Understanding Conflict of Interest
Conflict of interest is a common issue in the workplace.  Most of us have heard someone say, “It’s who you know, not what you know.”  We’ve heard co-workers complain that a manager’s relative always gets the biggest raise or the best assignment.  We might have seen colleagues accept lavish gifts from potential suppliers or offer expensive concert tickets to new customers.  Maybe a co-worker leaves our company 20 minutes early every day so she can get to her second job.  A supervisor may give a co-worker time off from work to do volunteer work at his church or might allow employees to solicit donations and funds in the workplace, whether for the Girl Scouts or a local school function.  Even though these situations are very different, they all fall under the heading of “conflict of interest.”

What is a Conflict of Interest?

A conflict of interest occurs when an individual’s personal interests – family, friendships, financial or social factors – could compromise his or her judgment, decisions or actions in the workplace.  Government agencies take conflicts of interest so seriously that they are regulated.  Industry organizations and corporations, including ours, follow that lead by including conflicts of interest in our Code of Conduct and standards of business operation.

Conflicts of interest are not automatically illegal – but hiding them or allowing them to influence your professional actions is.  Consider these situations:

– A neighbor who regularly does favors for you and your family wants to apply for a job with our company. He asks if you would put in a good word for him with the hiring committee.

– A former girlfriend is assigned to your department. The relationship had ended badly and remains a painful subject.  You will be supervising her and submitting reviews of her work to HR.

– A co-worker’s husband has started a new business and wants to publicize his services to our customers. They’ve asked you to mention the new company to the customers and contacts you have throughout our company.

– You volunteer with a local food bank that’s in dire need of donations. It’s a good cause and you’re sure your colleagues will want to contribute through a donation pledge at the office.

– Your cousin works for a competitor and has been going through a difficult time at work. You know some of the problems at her company. Some of those problems could impact our company.

– You have a bad personal relationship with a local business owner who is submitting a bid to provide services to our company. You know some personal details about him that could influence the decision to award a contract.

– You want to invest in a supplier to our company. The supplier provides good service and has let you know that her company will be increasing its workforce substantially in the next year.

Simply having a conflict of interest isn’t automatically illegal.  In fact, most of us have “interests” that can influence our judgment, decisions or actions. The examples noted above are all potential conflicts of interest.  The important part is what you do in each of those situations.  Do you allow your family, friendship, financial or inside knowledge affect your actions?  If you do, you would violate regulations and our Code of Conduct.

In our personal lives, we deal with personal interests all the time.  We might shop at a store where a relative works and stay away from another shop where an employee has been rude to us.  We share information among friends about companies as investment candidates.  We recommend contractors who have done good work for us – and we tell everyone about a provider who has done a poor job or overcharged.

In our business lives, we also have interests that could influence the way we do our jobs and the decisions we make in the workplace.  Even if we never act on them, there may be an appearance that a conflict of interest has influenced our decisions.  Consider this example.  Your supervisor is promoted to department manager.  His daughter-in-law is hired as the new supervisor and reports directly to the department manager.  Now, maybe the new supervisor is the best candidate for that position; maybe the new department manager can maintain total objectivity in overseeing the work of his relative.  Despite that, the situation appears suspicious and people could be forgiven for thinking that something was unfair or unethical about it.  When it comes to conflicts of interest, appearance is as important as reality.

Another reason conflicts of interest are taken so seriously by government agencies, industry organizations and corporations such as ours is that they are often “stepping stones” to more serious ethical misconduct and criminal activity.  Often, conflicts of interest set the stage for crimes including theft, fraud, kickbacks and insider trading.

Our company’s Code of Conduct contains clear policies about conflicts of interest and related topics such as how to handle gifts, hospitality and financial issues.  Any potential conflict of interest should be reported to your supervisor or the Chief Compliance Officer, who will determine whether it presents an ethical or compliance risk.  In some cases, simply reporting the conflict is enough.  In other cases, you will be asked to recuse yourself from any decision related to the conflict.

For example, if you are on the hiring committee and are friends with one of the job applicants, you would be asked to remove yourself from that application review and interview.  In a case where an individual has direct supervisory authority over a relative or friend, the CCO might require reassignment of those responsibilities.  In a case involving financial investments or interests, you might be required to divest investments that represent a conflict of interest.

By following our conflicts of interest policies, we achieve important objectives:

– Compliance with multiple federal, state and local laws governing conflicts of interest;

– The appearance of favoritism or unfair advantage, even if the conflict has never been acted on;

– Preferential treatment and unfair advantages for individuals who benefit from conflicts of interest;

– Serious ethical misconduct and even criminal activity that starts with a conflict of interest and too often ends in theft, fraud, kickbacks and corruption.

Points to Consider

– Conflicts of interest are regulated by federal, state and local laws as well as by individual companies, academic institutions and nonprofit organizations.

– Our company’s Code of Conduct specifically addresses conflicts of interest. Any questions about a specific situation should be referred to the Chief Compliance Officer.

– Simply having a conflict of interest is not illegal – but letting those interests affect your actions, decisions or judgment are serious violations of law and our Code.