Global Challenges in Addressing Conflicts of Interest (Part One)

By Lori Tansey Martens

Part I of this blog post will  deal with the challenges that firms may face when implementing conflict of interest policies and programs around the world.  Part II will present approaches and strategies to mitigate many of these challenges, in order to increase adherence to company standards.

 Perhaps the biggest challenge faced by most “westerners” when navigating conflict of interest challenges around the world is that they have a hard time understanding that the rest of the world doesn’t always think like they do, nor share their value systems.   In fact, many cultures do not subscribe to the belief that the business world is better off with impartial, ‘arms length’ relationships. 

 Yes, you read that correctly. Many societies including parts of Asia, Africa and the Middle East, actually believe that developing close relationships is the most important factor for success in business (and, frankly, in life as well.) Activities that foster close relationships are, therefore, seen as positive and ethical, even if they may meet the West’s definition of a conflict of interest.

I remember conducting an ethics workshop for a major multinational company in Africa.  We presented a conflict of interest scenario about hiring a brother-in-law as a supplier, but the participants were aghast at the “correct” answer, which was not to hire the family member’s firm.  “It is unethical for me NOT to hire my brother-in- law if he is qualified – and he will do a better job for my company because he is my brother, and therefore more accountable to me,” said one participant, summarizing the feelings of the entire group.

Now, I’m not suggesting that companies adopt the value systems in other cultures, but understanding the perspective of employees in other parts of the world is imperative to successfully implementing your own conflicts of interest policy.

Asia

In many Asian cultures, business has been conducted for centuries by family members with other family members, so the idea of “arms-length” makes little sense to many employees.  In fact, over 70% of businesses in Asia are family-owned, and even many of the large multinational corporations throughout Southeast Asia are connected through extended family ties. 

Additionally, in Asian cultures, social reciprocity is an important cultural tradition. In Chinese cultures it is known as “guanxi,” while in Japan, it is known as “kashi” and “kari.” These are best described as “favors” one party does for the other to build a relationship, and they are considered serious social duties.

In many instances, guanxi may be the only way to find scarce resources, trusted suppliers or a route through government bureaucracy. Lyman Miller, director of China Studies at Johns Hopkinʹs Paul H. Nitze School of Advanced International Studies, said of guanxi: ʺTo some Americans, it may seem mildly like corruption or insider dealings, but in China, itʹs the natural way of doing things. Everything is done through connections. Things that weʹd blanch at are standard operating procedure over there.ʺ

Africa

Historically, in many African countries, the moral responsibility of the individual was to contribute to the happiness and welfare of their individual family and their tribe.  The concept of social reciprocity also exists in African, albeit in a somewhat modified form from the Asian concept.  In parts of Africa, reciprocity goes more to the need for mutual assistance and aid, as expressed in the African proverb, “the right arm washes the left arm and the left arm washes the right arm.”

Middle-East

The business community in many Middle-Eastern countries can be small and, like other regions discussed, has traditionally been based on family. Depending on the country, it is likely that employees will face situations in which the only supplier for crucial services or supplies, or even the most qualified candidate for job openings, comes from a related party. Cross membership on boards is also common, sometimes even among competing organizations. And parts of the Middle-East can be particularly sensitive to the perception of “cultural imperialism,” resenting the imposition of Western values over local culture and customs.

 Europe

Many American firms can be surprised by the strength of attitudes toward personal privacy and the marked separation between personal and business life, which in some cases is supported by employment law in Europe.  While many American employees are used to lengthy conflict of interest disclosure forms, which ask about family relationships, financial holdings of family members, personal and professional associations, some of these questions will be resented by European employees as an unnecessary intrusion into their family and private lives.

In my next post, I’ll detail some strategies global companies can employ to navigate these challenges and successfully implement a conflicts of interest policy throughout their operations.

 Lori Tansey Martens, a 20-year veteran in global business ethics, is the President of the International Business Ethics Institute.  The Institute helps companies develop effective global ethics and compliance programs.  For more information, please visit www.business-ethics.org

 

One Comment
  1. Jason Lunday 6 years ago

    Nice insights, Lori, to a topic that continues to challenge global companies operating from a US perspective. You raise the helpful perspectives that others’ beliefs about the value of connections can be at times useful to the buainess and/or a problem relationship.

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