The Devil Makes Three: Response to Potential Conflicts of Interest Can Make or Break a Business

The Devil Makes Three: Response to Potential Conflicts of Interest Can Make or Break a Business

Many in business are wary of the term "conflict of interest," yet have trouble understanding exactly what it means. According to BusinessDictionary.com, a conflict of interest is a situation "that has the potential to undermine the impartiality of a person because of the possibility of a clash between the person's self-interest and professional interest or public interest." In short, conflicts of interest arise when a corporate manager, executive, or even regular employee stands to improve his or her personal situation by making one decision over another, despite the outcome to the organization (or the public in a governmental situation).

In recent months much has been written about potential conflicts of interests that may arise during the Trump Presidency given that Mr. Trump is a well-known businessman with interests across the globe. Would an individual in public office put their own interests above those of the country? In a more localized sense, would a corporate executive choose a contractor well known for providing access to a luxury box at a popular sporting event at the risk of compromising a negligible amount of profit to the organization? These are the decisions that both an elected official and a private executive face on a regular basis.

As represented by the illustration above, the angel on the left shoulder is telling our executive to act in the best interests of the organization, while the devil on the right shoulder tells him to eschew the safe route in lieu of taking risks that may harm the company, but are sure to benefit his own personal interest. You may think that these situations will not come up in your career, but they almost certainly already have. Indeed, have you ever attended a conference in Scottsdale (or a similar warm weather locale) in January over a similar seminar in Green bay during the winter? In making your decision you may have surmised that you are getting virtually the same education at both even though the conference in Green Bay is targeted at your specific industry you may have dealt with a conflict of interest. Nevertheless, you chose the warmer weather over the likely better seminar for your career and your company. That is a conflict of interest.

Conflicts of interest are everywhere, and how we deal with them separate the organizations on the front page of online newspapers for all the wrong reasons from those lauded with awards. So how do we make the right decisions? After all, it is a fairly universally accepted truth that people tend to act in their self-interest (and the interest of those closest to them) the vast majority of the time. Armed with that information, there are a variety of tools that can be used by an organization to educate its executives and managers on how to brush the devil aside and keep the company on the right ethical path.

Identify Hot Button Areas Where Conflicts of Interest are Likely to Arise

hot-buttonIn general, gifts and benefits are the area where conflicts of interest are most likely to arise. When acting on behalf of a company, individuals should never accept gifts and benefits unless it is clear that the particular gift or benefit 1) does not diminish the authority or ability of the corporate representative to independently make decisions and act in the best interest of the organization; 2) enhance the best interests of the organization as a whole, either by providing more time to learn about the inner workings of the client or company being served, or education about the greater corporate community as a whole; 3) have no apparent impact on professional judgment or appearance of bias. You should never accept a gift or benefit unless the end result will "feel like work" and "look like work." The gift tail simply cannot, under any circumstances, wag the corporate dog.

Prevent Individuals With Competing Interests From Potentially Conflicting Situations Through Policy and Training

Company policies go a long way towards reducing the potential impact of conflicts of interest. By clearly establishing a policy identifying potentially conflicting situations like financial interests in competing or contracting businesses or similar situations your company is far more likely to absolve itself from the negative repercussions arising from member or employee conflicts.

This is certainly not to say that simply having a policy against conflicts of interest or providing employee and/or executive training on the subject will eliminate the potential for unscrupulous or unethical conduct. As stated above, people tend to act in their self-interest, and no policy or training program is going to prevent a rogue employee from doing something for personal gain that runs counter to the best interests of the organization. That said, the more the organization makes clear that it has ethics and compliance in mind, the more likely it will hire and retain employees and executives who are receptive to programs and policies aimed at eliminating the appearance of impropriety. The first step in doing so is giving your employees to opportunity to understand why conflicts of interest are a problem and what to do when they arise.

Provide an Appropriate Reporting Structure for Conflicts of Interest

There is nothing worse than being presented with an ethical dilemma and not knowing where to turn or what to do. Many times, the unknown is what leads people to take the low road and do things that are outside the best interests of the organization. For this reason, it is critical that your company have a structure in place where even the highest level executives can report a potential conflict and retreat from the situation. The chain of reporting should be in writing and should contain the adverse consequences that will occur if your employees or executives fail to use it.

All too often managers get caught up in the fear of what may happen if they speak to a higher level employee. At the highest levels of the organization, it may mean reporting to a Board of Directors that ultimately decides whether you will remain in your position. It is absolutely necessary that corporate representatives feel free to report potential conflicts of interest and other ethical dilemmas without fear of consequence (assuming they have not acted on the conflict at the time it is reported). Providing an open line of communication is a proven method of increasing communication and getting conflicts out in the open before they can adversely impact the organization or the individual presented with the conflict. Again, when people are acting in their self-interest, if they know they will be lauded for reporting a potential problem rather than punished for it are much more likely to take the moral high road.

Don't Let Conflicts of Interest Derail the Bigger Picture

The large amount of press the subject of conflicts of interest has gained since November has led to several questions posed by companies worried that their executives and employees are "in it for themselves," and out to do whatever they can to gain financial and professional gain even at the expense of the company. Much like the fears with the state of the Federal Government's Executive Branch, these concerns are real, yet probably overblown. Assuming your organization takes the proper steps to educate its members about the problems created by conflicts of interest, and expresses a willingness to train on policy and procedure when those conflicts present themselves, most members of your organization will likely make the right decisions and take an ethical stance, despite their predisposition to act in their own self-interest. This is because, at the end of the day, the risk of making the wrong decision ultimately is a public and organizational shame, along with demotion or termination.

Syntrio is a leader in both the ethics and compliance field, as well as human resources and employment law, and is prepared to help your company implement a compliance program aimed at reducing the potential impact of conflicts of interest within the organization. Syntrio takes an innovative philosophy towards compliance program design and strives to engineer engaging, entertaining, and thought provoking content. Contact www.syntrio.com for more information about our ethics and code of conduct online courses and remember to follow us on Facebook, TwitterGoogle Plus and LinkedIn for daily updates on employment law and compliance that impact your company!

 

Written by Jonathan Gonzalez, Esq., Chief Counsel for Syntrio.

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