Smith College is a charitable organization under the laws of the Commonwealth of Massachusetts. Under Massachusetts law, you, as a member of the Board of Trustees (the “Board”) of Smith, are subject to the duty of care and the duty of loyalty. The duty of care means that you must act with such care as an ordinarily prudent person would use in the performance of your function. The duty of loyalty means that you must act in good faith and in a manner that you believe is in the best interests of Smith.
In addition, as fiduciaries of Smith, the members of the Board, must avoid conflicts of interest between personal interests and the interests of Smith. Generally, a conflict of interest exists when a person is in a position both to influence a decision and to benefit from that decision.
The members of the Board have a wide range of professional and personal associations, and may have interests in other entities. In order to assure Smith’s many constituents, including donors, governments, faculty, students and staff, of the integrity of Smith and of its Board, you should avoid situations in which such associations or interests pose an actual, potential or apparent conflict of interest or impair Smith’s reputation.
The Board has adopted this Conflict of Interest Policy (the “Policy”) to assist you, as a Trustee, and the other persons subject to this Policy. The Board bears ultimate responsibility for the terms and administration of the Policy, but may delegate certain actions and responsibilities to a committee of the Board, who may be advised by the Secretary of the Board or other designated personnel.
Guidelines for Determining Conflicts of Interest
For purposes of this Policy, a conflict of interest is presumed to arise when the College has or is considering a (i) transaction or other business relationship with a Trustee or a Trustee’s family member (as defined below) or (ii) with an outside entity in which the Trustee or a family member has a “material financial interest”.
A. What is a “Material Financial Interest”?
A financial interest is presumed to be a “material financial interest” if it entails:
- an ownership or investment position, for example, stock options, a partnership interest or other ownership interest, valued at more than $25,000, except equity ownership in a publicly traded company amounting to less than a 5% ownership interest in such public company.
- Non-dividend compensation, partnership income, salary, consulting fees, board fees, etc., of more than $25,000 in any 12-month period during the past three years, or the expectation of such compensation in the future.1
- Real property, personal property, intellectual property or other property valued at $25,000 or more.
- A position of real or apparent authority in a company or other outside entity, such as acting as a director, officer, trustee or partner.
B. Parallel Investments in Non-Public Entities; Examples of Potential Conflicts
A conflict of interest may also arise when a Trustee, a family member or an entity in which such person has a material financial interest, has or is considering an investment in an entity, such as a fund or a partnership, that is not publicly traded and in which Smith has or is considering an investment. Such a “parallel investment” could be seen to create an appearance that the Trustee is benefiting from Smith’s investment.
The basic rule is that a Trustee or a family member should not be seen to personally benefit from any investment made on behalf of Smith. For example, if a Trustee is involved in making decisions for an entity from which the Trustee does not derive any personal benefit, and that entity also invests in an investment held by Smith, this would not in and of itself cause a conflict of interest.
While it is not possible to identify all potential conflicts, examples of potential conflicts that warrant disclosure could include a suggestion or recommendation by a member of the Board that Smith invest in an investment in which such Board member or a family member holds a material interest. Other examples could include a parallel investment in a non-publicly traded fund or a “piggy backing” investment in a direct investment when made for the benefit of a Trustee, or a family member, or for an entity from which the Trustee could earn a fee or benefit from capital appreciation
Promptly upon becoming aware of any such potential conflict, the Trustee must disclose to the Chair of the Board and the Secretary of the Board any “material financial interest” in a non-publicly traded entity in which the Trustee knows Smith is considering an investment or with which Smith is a considering a transaction. While such a potential conflict is unlikely, the rule is that the Trustee should not participate in any decision by the Board or of any of its committees, including the Investment Committee, regarding such investment or transaction.
C. When is a Trustee presumed not to have a “material financial interest”?
A Trustee is presumed not to have a material financial interest in a publicly traded entity that invests in other publicly traded entities, such as through a mutual fund, as long as the Trustee does not control or have investment discretion with respect to the investment decisions.
D. Who is a “Family Member”?
A Trustee’s “family member” is (a) a spouse, dependent child, or domestic partner, (b) any individual who lives in the same household as the Trustee and (c) any person to whom the Trustee provides primary financial support and over whose accounts the Trustee exercises control or has investment discretion (or provides ongoing investment advice).
For the avoidance of doubt, “family member” accounts covered include (i) securities accounts, (ii) any trust or other arrangement for the benefit of the Trustee or other “family members”, (iii) any partnership, corporation or other entity owned and operated as an investment vehicle for the benefit of the Trustee or other “family members”, (iv) and any other accounts for the benefit of the Trustee or other ”family members” and over which the Trustee has investment discretion or provides investment advice.
E. Disclosure of Material Financial Interests
A Trustee who has a known “material financial interest” in a pending transaction or proposed transaction or other business relationship of the College must promptly disclose to the Chair of the Board and the Secretary of the Board the existence of the interest and any other material information that the Trustee has regarding this interest or relationship. In addition, each Trustee must annually sign and submit to the Secretary of the Board a statement disclosing all “material financial interests” of the Trustee or a family member, that are known or reasonably should have been known to the Trustee, in any outside entity with which the Trustee knows the College has or is considering a transaction, or a business relationship, or affirming that the Trustee knows of no such transaction or relationship. For the avoidance of doubt, this disclosure obligation and the requirement to sign and submit an annual disclosure statement applies to all other persons subject to this Policy.
Moreover, an additional annual supplemental disclosure statement must be submitted by Members of the Investment Committee, including its non-Trustee members, the Chief Investment Officer and Investments Office staff members in accordance with the Supplemental Conflict of Interest Policy.
The Secretary of the Board shall review the annual statements of disclosure, including those submitted pursuant to the Supplemental Conflict of Interest Policy, and determine if a “material financial interest” has been disclosed. If a “material financial interest” has been disclosed, the Secretary shall promptly share with the Executive Committee such disclosure forms and any additional information about the current or proposed transaction and the business relationship that may give rise to a conflict of interest which the Executive Committee may deem informative.
If the conflict of interest involves the Chair of the Board, any other member of the Executive Committee, or a non-Trustee member of the Investment Committee, the Secretary shall share the disclosure forms and any additional information with the other disinterested members of the Executive Committee. In addition, the Secretary shall disclose the information to the Executive Vice President for Finance and Administration on a need to know basis, as determined by the Executive Committee.
The Executive Committee shall review the information provided in the disclosure forms and determine whether or not there is a conflict of interest. If it is determined that there is a conflict of interest, the Chair of the Board shall so advise the affected Trustee, who shall have the opportunity to discuss the matter with the Executive Committee. The matter may be referred to the entire Board for a decision.
If a Trustee becomes aware of a potential conflict of interest during or just before a meeting of the Board, the interested Trustee shall so inform the Board and shall be recused while the Board discusses the matter. The interested Trustee may be asked to make a presentation to the Board to assist the Board in its deliberations. If it is determined that no conflict of interest exists, the interested Trustee may rejoin the meeting and participate in discussions and a vote on the proposed transaction. If it is determined that a conflict of interest exists, the interested Trustee shall be required to leave the meeting prior to any discussion of the proposed transaction or arrangement and shall not vote on the matter.
The Board shall approve the transaction or arrangement only upon a finding by a majority vote of the disinterested Trustees, that the transaction or arrangement is in the best interest of, and is fair and reasonable to, Smith.
If the Board has a discussion or meeting at which a Trustee’s financial interest in a matter is disclosed, a determination regarding a conflict of interest is made, or a transaction or arrangement in which a Trustee has a conflict of interest is considered, the Board’s consideration of these matters, including any reasons for approval, shall be reflected in the minutes of the meeting.
Trustees shall not encourage or accept gifts, favors, gratuities and the like for themselves or a family member from any individual or entity that to the Trustee’s knowledge has, or seeks to have, a business relationship with Smith.
Appropriation of Opportunities
If a Trustee becomes aware of a business, investment, or other potentially valuable opportunity that rightfully belongs to Smith, the Trustee shall bring the opportunity to the attention of the Board.
Actions Not Void or Voidable
No transaction or action undertaken by Smith, the Board or any Committee of the Board, shall be void or voidable, or may be challenged by any outside party or person, by reason of having been undertaken or approved in violation of this Policy or its principles.
Approved by the Smith College Board of Trustees, January 9, 2004
Revised and approved by the Smith College Board of Trustees, October 18, 2008
Revised and approved by the Smith College Board of Trustees, October 21, 2017
Revised and approved by the Smith College Board of Trustees, December 7, 2021
- Professional services relationships between Smith and a Trustee, or his or her firm, present special conflict of interest concerns. In assessing whether the service presents a conflict, and whether or not the relationship should go forward, the Board should consider such factors as whether the relationship between Smith and the firm is longstanding, the cost, quality of services and the reputation of the firm in comparison to other alternatives, the conflicted role of the Trustee in the relationship, and financial, and other benefits to Smith, the firm, and the Trustee.
Supplemental Conflict of Interest Policy
Approved October 2022
The Chief Investment Officer will assume responsibility for the management of Smith's endowment investments, effective January 1, 2022. In addition, the Investment Committee's role and responsibilities will similarly evolve. Accordingly, the Board of Trustees has determined that it would be appropriate to provide additional guidance with respect to conflicts of interest. To that end, the Board has adopted this Supplemental Conflict of Interest Policy ("Supplemental Policy"). For the avoidance of doubt, the provisions of the Smith College Conflict of Interest Policy are also applicable.
This Supplemental Policy applies, as relevant, to (a) members of the Board's Investment Committee, including its non-trustee members, (b) the Chief Investment Officer, (c) staff members of the Investments Office, and (d) Board designated College officers and personnel supporting the Investment Committee or the Investments Office. Members of the Investment Committee and designated College officers and personnel are referred to as "Investment Committee Members." The Chief Investment Officer and Investments Office staff members are referred to as "Investments Office Members."
Investment Committee Members and Investments Office Members shall adhere at all times to the highest ethical and legal standards in the performance of their duties. This Supplemental Policy provides guidance to Investment Committee Members and Investments Office Members in order to avoid situations that pose actual, potential or the appearance of any conflict of interest with respect to supervision and management of Smith's endowment investments. Generally, this Supplemental Policy requires full disclosure and transparency as the approach to dealing with conflicts of interest rather than on blanket investment prohibitions. In all cases, however, Investment Committee Members and Investments Office Members have a continuing obligation promptly to disclose any actual, potential or perceived conflicts of interest, as set out below.
In the event in which an Investment Committee Member, an Investments Office Member, or a "family member" (as defined in Smith's Conflict of Interest Policy) of any such person, is a general or managing partner, director, sponsor, controlling person, employee, limited partner, or equity investor of, or has any other personal connection to any fund, partnership, or vehicle in which Smith has invested, plans to invest, or is considering an investment, the Investment
Committee Member or Investments Office Member must promptly disclose it to the Chair of the Investment Committee. Any person with any conflict shall recuse themselves from any discussion or decision with respect to the investment. After full disclosure has been made relating to the nature of and reason for the conflict, and a determination has been made that such transaction has not and will not constitute an "excess benefit transaction" within IRS law, rule or regulation, the investment may be made or continue to be held if it is or has been approved by the Investment Committee, including the affirmative approval of the Chair of the Investment Committee (or, in the case that the Chair has a conflict, the Vice Chair of the Investment Committee). If the Investment Committee lacks a quorum to approve the investment without the member that has recused themself, the Investment Committee shall nonetheless record its vote but the Chair of the Investment Committee (or, in the case that the Chair has a conflict, the Vice Chair of the Investment Committee) may approve the investment.
Investment Committee Members, Investments Office Members, and "family members" should not leverage their association with Smith College to obtain access to, or secure more favorable terms in connection with, any investment opportunity.
Every Investments Office Member should exercise care to avoid any potential or actual conflict of interest or the appearance of a conflict of interest between the Investments Office Member's personal or business interests and the interests of Smith.
Every Investments Office Member will comply with all applicable local, state and federal laws, in addition to the provisions of the Smith College Conflict of Interest Policy, as supplemented by this Policy.
These guidelines apply to personal accounts and accounts over which the Investments Office Member has control or the ability to influence investment decisions.
Disclosure of Confidential Information
Confidential information of any kind obtained by an Investments Office Member through or as a result of his or her position in the Investments Office shall not be disclosed to any person, including any family member, outside the Investments Office. Trading on the basis of material non-public information about a public company or disclosure to any person of such information is prohibited and may be considered insider trading under applicable law.
No Investments Office Member shall make any investment in a publicly-traded company which would be considered "front running," e.g., an investment made prior to or coincidental with execution of an investment made for Smith.
Pre-Approval of Trades
The Director of Operations of the Investments Office shall maintain a complete and updated list of investments in publicly-traded companies directly held by Smith and in publicly-traded companies about which the Investments Office has obtained any material non-public information.
This list maintained by the Director of Operations is referred to as the "Restricted List." Investments Office Members are permitted to make investments in bank accounts, open-end mutual funds, publicly-traded ETFs, government and municipal securities and Smith-sponsored retirement plans, without pre-clearance and approval. Investments Office Members must seek pre-clearance from the Director of Operations for any other transaction in any publicly-traded security by submitting a written request to the Director of Operations. No transaction in such a publicly-traded security shall be executed by any Investments Office Member prior to obtaining pre-approval from the Director of Operations. If a security is on the Restricted List, the Director of Operations shall not grant approval. If an Investments Office Staff Member intentionally violates this requirement, he or she may be subject to termination of employment.
A list of personal accounts or accounts pertaining to or containing publicly-traded securities over which any Investments Office Member has control or the ability to influence investment decisions must be submitted to the Chief Investment Officer at the time such Investments Office Member is hired and annually thereafter.
Additional Investment Guidance
Without pre-approval by the Chief Investment Officer and the Chair of the Investment Committee, an Investments Office Member cannot invest in any non-publicly traded investment vehicle or fund which is not available in the general market and in which Smith has invested, plans to invest, or is considering an investment.
An Investments Office Member must obtain the written approval of the Chief Investment Officer prior to joining or participating in any outside board, committee or undertaking any similar activity. All Investments Office Members shall provide a list of outside activities, and disclose any compensation or remuneration, to the Chief Investment Officer, who will make a report to the Chair of the Investment Committee about such activities.
Meals and Lodging
Investments Office Members can participate in investor meetings hosted by an existing or prospective investment advisor or manager, service provider or other persons as long as such meetings are a basis for communicating relevant investment decisions to investors. The modest cost of related meals, transportation and hotel accommodations may be accepted if provided to all other existing or potential investors. All persons must use good judgment and no acceptance of any meal, lodging, etc., should in any case be viewed to compromise independence or objectivity.
Except for items of nominal value (less than $50), all gifts or other items of value must be turned over to the Chief Investment Officer who shall make a determination about donating such gifts to charity. Gifts may, however, be accepted if the same gifts of equivalent value are provided to all other persons attending a general event.