Conflicts of interest

The phrase “conflicts of interests”, aside from sounding like the title of a Hollywood blockbuster, has become, I believe, a “term of art”. People nod knowingly when the phrase is used, but may well take more time to explain what the phrase means if asked. So, what is a “conflict of interests”?

A “conflict of interests” is when personal interests interfere with, or appear to interfere with, your ability to perform your job/duty without bias to the interests of your employer. It is when a private or personal duty conflicts with your duty to your employer - and the “higher duty” to your employer must take precedence.

Examples include:

1. You or a member of your family has a significant financial interest, such as shares, in companies that are suppliers, subcontractors or competitors to your employer.

2. You are asked to join panel considering the promotion of a colleague who is a close friend or against whom you have a longstanding grudge. A conflict of interest can be positive and negative - to prefer another or to unfairly discriminate against them.

It’s a small world…

One of most common ways in which conflicts of interests arise is through knowing people involved in the same business transaction or decision. Some communities are small and contain family relationships interwoven through many generations. What we might call “corruption” is, in many cultures, the way that people have culturally “done business” for generations – by preferring friends and relatives, by actively acting on ‘interests’.

A conflict of interest is, of itself, not wrong – they arise because we live in communities. However, failing to declare a conflict of interest can give rise to corruption. An actual or potential conflict of interest should be declared.  If in doubt – declare! Once information about the conflict of interests is available to line management, then constructive discussions can take place about how it can be avoided or mitigated.

The 4 Ps and 4 Rs

Identifying conflicts of interests can be approached by applying these 4 points:

1. Public duty v Private interests

Do I have a personal or private interest that may conflict, or be perceived to conflict, with my public duty?

2. Perception

How might my involvement in the decision be viewed by others?

3. Proportionality

Does my involvement in the decision seem fair and reasonable in the circumstances?

4. Peace of mind

What are the consequences if I ignore this potential conflict of interests? What if my involvement were questioned publicly?

Responding to conflicts of interests can be approached by applying these 4 points:

1. Report and record

Potential or apparent conflicts of interest can be just as damaging as actual conflicts of interest. Both they and actual conflicts of interests should be reported and recorded. If in doubt – declare!

2. Restrict

It may be appropriate to restrict your involvement in the panel, to abstain from voting.

3. Remove

It may be appropriate that you are removed from the panel/decision process.

4. Relinquishing

Giving up the private or personal interests, such as the second job, political involvement or charitable directorship may be required, after careful discussion, to ensure there is no ongoing conflict, or perceived conflict, with your duty.

To preserve the integrity of public and commercial decision making it is important that all involved are aware of the definition of a conflict of interests, how conflicts of interests can arise and of the need to report actual or potential conflicts of interests so constructive conversations can take place whether the conflict can be avoided or mitigated.

Michelle Witton, Compliance Consultant (www.mwethics.com)