Conflict of Interest Policy

1. Purpose

This policy is intended to protect HSI's interest when contemplating any transaction or arrangement that might benefit the private interest of an officer, director, key employee, or affiliated party. It is intended to supplement, not replace, applicable federal and state laws governing conflicts of interest applicable to nonprofit and charitable organizations.

This policy reflects the IRS Form 1023 sample conflict of interest policy and the standards expected of organizations recognized as exempt under Internal Revenue Code Section 501(c)(3). It is also intended to satisfy the documentation requirements typically requested by institutional funders.

2. Definitions

2.1 Interested Person

Any director, officer, key employee, or member of a committee with governance-delegated powers who has a direct or indirect financial interest, as defined below, is an interested person.

2.2 Financial Interest

A person has a financial interest if the person has, directly or indirectly, through business, investment, or family:

• An ownership or investment interest in any entity with which HSI has a transaction or arrangement.
• A compensation arrangement with HSI or with any entity or individual with which HSI has a transaction or arrangement.
• A potential ownership, investment interest, or compensation arrangement with any entity or individual with which HSI is negotiating a transaction or arrangement.

Compensation includes direct and indirect remuneration as well as gifts or favors that are not insubstantial. A financial interest is not necessarily a conflict of interest. A person with a financial interest may have a conflict of interest only if the appropriate review body decides that a conflict of interest exists, as described in Section 4.

2.3 Family

For purposes of this policy, family includes spouse, domestic partner, parents, children, siblings, parents-in-law, children-in-law, and siblings-in-law of the interested person.

3. Duty to Disclose

In connection with any actual or possible conflict of interest, an interested person must disclose the existence of the financial interest and be given the opportunity to disclose all material facts to the directors and members of committees with governance-delegated powers considering the proposed transaction or arrangement.

Disclosure must be timely. The interested person must disclose the conflict at the earliest moment they become aware of it, in advance of the transaction or arrangement being approved or executed. Disclosure after the fact does not satisfy this duty.

4. Procedures for Addressing the Conflict

4.1 Determining Whether a Conflict Exists

After disclosure of the financial interest and all material facts, and after any discussion with the interested person, the interested person leaves the meeting (or recuses themselves from the relevant communication thread) while the determination of a conflict of interest is discussed and decided. The remaining board members or committee members decide whether a conflict of interest exists.

4.2 Procedures for Addressing the Conflict

If a conflict of interest is determined to exist, the following procedures apply:

• An interested person may make a presentation at the board or committee meeting, but after such presentation must leave the meeting during the discussion of, and the vote on, the transaction or arrangement that results in the conflict of interest.
• The chairperson of the board or committee appoints a disinterested person or committee to investigate alternatives to the proposed transaction or arrangement.
• After exercising due diligence, the board or committee determines whether HSI can obtain a more advantageous transaction or arrangement with reasonable efforts from a person or entity that would not give rise to a conflict of interest.
• If a more advantageous transaction or arrangement is not reasonably possible, the board or committee determines by a majority vote of the disinterested directors whether the transaction or arrangement is in HSI's best interest, for its own benefit, and whether it is fair and reasonable.

4.3 Violations

If the board or committee has reasonable cause to believe a member has failed to disclose actual or possible conflicts of interest, it must inform the member of the basis for such belief and afford the member an opportunity to explain the alleged failure to disclose. If the board or committee determines the member has failed to disclose an actual or possible conflict of interest, it takes appropriate disciplinary and corrective action, up to and including removal from the board or termination of employment.

5. Records of Proceedings

The minutes of the board and all committees with governance-delegated powers must contain:

• The names of the persons who disclosed or otherwise were found to have a financial interest, the nature of the financial interest, any action taken to determine whether a conflict of interest was present, and the board's or committee's decision as to whether a conflict of interest in fact existed.
• The names of the persons who were present for discussions and votes relating to the transaction or arrangement, the content of the discussion, including any alternatives to the proposed transaction or arrangement, and a record of any votes taken.

6. Compensation

A voting member of the board who receives compensation, directly or indirectly, from HSI for services is precluded from voting on matters pertaining to that member's compensation. The same restriction applies to voting members of any committee whose jurisdiction includes compensation matters.

These voting restrictions do not prohibit any board or committee member from providing information to a relevant committee regarding compensation.

7. Annual Statements

Each director, officer, and key employee must annually sign a statement which affirms that the person:

• Has received a copy of the conflict of interest policy.
• Has read and understands the policy.
• Has agreed to comply with the policy.
• Understands that HSI is a charitable organization and, in order to maintain its federal tax exemption, must engage primarily in activities that accomplish one or more of its tax-exempt purposes.

The Executive Director maintains a file of signed annual statements. New directors, officers, and key employees sign the statement upon assuming their role and annually thereafter.

8. Periodic Reviews

To ensure that HSI operates in a manner consistent with charitable purposes and does not engage in activities that could jeopardize its tax-exempt status, periodic reviews are conducted. The reviews include, at a minimum:

• Whether compensation arrangements and benefits are reasonable, based on competent survey information, and the result of arm's length bargaining.
• Whether partnerships, joint ventures, and arrangements with management organizations conform to HSI's written policies, are properly recorded, reflect reasonable investment or payments for goods and services, further charitable purposes, and do not result in inurement, impermissible private benefit, or in an excess benefit transaction.

9. Scope of Application

This policy applies to:

• The Executive Director in their capacity as the Institute's chief executive.
• All members of the board of directors, current and future.
• All officers of HSI, whether or not on the board.
• All members of any committee with governance-delegated powers.
• All key employees, defined as employees with substantive control over the Institute's resources or strategy.
• Significant advisors identified in writing by the Executive Director as having a sufficiently consequential advisory role to warrant disclosure obligations.

Pending the constitution of HSI's board, the Executive Director discharges the procedural responsibilities assigned to the board under this policy, with the requirement that all such determinations be documented in writing and made available to the board for review upon its constitution.