Global Challenges in Addressing Conflicts of Interest (Part Two)
By Lori Tansey Martens
In my last post, I outlined some of the challenges that global organizations face when implementing conflict of interest procedures throughout the world. In this post, I make recommendations to help mitigate some of those challenges.
Standards and Policies
First, many international employees will be unclear as to the definition of conflicts of interest. Accordingly, conflict of interest standards should include a clear and precise definition of the concept. Unfortunately many companies define conflicts of interest around the following lines: A conflict of interest occurs when you have personal interests which may conflict, or appear to conflict, with the company’s interests, or, A conflict of interest arises when we become involved, directly or indirectly, in activities that could impair, or be perceived to impair, our responsibility to act in the best interests of the company.
Sound familiar? The problem with this type of definition is that it assumes that the employee’s and the company’s interests are at odds – the term ‘conflict’ itself is negative. Yet, many international employees will see some of these situations not as conflicts, but as “win-wins,” both for themselves and for the company.
If we could go back and rewrite our terminology on this topic, I would recommend that we talk about “Confluences of Interests” as opposed to “Conflicts of Interests”; however, I doubt that’s going to happen anytime soon. But companies can certainly embed this concept into their definitions. For example, companies can add the following to their standard conflict of interest definitions: We may face situations where there is an overlap between our own personal interests, and the interests of the company. Even when these situations appear to be in the best interests of both parties, they require particular care and scrutiny by your manager (or other appropriate company resource.)
The policy itself should also include “Q&As” that illustrate the nuances around some of the situations that can arise in an international context. For example: Q. In our region, the best supplier for a certain resource is a firm owned by our Managing Director’s wife. To not buy from this firm will increase our costs significantly. What should we do? A. In certain situations, the company may elect to do business with suppliers who are closely related to key personnel. However, in all such cases, in order to promote transparency and to ensure fairness in supplier selection, the personal relationship must be disclosed to the Regional Director, who will make a determination as to the best course of action.
Another global concern is that some companies may consider employee involvement with certain non-profit organizations and charities to be a potential conflict of interest. However, companies should be aware that this is a particularly sensitive issue in Europe. Employees in Europe may view such concerns as a violation of their right to privacy. If companies include this element in the standard, the language should be very precise. For example, companies might specify that service in charities and nonprofit organizations “with aims that are overlapping or in direct conflict with the goals and aims of the Company” should be disclosed.
The standard or policy should also include a statement demonstrating respect for employees’ right to privacy for relationships that are outside the business sphere. For example, “The Company respects the privacy of personal affairs of all employees, but employees must disclose situations that could result in real or perceived overlaps and/or conflicts between their personal interests and the interests of the Company.”
Finally, the policy should explain why managing confluences of interest are important for an organization. The rationale should extend to both potential ‘conflicts’ (e.g., an employee’s personal relationships may compromise his/her business judgment, decisions clouded by personal interests can negatively influence the long-term welfare of the organization, etc.) and ‘confluences’ (e.g., the company desires full transparency even in situations where both the company and the employee stand to benefit from the particular situation to ensure fairness, avoid misunderstandings, etc.)
The same considerations for policy concerning definitions, illustrations and rationales, holds equally true for training. Dedicated training on this topic is a must in many international locations given that, as discussed in the previous blog post, it may run counter to prevailing local culture and customs. And similar to the formation of policy, the training needs to focus on not just the “what,” but the “why” and the “how,” using scenarios, case studies, and potentially even role-plays.
Multinational companies should avoid blanket prohibitions against all confluences of interest since situations may arise internationally that are unique and ambiguous. Likewise, there may be situations in which overlapping interests are unavoidable. If a company operates in small villages where all residents know each other, it could be difficult for staff to avoid business relationships with relatives or friends. The conflict of interest processes can anticipate these situations and outline clear procedures for employees to follow. For example, many companies place the focus on disclosure of these situations to management, or other appropriate company resource, either verbally or in writing, instead of forbidding such situations outright.
While conflicts of interest can pose global challenges, companies can anticipate and mitigate many of these concerns through well thought-out standards, dedicated training and adaptable procedures.
And I’d like to thank my good friend Jeff Kaplan for allowing me to post on his blog site. I’m hoping that you’ll agree that this was a good example of an entirely appropriate ‘confluence’ of interest!
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