Q: As the new pastor of a small church, I am concerned that our music director is also the church treasurer and that two married couples sit on the church council. Doesn’t this create a conflict of interest?

A: Yes—but not all conflicts are equally serious. Your board needs to create a written policy defining conflicts of interest and the process it will use to handle them when they arise, as they inevitably do, especially in small congregations.

The congregation’s mission deserves each leader’s loyalty. When what is best for the mission conflicts with a leader’s personal interests or preferences, the leader’s duty is to act for the mission. A conflict of interest arises when a leader has a personal interest or conflicting duty that may make this difficult. Members of a governing board, like your church council, need to be especially vigilant about conflicts of interest.

The clearest conflicts are financial—such as when the congregation buys something from a company owned by a governing board member—but there are subtler conflicts. For example, a board member might belong to the board of a preschool that rents space from a church, an art museum that bids on paintings at a synagogue fund-raising auction, or a community center that competes for gifts from members of the congregation.

Because intertwined relationships are typical of congregations, it is not realistic to avoid all conflicts of interest, but the board can protect its members from criticism and embarrassment by having a clear policy for responding to conflicts when they arise.

There are three levels of response to conflicts of interest: disclosure, recusal, and resignation. Mild conflicts of interest (for instance, when a board member’s cousin holds stock in an office-supply chain) can be managed simply by disclosing them. If the remaining board members agree that the conflict is minor, the affected member can continue to participate in the decision. More serious conflicts—for instance, where a member’s daughter is a candidate for a scholarship—require recusal: the member leaves the room and does not discuss or vote on that item. More serious conflicts of interest—for instance, if a board member is a contractor who wants to bid on a new building—involve such a pervasive division of loyalty that resignation is required. The choice of the level of response that fits a specific case is best made by board members who are not affected by the conflict.

A treasurer who signs his or her own paycheck has a clear conflict of interest. When the treasurer also signs checks to his or her work supervisor, the conflict becomes more serious. Most congregations choose to prohibit paid staff members from serving as officers or board members.

The case of two spouses sitting on the board together is less clear. Their duty to act for the church’s mission may potentially conflict with their duty to support each other, or their interest in domestic peace. But in this, the difference between spouses and close friends is a matter of degree. Many congregations avoid putting spouses on the board simultaneously in order to distribute opportunities for leadership. In the process they put to rest potential concerns about conflicts of interest.

It is much easier to address conflicts before they arise than afterward. A written policy helps leaders avoid conflicts of interest and handle them appropriately. The policy should define conflicts of interest and make disclosure of them an annual routine. Such a practice makes it easier for members to disclose conflicts that arise later, when the board takes up an issue that affects them. The policy needs to make it clear that every board member has a duty to raise conflict-of-interest concerns, and that the board itself (excluding those affected by the potential conflict of interest) will decide whether disclosure, recusal, or resignation is the right response in every case.

This column is adapted from Governance and Ministry: Rethinking Board Leadership, a new book by Dan Hotchkiss, available from the Alban Institute.

Dan Hotchkiss, a Unitarian Universalist minister, is an Alban Institute senior consultant who speaks, writes, and consults widely on strategic and financial planning, congregational governance, clergy leadership, and social justice ministries. He is the author of Governance and Ministry: Rethinking Board Leadership (Alban Institute, 2009) and Ministry and Money: A Guide for Clergy and Their Friends (Alban Institute, 2002).