The majority of citizens who join nonprofit boards have good intentions. On rare occasions, however, board members leverage their involvement for self-serving purposes to the detriment of the organization. A well-drafted conflict of interest policy is vital to protect the charity against charges of impropriety.
At a minimum, your policy should require members to disclose conflicts. If a conflict exists, that member should refrain from voting accordingly, and a procedure should be set that dictates how the board will manage the conflict.
Policies vary from organization to organization and should be signed by board members at least annually.