Approvals of conflicts of interest: what is the appropriate standard?


While some organizations bar conflicts of interest in all cases, many opt for allowing COIs  to exist where appropriate. But how should appropriate be defined for these purposes?

One formulation that I have recommended is:

A COI may be approved only where doing so would clearly be in the best interest of the company.

Two comments about this.

First, the word “clearly” is intended to require a showing greater than a mere preponderance of the relevant facts. Of course, it is not as high as “beyond a reasonable doubt,” which, in my view, would be widely seen as overkill in this setting.  But, it is still a high standard  and presumably would require rejection of any proposed COI where there was a lack of genuine clarity on this issue.  Indeed, given that COI problems often involve lack of clarity, the use of the word in a COI policy should itself be helpful.

Second, the “best interest of the company” should be read broadly. It requires more than an absence of corruption or other  outright misconduct. Rather, it also mandates consideration of how  the COI at issue could impact the ethical culture of the organization and related matters.

For more on COIs and harm see this recent piece from the FCPA Blog.

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