family Memberís judgment with respect to transactions to which the entity is a party.

Article III.  Conflict of Interest Defined.

   A Conflict of Interest exists where the personal interests of an Interested Person are or may be inconsistent with the best interests of The Foundation. For purposes of this Policy, the following circumstances shall be deemed to create a Conflict of Interest:

A contract or transaction between The Foundation and an Interested Person or Family Member (e.g., The Foundation contracts for services to be provided by a directorís child).
A contract or transaction between The Foundation and an entity in which an Interested Person or Family Member has a Financial Interest or with which such Person has a relationship, for example as a director, officer, trustee, or guardian (e.g., The Foundation makes a grant to a university where a member of The Foundationís board of advisors serves on the board of directors).
A compensation arrangement between any entity or individual with which The Foundation has a contract or transaction and an Interested Person or Family Member (e.g., The Foundation makes a grant to a university where a directorís sister is employed).
A compensation arrangement between any entity or individual with which The Foundation has a contract or transaction and an entity in which an Interested Party or Family Member has a Financial Interest or with which person has a relationship, for a example as a director, officer, trustee, or guardian (e.g., The Foundation makes a grant to a university which is performing research, for a fee, for a company owned by one of The Foundationís directors).
An Interested Person competing with The Foundation in the rendering of services or in any other contract or transaction with a third party (e.g., one of The Foundationís employees seeks a research grant to write a paper on international energy issues from a foundation to which The Foundation has applied for funding).
An Interested Person having a Financial Interest in, or maintaining a relationship with (for example, as director, officer, trustee or guardian), an entity or individual that competes with The Foundation in the Provision of services or in any other contract or transaction (e.g., one of The Foundationís employees serves as director of a new charity with a mission similar to The Foundationís).
An Interested Person accepting gifts, entertainment or other favors from any individual or entity that (i) does or is seeking to do business with, or is a competitor of , The Foundation or (ii) has received, is receiving or is seeking to receive a loan or grant, or to secure other financial commitments from The Foundation, in both cases under circumstances where it might be inferred that such action was intended to influence or might influence the Interested Person in the performance of his or her duties (e.g., a potential grantee offers one of The Foundationís employees free tickets to the World Series).
Article IV.   Procedures.

   Section l. An Interested Person must disclose orally or in writing all material facts related to an actual or potential Conflict of Interest to directors and/or members of committees considering a proposed contract or transaction to which the Conflict of Interest relates. If a contract or transaction is not being considered by the Board or a committee, the required disclosure must be made to the Chairperson or the Chairpersonís designee. Until a Conflict of Interest has been voted upon by the Board or a committee in accordance with this Policy, an Interested Person shall refrain from any action that might affect The Foundationís participation in any contract or transaction affected by a Conflict of Interest.

   Section 2. After disclosure of the Conflict of Interest and all material facts, and after the Interested Person responds to any questions that the Board or committee may have regarding the Conflict of Interest, the Interested Person shall leave the Board or committee meeting while the Conflict of Interest is discussed and voted upon in accordance with the procedures set forth in Section 3 below. An Interested Person may not vote on the contract or transaction to which the Conflict of Interest relates, but may be counted in determining the presence of a quorum for purposes of the vote.

   Section 3. The Board or committee shall determine by a majority vote of the disinterested directors whether a Conflict of Interest exists and, if so, whether The Foundation shall nonetheless enter into the contract or transaction because it is in The Foundationís best interest. If appropriate, the Chairperson may appoint a disinterested person or committee to investigate alternatives to a proposed contract or transaction.

   Section 4. The minutes of the Board or committee meeting shall reflect (a) that the Conflict of Interest was disclosed, (b) the Board or committeeís decision regarding the Conflict of Interest, including a statement that the Interested Person was not present during the final discussion and vote, and (c) that the Interested Person abstained from voting.

Article V.   Violations of the Conflict of Interest Policy.

   Section 1. If the Board or committee believes that an Interested Person has failed to disclose an actual or potential Conflict of Interest, it shall inform the Interested Person of the basis for such belief and afford the Interested Person an opportunity to explain the alleged failure to disclose.

   Section 2. If, after hearing the response of the Interested Person and making any further investigation as may be warranted in the circumstances, the Board or committee determines that the member has in fact failed to disclose an actual or potential Conflict of Interest, it shall take appropriate disciplinary and corrective action, which might include removal of a director from a committee or termination of an employeeís employment.

Article VI.    Annual Statements.

   Each Interested Person shall annually sign a statement which affirms that such person has received a copy of the Conflict of Interest Policy, has read and understands the Policy, and has agreed to comply with the Policy. In addition, each Interested Person shall disclose on the annual statement any relationships, circumstances or positions in which the Interested Person or a Family Member is involved that he or she believes could contribute to a Conflict of Interest arising. Any such information regarding an Interested Person or a Family Member shall be treated as confidential and shall generally be made available only to the Chairperson, the Executive Director, and any committee appointed to address Conflicts of Interest, except to the extent additional disclosure is necessary for implementation of the Policy.

Review of Policy.

   This Policy shall be reviewed annually by the Board of Directors. Any changes to this Policy shall be communicated immediately to all Interested Persons.

ANNUAL CONFLICT OF INTEREST DISCLOSURE STATEMENT FOR FISCAL

YEAR 20__

Name: __________________________________

Title:___________________________________

Please describe below any relationships, positions, or circumstances in which you or a Family Member (as defined in the Conflict of Interest Policy) are involved that you believe might constitute or may lead to a Conflict of Interest (attach additional sheets if necessary):



I hereby certify that I have received a copy of the current Conflict of Interest Policy, have read and understand the Policy, and agree to abide by it. I further certify that the information set forth above is true and complete to the best of my knowledge.

Signature: ____________________________________ Date:_______________________


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