Conflicts of Interest are among the thorniest issues that
organizations and ethics and compliance professionals face.
Potential conflicts of Interest (“COIs”) are all too common and can be particularly difficult to identify or prevent. As a recent Ethics & Compliance Initiative survey and report states, “there are a virtually infinite variety of situations that might create a conflict, existing as they do at the intersection of personal, family, financial, and organizational interests.”
Consequently, only 57 percent of the survey respondents expressed confidence that their organizations are identifying and addressing all reasonably likely COI-related risks (although 88 percent believe their organizations’ stated positions on COIs are clearly articulated, and 75 percent believe their organizations’ procedures for resolving COIs are sufficient).
Communications, training, policies, and procedures are all necessary to define, identify, deal with, and prevent conflicts of interest. The ECI report offers insights into all four. And right from the start (defining conflicts of interest) it can be complicated. Most organizations address common types of conflicts in their codes of conduct, but “few Code provisions or policies prohibit any type of conflict in every instance.” In addition, “some conflicts are more challenging to manage [or identify?] due to lack of visibility,” (ECI, 2016).
So, what are potential conflict of interest situations? The report provides detailed examples, which it adapted from Kimberly-Clark’s code of conduct, and spells out potential risks. Following is a summary, adapted from ECI’s Conflicts of Interest, 2016.
Outside employment or personal business interests: Conflicts of interest—real or perceived— can occur if outside employment or business interests interfere with an employee’s ability to do their job or if he or she conducts outside business with the employer’s vendors, suppliers, customers, or competitors.
Personal relationships: Conflicts of interest can occur when friends or family members own or are employed by a vendor, supplier, customer, or competitor, or when employees supervise or are in a position to hire a friend or family member.
Financial interests: Conflicts of interest can occur when friends, family members, or employees have financial interests in a vendor, supplier, customer, or competitor.
Political activity: Conflicts of interest can occur if an employee works on political campaigns, expresses political views, or makes contributions to political parties or candidates in a way or in a setting that implies the employee is acting on behalf of the organization. In addition, financial contributions could trigger concerns about violations of campaign finance laws or other regulatory restrictions.
Public service (e.g. volunteer work) and work on outside boards: Conflicts of interest can occur if the outside entity’s goals are at odds with organizational goals, or if time commitments or the desire to help the outside entity interfere with an employee’s ability to do his or her job effectively or appropriately.
Speeches and presentations: Conflicts of interest can occur if employees are offered a fee, expense reimbursement, or other personal benefit for speaking or presenting on a topic connected with their job.
There is nothing inherently wrong with any of these activities, in fact some are actively encouraged by employers (community involvement, volunteer work, and participation in professional associations and industry events, for example). And yet, real potential for conflict exists. Which is why it is important for organizations and their HR and ethics and compliance professionals to understand the risks and the realities and to help employees understand them too.
Next week’s blog post will summarize ECI’s recommendations about how to identify, deal with, and prevent conflicts of interest.
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Ethics & Compliance Initiative (ECI). Conflicts of Interest, October 2016.