Conflict of Interest Standard Operating Procedure

INTRODUCTION:

The Global Water's effectiveness depends on its record of accomplishment and its reputation. The Global Water's success results directly from maintaining the confidence of the individuals, groups, and organizations with whom it works. The Global Water's greatest asset is its good name. For that reason, it is crucial that the Global Water have a responsible and well-conceived Conflict of Interest policy and procedure. In addition, having a sound Conflict of Interest policy and procedure will help the Global Water comply with the Standards for Charity Accountability established by the BBB Wise Giving Alliance, the premier charity watchdog organization in the United States. The policy and procedure will also help assure compliance with the U.S. Internal Revenue Service (IRS) rules against private inurement and private benefit and with state statutes addressing conflict transactions.

One of the principal purposes of the Conflict of Interest policy and of this procedure is to help Global Water staff and Board members identify and avoid or resolve conflicts of interest with the Global Water. For that reason, Global Water employees and Board members must read and retain a copy of this Conflict of Interest Policy and Procedure at the outset of their tenure with the Global Water and at such time as the policy or procedure is amended. There may be certain volunteers, such as Chapter Trustees or Global Water grantees, who, because of the level of their involvement in Global Water business, and because of their access to inside information, are covered by this Conflict of Interest policy and must be fully informed of its contents. Any questions concerning the scope or possible impact of the Conflict of Interest policy or procedure upon any volunteers should be addressed to the Worldwide Office Legal Function. In addition, the Conflict of Interest policy and this procedure will be discussed at all orientation sessions for new employees and Board members.

This Standard Operating Procedure provides guidance in three areas:

1. Understanding conflict concepts and definitions;
2. The Global Water's administration and procedure for reviewing and managing conflicts; and
3. Key questions to evaluate conflicts and potential conflicts.

In situations in which there is an actual or an appearance of a conflict, the Conflicts Review Committee must review the situation, as set forth in Section II, below. The Conflicts Review Committee will be comprised of the General Counsel, Chief Compliance Officer, Director of Finance, the Chief Administrative Officer and the Chief Conservation Officer. The Conflicts Review Committee will review and approve, approve with modifications, or disapprove the recommended course of action. 

I. UNDERSTANDING CONFLICT CONCEPTS AND DEFINITIONS

A. Conflict of Interest: A conflict exists when a covered person (as defined below) proposes to act on any issue, matter, or transaction in which the Global Water has an interest, and the covered person may have an interest separate from the Global Water. A conflict of interest also exists in situations in which there is an appearance that a covered person is utilizing inside information that is proprietary to the Global Water for his or her benefit, is acting in his or her own interests rather than the best interests of the Global Water, has the ability to exercise undue influence over Global Water decisions, or is receiving favorable treatment by the Global Water because of his or her status as a covered person.

B. Covered Persons: All employees, Board members, Chapter Trustees/Advisors, and, as defined below, Close Relatives, Major Donors, Related Organizations, and Other Insiders .

C. Close Relative: spouse, child (natural or adopted), parent and step-parent, inlaws (father, mother, daughter, son, brother and sister in-laws), grandchild, grandparent, brother or sister of a covered person, and any person with whom a covered person shares living quarters under circumstances that closely resemble a marital relationship or who is financially dependent upon the covered person.

D. Inside Information: Any material information that is identified as confidential and proprietary, pertaining to the business and affairs of the Global Water, whether related to a specific transaction or to matters pertaining to the Global Water's interests, activities, and policies.

E. Major Donor: An individual, corporation, or foundation that makes a gift or pledge of US$500,000 or more at any one time or cumulatively within a 5 year period prior to the occurrence of the conflict either in cash, appreciated securities, other assets or in land, easement, or bargain-sale value.

F. Other Insiders: Individuals, such as former BOG members, former Chapter Trustees, members of Global Water advisory boards or committees, members of the President’s Conservation Council, volunteers or former employees who, by virtue of their current involvement or their involvement within the past 12 months with the Global Water, either have access to inside information that could place them within a conflict situation or could give the appearance of such persons having the ability to unduly influence the Global Water. Depending on the facts and circumstances, an independent contractor, grantee, other outside party, or their employees may be an "other insider" where that person or entity has access to inside information.

G. Related Organization: Any organization in which a covered person directly or indirectly:

a. owns or controls 5% or more of any voting security; or

b. is a director, executive officer, executor, administrator, trustee, beneficiary, controlling partner, or otherwise serves in a fiduciary capacity or holds a substantial beneficial interest; or

c. has legal or de facto power to control the election of a majority of directors; or

d. has legal or de facto power to exercise a controlling influence over the management or policies.

"Organization" includes a corporation, partnership, trust, estate, joint venture, and unincorporated affiliation of any kind as well as public boards and commissions and not-for-profit organizations. 

II. Global Water ADMINISTRATION AND PROCEDURE FOR REVIEWING AND MANAGING CONFLICTS

Procedure:

A member of the staff involved in a conflict or appearance of a conflict will disclose and bring the matter to the attention of his or her supervisor and will answer the applicable questions outlined in Section III, below. Based on the analysis of the applicable questions, the supervisor will bring the matter to the attention of the appropriate Global Water attorney with a recommended course of action. Each request for approval of a proposed course of action will describe in detail the particular activity in question that gives rise to the conflict or appearance of conflict, the reasons why the proposed course of action should be approved, and any special circumstances surrounding the situation. The attorney will then submit the request to the General Counsel, along with a recommended course of action. The General Counsel will convene the Conflicts Review Committee as the final arbiter of the matter.

A Chapter Trustee/Advisor involved in a conflict or appearance of a conflict will disclose and bring the matter to the attention of the appropriate Operating Unit Director and/or Global Water attorney who will work with the Chapter Trustee/Advisor to develop an appropriate recommended course of action, based on answers to the applicable questions outlined in Section III, below. The recommendation will be reviewed and approved by the Chapter Board and which will then be submitted to the General Counsel. Each request for approval of a proposed course of action will describe in detail the particular activity in question that gives rise to the conflict or appearance of conflict, the reasons why the proposed course of action should be approved, and any special circumstances surrounding the situation. The General Counsel will bring such conflict and the recommended course of action to the above-referenced Conflicts Review Committee as the final arbiter of the issue. The Conflicts Review Committee will review and approve, approve with modifications, or disapprove the recommended course of action. If a conflict involving a member of a Chapter Board of Trustees is brought to the attention of a Global Water staff member, the staff member will immediately notify the appropriate Operating Unit director and the Global Water attorney of the matter.

A member of the Board of Directors involved in a conflict or appearance of a conflict will disclose and bring the matter to the attention of the appropriate Global Water attorney who will work with the Board member to develop an appropriate recommended course of action, based on answers to the applicable questions outlined in Section III, below. The recommendation will then be submitted to the General Counsel. Each request for approval of a proposed course of action will describe in detail the particular activity in question that gives rise to the conflict or appearance of conflict, the reasons why the proposed course of action should be approved, and any special circumstances surrounding the situation. The General Counsel will bring such conflict and the recommended course of action to the above-referenced Conflicts Review Committee to review and ratify the recommended course of action or propose a course of action with modifications. The course of action recommended by the Conflicts Review Committee will be submitted to the Board of Directors Audit Committee as the final arbiter of the issue. The Audit Committee will approve, approve with modifications or disapprove the recommended course of action, as the final arbiter of the issue. If such a conflict involving a member of the Board of Directors is brought to the attention of a Global Water staff member, the staff member will immediately notify the appropriate Operating Unit or functional department director and the Global Water attorney of the matter.

If other insiders, major donors are involved in a conflict or appearance of a conflict, the other insider, major donor, or the Global Water representative working with such individual will disclose and bring the matter to the attention of the appropriate Global Water attorney who will work with the other insider or major donor to develop an appropriate recommended course of action, based on answers to the applicable questions outlined in Section III, below. The recommendation will then be submitted to the General Counsel. Each request for approval of a proposed course of action will describe in detail the particular activity in question that gives rise to the conflict or appearance of conflict, the reasons why the proposed course of action should be approved, and any special circumstances surrounding the situation. The General Counsel will bring such conflict and the recommended course of action to the above-referenced Conflicts Review Committee to review and ratify the recommended course of action or propose a course of action with modifications. If such a conflict involving an other insider or major donor is brought to the attention of a Global Water staff member, the staff member will immediately notify the appropriate Operating Unit or functional department director and the appropriate Global Water attorney of the matter.

Courses of Action: In all cases, conflicts of interest or circumstances giving rise to the appearance of a conflict must be disclosed in advance of initiating the activity giving rise to the conflict and in accordance with the procedures stated above. In developing responses to such conflicts, every effort will be made to avoid the conflict. In cases where it is not possible to completely avoid a conflict or the appearance of a conflict, reasonable efforts will be made to mitigate the effects of the conflict. At a minimum, the recommended course of action will ask the individual involved in the conflict to disclose the situation to the relevant parties and recuse and absent him/herself from any involvement in decisions pertaining to the conflict or the appearance of conflict. Before the conflict is disclosed and while the request for approval of a proposed course of action is pending or being considered, the individual involved in the conflict will refrain from participating in the questionable activity and/or withdraw from any discussion of or decision on the matter.

Report to the Board of Directors: All conflicts reviewed by the Conflicts Review Committee will be reported by the General Counsel to the Audit Committee of the Board of Directors. The General Counsel’s report will include the nature of the conflict, parties involved, and the disposition of conflict.

 III. KEY QUESTIONS TO EVALUATE CONFLICTS AND POTENTIAL CONFLICTS:

There are many difficult and ambiguous issues associated with the types of conflict issues that confront the Global Water. The following are typical categories of situations where conflicts might arise or give rise to the appearance of a conflict. While not all-inclusive, the following represent the great majority of types of conflict situations confronted by the Global Water. If a particular scenario is not addressed, consult with a Global Water attorney who will assist in analyzing relevant factors.

In evaluating conflict situations in order to determine an appropriate course of action, the Global Water will be guided by the following criteria and considerations:

• Compliance with the letter and the spirit of all applicable laws relevant to all parties to the transaction;
• Adherence to Global Water policies and procedures;
• Ability to act within the scope of the Global Water's values, such as "integrity beyond reproach;"
• Avoidance of private benefit and inurement;
• Transparency;
• Conservation benefits likely to be achieved;
• Consequence to the Global Water from declining to participate;
• Financial or other benefit to the Global Water;
• Nature and extent of risk to the Global Water's reputation;
• Availability of other alternatives;
• Ability to mitigate reputational risks; and
• Financial or other benefits to the other party.

In order to help those involved with Global Water activities to understand and evaluate those actual and potential conflicts as well as situations that give rise to the appearance of a conflict, it is required that the individual involved with the conflict and the Global Water supervisor/Global Water representative answer the following questions and submit the analysis to the Conflicts Review Committee, following the procedure outlined above. The Conflicts Review Committee, in reviewing whether to determine how to proceed with an actual or a perceived conflict, will use the answers to these questions as one factor in making their decision.

A. Hiring individuals who are close relatives of covered persons.

·         Is this job integral to the success of the Global Water?

·         Have all Global Water policies and procedures relevant to employment been followed?

·         Can this position be structured so that the conflicted party has no supervisory responsibilities with the employee without disrupting the Global Water's business practices?

·         Will the conflicted party play any role in the hiring process?

·         Has the Global Water assessed the public relations and political environment at all scales to be sure that this hire will not damage the Global Water's reputation?

·         What steps have been taken to determine if other qualified candidates exist?  Has there been an open and competitive bidding process?  Does this person have a unique expertise that the service cannot be obtained anywhere else?

·         Is the close relative candidate significantly more qualified or available at a more favorable costcompared to other candidates?  What are the alternatives if this person is not employed by the Global Water?

·         Has the Global Water balanced the financial benefits to the Global Water with the reputational risk to the Global Water of the hire?

·         How will this appear in the eyes of the public when tested against the value of "integrity beyond reproach?"

B. Contracting for products or services with covered persons.

• Is this product or service integral to the success of the Global Water?
• Are the products, services, or expertise unique or very specialized?
• Has the Global Water taken appropriate measures to ensure that the Global Water obtains the best market price for the work or services? Has there been an open and competitive bidding process?
• Has the Global Water received information from parties other than the conflicted party that address the cost and quality of the service or products being acquired or provided?  
• Has the Global Water accessed the local public relations and political environment to be sure that this hire will not damage the Global Water's reputation?
• Will the management of the delivery of the service or product within the Global Water be done by someone other than the conflicted party or other than someone who is supervised by the conflicted party?
• Are all of the costs, including the appearance of an insider arrangement, significantly less that the benefits to be obtained from the services to be performed or products provided?
• How will this appear in the eyes of the public when tested against the value of "integrity beyond reproach?"

C. Purchases or Gifts of Interests in Land from or Sales of Interests in Land to Covered Persons.

• For acquisitions, has the Global Water determined that this is land or an interest in land that would be acquired by the Global Water regardless of ownership (i.e. the property meets Global Water conservation standards and objectives)?
• Has the proposed transaction been characterized accurately in the legal documents and with the public?
• Have appropriate independent valuations been obtained in compliance with the Global Water's Real Estate - Documentation of Value and Conservation Buyer Transactions procedures?
• Has the proposed transaction been reviewed to ensure that appropriate conservation benefits are obtained?
• Are the terms and conditions of the purchase sufficient to protect the land and on terms favorable to the Global Water?
• Will the covered person obtain any direct or indirect economic benefit from the transaction and, if so, have such benefits have been properly reflected in pricing the transaction and determining values?
• Has the transaction been structured to ensure that the Global Water's standards of transparency will be achieved?
• Does the transaction comply with the Global Water's policy on Conservation Sales To or From Related Parties? (Note: There may be cases where the Global Water will want to grant exceptions to that policy. The questions in this paragraph may be relevant for an analysis of when an exception may be appropriate.)
• For sales, has the Global Water marketed the property in an open, equitable, and transparent marketing process?
• Has the Global Water done a political and public relations assessment of the impact of this donation, purchase, or sale on the Global Water's reputation.
• How will this transaction appear in the eyes of the public when tested against the value of "integrity beyond reproach?"

D. A covered person serving on the governing board of public and/or private corporations, non-profit organizations or government agencies commissions, or councils transacting business with the Global Water or with which the Global Water may have a potential adverse interest.

• Is the covered person serving on the board of that entity as part of his or her job responsibility for the Global Water?
• Was there an advance disclosure and have both parties agreed that, in cases of conflict or where there was a direct and adverse interest/competition, there would be a mechanism for recusal, disclosure, or any other safeguards to protect the Global Water?
• Is there a plan in place for how staff will conduct themselves when serving on other Boards?
• Will the individual’s time spent working on issues for the other board take away from his or her ability to perform his or her job for the Global Water and if so, what is the benefit to the Global Water?
• What impact will this service have on the Global Water's ability to do its business and on the Global Water's reputation?
• Will any decisions made by the individual working for the other organization be made with regard to the Global Water's best interests?
• What are the costs and benefits to the Global Water?
• What are the alternatives, if any?
• How will this appear in the eyes of the public when tested against the value of "integrity beyond reproach?"

E. Use of inside information by a covered person.

• Is the information proprietary to the Global Water?
• What steps have been taken to protect the information?
• What are the costs and benefits to the Global Water?
• Is there any private benefit or private inurement?
• What are the alternatives, if any?
• How will this appear in the eyes of the public when tested against the value of "integrity beyond reproach?"

F. Transactions with grantees.

• Does the grantee have a conflict of interest policy?
• Would the issue violate the Global Water's conflict of interest policy and procedure?
• What are the alternatives, if any?
• Is the activity integral to the success of the Global Water or the grantee?
• Has the Global Water accessed the local public relations and political environment to be sure that this relationship will not damage the Global Water's reputation?
• Will the management of the project be done by someone other than the conflicted party or other than someone who is supervised by the conflicted party?
• How will this appear in the eyes of the public when tested against the value of "integrity beyond reproach?"

G. Global Water employees who engage in work outside the Global Water, including contracts and consultancies, and including both paid and unpaid work.

• Is the other entity in the same or a similar field as the Global Water?
• Are the other entity’s purposes or interests in any way adverse to the Global Water's mission and interests?
• Does the employee have access to financial or other confidential or proprietary data or information of the Global Water? If so, what is the level of sensitivity?
• Does the outside work detract in any way from the employee’s ability to perform her/his job duties during normal business hours?
• Does the outside work create a conflict of loyalty between the Global Water and the other employer?
• Does the outside work create any risk to the Global Water's reputation?
• How will this appear in the eyes of the public when tested against the value of "integrity beyond reproach?"

CONCLUSION:

Adhering to the Conflict of Interest policy and this standard operating procedure is a condition of association with the Global Water as an employee, Board member, or Chapter Trustee/Advisor. Violations of the Conflict of Interest policy and this procedure may be grounds for dismissal as an employee or severance from the Board of Directors or a Chapter Board/Advisory group. The Audit Committee of the Global Water's Board of Directors and the General Counsel will review and assess the Conflict of Interest policy and this standard operating procedure and their implementation on a regular basis and notify employees, Board members, and Chapter Trustees/Advisors of any changes and/or revisions thereto. 

PURPOSE:

To assure and ensure that the Global Water will live up to its high fiduciary obligations and operate in compliance with our highest corporate value: "Integrity Beyond Reproach." 

ORIGIN:

Instructions for handling conflicts of interest were originally included as part of the prior Conflicts of Interest Policy. New as Standard Operating Procedure in August 2007.

REFERENCES, RESOURCES, AND EXPLANATORY NOTES:

See the policy: Conflict of Interest

EXAMPLES: For specific examples of conflict or perceived conflict situations see examples below.

EXAMPLE: X, who is a land-protection specialist for the Global Water, is negotiating to acquire a critical natural area from the Y corporation. X has developed a good working relationship with the real estate director of the Y corporation. The Y corporation invites X to use the Y corporation's mountain retreat for a weekend getaway. Assuming that the value of the use of the mountain retreat to X is in excess of US$100, X is confronted with a potential conflict situation. For example, this arrangement could create the perception that X has received this benefit from Y corporation in exchange for some concession in the business negotiations. X should not accept this offer.

EXAMPLE: The facts are the same as above except the real estate director of the Y corporation will be using the retreat at the same time as X. In addition, X and the real estate director have decided that they will hammer out the final details of negotiations while at the mountain retreat. Although X's use of the mountain retreat in this instance is not a conflict situation, there still is a risk of a perceived conflict. Therefore, X still would have an obligation to disclose.

EXAMPLE: X is the head of the benefits program for the Global Water and is recruiting for a position to have responsibility for the Global Water's health insurance program. X's spouse has expertise in managing health insurance programs. Unless there are some very unusual circumstances, X would be discouraged from hiring his or her spouse because of the potential conflict of interest. For example: if X hired his or her spouse, X would be in the position of making salary decisions which would directly, or at least indirectly, have a financial impact upon X.

EXAMPLE: XYZ Corporation is selling property to the Global Water for fair market value. The Global Water's Board member, Jones, is also a member of the board of XYZ Corporation. Jones appraises the property for XYZ Corporation. Even if Jones waives all appraisal fees, a conflict exists both because Jones is a director of both corporations and both corporations have an interest in the transaction, and because Jones rendered consulting services. Jones should recuse himself, on the record, from any involvement in this project.

[Note: If Jones own more than 5% of XYZ, the Global Water's policy regarding Conservation Sales to or From Related Parties would prohibit the Global Water from purchasing of land from XYZ Corporation.]

EXAMPLE: X is on the Board of the Global Water and is also the chairman of the Board of the Y Corporation. The Y Corporation owns land which is of great ecological interest to the Global Water. Through the intervention of X, Y Corporation is willing to sell this property to the Global Water at a substantial discount, the discount being confirmed by the Global Water's independent appraisals. Because of X's relationship with both Y Corporation and the Global Water, X has a conflict. However, provided that X does not own more that 5% of the equity of the Y corporation, provided that there is full disclosure of the situation to both Y Corporation and the Global Water, and provided that X recuses himself from any involvement in the decision concerning this property, there is no reason why the Global Water could not proceed with the transaction. The Conflict of Interest policy is not intended in any way to discourage covered persons from helping the Global Water acquire property through gifts or partial gifts.

EXAMPLE: The Global Water's OU has given grants on a regular basis to grantee A. X is the director of the OU. X’s mother is on the grantee A’s board. Because of X’s relationship with his mother, X has a conflict. X should recuse himself from managing the relationship with grantee A and another Global Water employee that does not report to X should determine the types of projects to fund, the amounts to donate to the grantee, and provide oversight to ensure grantee A is using the funds properly. For example, if X were not to recuse himself, there is the appearance that X, as a favor to his mother, could fund projects that may not necessarily further the Global Water's mission, provide greater funds than necessary, or not provide sufficient oversight over the project.

EXAMPLE: The Global Water has given grants on a regular basis to grantee A. Grantee A’s Executive Director and Finance Director are husband and wife. Because of this relationship and the ease of using inside information for their own benefit, a conflict of interest exists. TNC would be discouraged from providing future grants to grantee A until the conflict is resolved either through additional TNC oversight of grantee A, implementation additional checks and balances within grantee A’s organization to prevent fraud, theft, etc., or the resignation of either the Executive Director or the Finance Director.

RESPONSIBLE FUNCTION/PARTY: