Training Managers on Conflicts of Interest

While COI risks can exist at any level of an organization, as a general matter the risks increase (often sharply) as one proceeds up the org chart.  Most obviously, this is because a) senior managers tend to have greater opportunities for COI-fraught relationships and activities than do other employees; and b) COIs at higher levels of an organization are likely to be more harmful than are lower-level conflicts.   Perhaps less obviously, and the subject of a future posting, the findings of recent behavioral ethics research demonstrate that individuals with power in organizations tend to be less self-critical than are others on ethical matters.

Given all of these factors, training managers on COIs can be an essential risk mitigant for many organizations.

COI training for managers can (and often should) be part of broader C&E training covering other significant areas of risk, as well as the roles of managers in the operation of the C&E program.  Such training typically has two dimensions: an individual one – to help managers avoid having COIs themselves, and an organizational one – to assist managers in preventing/addressing COIs by colleagues and third parties.

More specifically, one might i) start the COI part of the training with an attention-getting hypothetical (or actual) case, perhaps showing how harmful even well-meant COIs can be; ii) identify generally the types of COIs most relevant to the entity (individual COIs for all, organizational ones for some), as well as any special COI issues (such as, for certain types of entities, the need to avoid contributing to a COI by a third party); iii) describe the legal and business imperatives for strong C&E efforts in these areas; iv) discuss how employee perceptions of COIs by managers can undermine faith in the C&E program as a whole (an aspect of “normative compliance,” which also will be the subject of a future post); v) review applicable company policies and procedures regarding COIs, perhaps using a hypothetical case to illustrate how they should work; vi) examine particular compliance challenges for this risk area, including the tendency of individuals to rationalize conflicts-driven decision making and the frequent difficulty of challenging individuals on matters that have a sensitive personal dimension (which COIs often do); vii) explain what a manager’s specific role is to ensure COI-related compliance; viii) identify COI-related “red flags” to help them meet those responsibilities; and ix) connect COI issues to other risk areas of significance – such as corruption, fraud and insider trading/confidential information.

Finally, it may be helpful to offer the training within a framework of achieving and maintaining “heightened ethical awareness,” which should be seen as a true facet of leadership at the company.


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