Conflict of Interest Policy for Trustees, Officers and Key Employees

Purpose

The trustees, president, officers and other key employees of EMU, by virtue of their offices, have a fiduciary relationship with the University which requires that they act in good faith and with loyalty to the University's best interests. When they exercise discretionary authority over University affairs, they must act solely in the interest of the University. They may not use this authority for their own benefit. This Conflict of Interest Policy is intended to permit the University and its trustees, president, officers and key employees* to identify, evaluate, and address any conflicts of interest that might call into question this duty of loyalty to the University. The Policy also intends to conform University practices to federal and state law, including laws and regulations dealing with excess benefit transactions and conflicts of interest on the part of officers, trustees, key employees and other disqualified persons of charitable organizations, as they are defined below.
Policy Statement

I. Covered Persons

This policy applies to the following persons: (1) voting members of the Board of Trustees; (2) officers as defined in the Bylaws; (3) key employees of the University; and (4) former voting trustees, officers and key employees for a period of one year from the end of their respective service to the University (the "Covered Persons"). New covered persons should receive the Policy within 90 days of employment or volunteering.

II. Covered Transactions

This policy is intended to cover the general standards of conduct expected of Trustees, Officers and key employees in transactions involving the University as well as specific standards set forth in Virginia law and the Internal Revenue Code. The transactions covered by this policy (the "Covered Transactions") are (i) Potential Conflict of Interest Transactions, and (ii) Potential Excess Benefit Transactions, as defined below.

1. Potential Conflict of Interest Transactions: A Potential Conflict of Interest Transaction is any transaction between the University and (i) a Covered Person, (ii) a Covered Person's Family Members (as defined below), domestic partner or a person with whom one cohabits, (iii) an entity in which a Covered Person or any person or entity described in this Section 1 has ownership interests, whether in the form of equity or debt, in the aggregate of more than 35 percent (a material financial interest), or (iv) an entity in which the Covered Person is an officer, director, trustee or employee. A Potential Conflict of Interest Transaction also includes any other transaction in which there may be an actual or perceived conflict of interest, including any transaction in which the interests of a Covered Person may be seen as competing with the interests of the University.
2. Potential Excess Benefit Transactions: A Potential Excess Benefit Transaction is any transaction in which an economic benefit (including the payment of compensation) is provided by the University directly or indirectly to or for the use of a "disqualified person" under Section 4958 of the Internal Revenue Code (including a Covered Person), and any person with a relationship to the disqualified person described in paragraphs a or b below, or an agent or nominee of any of the foregoing:
   1. spouse, parents, sibling, child, or spouse of a sibling (a "Family Member"), domestic partner or person other than a spouse with whom one cohabits; or
   2. an entity in which the disqualified person and his or her Family Members own in the aggregate, directly or indirectly: (i) in the case of a corporation, more than 35 percent of the combined voting power; (ii) in the case of a partnership (or limited liability company), more than 35 percent of the profits interest; and (iii) in the case of a trust or estate, more than 35 percent of the beneficial interest.
3. Excluded Transactions: A Covered Transaction shall not include the provision of goods or services without charge to the University.

III. Duties of Covered Person

When a Covered Person becomes aware of a proposed Covered Transaction, he or she shall do the following: 

1. immediately disclose the existence and circumstances of such Covered Transaction to the Chair of the Finance and Audit Committee of the Board of Trustees (the "Committee") and to the VP for Finance;
2. refrain from using his or her personal influence to encourage the University to enter into the Covered Transaction; recuse himself or herself from participation in any discussions regarding the Covered Transaction with officials of the University, at meetings of the Board of Trustees, at meetings of the Committee, and with other members of the University community, except to respond to requests for information from the General Counsel, the Committee or the Board of Trustees about the Covered Transaction; and
3. refrain from taking action to cause the Covered Transaction to be consummated until the Covered Transaction is approved by the Board of Trustees, or, if the Committee determines that it is not reasonably practicable to obtain the approval of the Board of Trustees prior to consummation of the Covered Transaction, until the Covered Transaction is approved by the Committee.

IV. Standard for Approval of Covered Transactions

The Committee may approve the University's entry into a Covered Transaction upon the determination of the Committee, based on comparable market data, that the economic benefit provided by the University in the transaction does not exceed the fair market value of the consideration received by the University, (ii) such transaction is fair, just and reasonable as to the University and is entered into for the benefit of the University and (iii) could not have obtained a more advantageous arrangement with reasonable effort under the circumstances.

V. Administration of Policy

This policy shall be administered by the Finance and Audit Committee of the Board of Trustees with the assistance of the secretary of the Board of Trustees, acting free of any conflicts of interest. (A Committee member or Trustee will be considered to be acting free of any conflicts of interest with respect to a particular Covered Transaction if he or she (1) is not a disqualified person as defined in Section II hereof, participating in or economically benefiting from the transaction and is not related to such a disqualified person, (2) is not in an employment relationship subject to the direct control of the disqualified person, (3) is not receiving compensation or other payments subject to the approval of the disqualified person, (4) has no material financial interest affected by the transaction or arrangement, and (5) does not approve a transaction providing economic benefits to the disqualified person, who in turn has approved or will approve a transaction providing economic benefits to the individual.)

1. The Committee shall:
   1. require as a matter of standard procedure that each trustee, officer, and key employee complete annually a Conflict of Interest Questionnaire (a signed disclosure statement) provided as Attachment A. These questionnaires will be filed with the secretary and will be reviewed by the Finance and Audit Committee in preparation for the annual financial audit.
   2. review proposed Covered Transactions to determine whether they meet the standard for approval set forth above;
   3. submit to the Board of Trustees (acting free of any conflicts of interest) for approval or ratification any Covered Transaction that the Committee determines meets the standard set forth in paragraph IV above;
   4. maintain contemporaneous minutes and such other documentation as may be necessary and appropriate to document its review of Covered Transactions;
   5. review the operation of this policy and make recommendations to the Board of Trustees regarding changes to this policy; and
   6. report regularly to the Board of Trustees regarding the work of the Committee.
2. The University's outside legal counsel will be engaged to assist the Committee in carrying out its responsibilities under this policy. The legal counsel will be invited to attend all relevant meetings of the Committee, and may assist in preparing the minutes of such Committee meetings, as appropriate.

*A definition of key employees can be found in the instructions to IRS Form 990. It includes a three-part test, one part of which is a threshold compensation level of $150,000. 

Form

GPP.01.1 Conflict of Interest Policy Annual Form.docx

Responsible Person

The Vice President for Finance is responsible for this policy.

Policy Review

This policy will be reviewed as needed and at least every five years.

Distribution

• Faculty/Staff Handbook
• Trustee Manual

Approved by the President's Cabinet: November 30, 2009 

Approved by Finance and Audit Committee: November 13, 2010