Conflict of interview review processes

As prior posts have discussed, reviews of disclosed employee conflicts of interest pose a number of challenges. Disclosures may not truly mitigate conflicts.  Indeed, they may actually cause more wrongful COI-based conduct to occur than would be the case absent a disclosure.

Still, very few business organizations opt for a true “zero tolerance” approach to all COIs.  And for those that don’t, COI review processes are necessary for determining when a COI should be permitted to exist and under what conditions.

At a minimum, COI reviews should be conducted by an independent person or body.   Independence for these purposes means more than COI-free in the traditional sense.  It should also encompass the behavioral ethics concept of “motivated blindness,”  i.e., a reviewer should not be someone who may – due to the relationships involved – be inclined to approve a conflict-laden relationship or transaction.

For this reason, companies may wish to have COI reviews conducted by a C&E committee.  One obvious benefit to this approach is that there is “safety in numbers.” Another is that the committee will have or develop expertise (born of experience) in evaluating conflicts, which behavioral ethics research shows can be useful.    Offering less C&E protection – but still more than having COI reviews made by a line supervisor – is tasking a staff function, such as legal or HR,  for this job.

Of course, some companies do permit supervisors to approve COIs.  If this approach is adopted, companies should still seek to have a reasonable degree of rigor in the process by:

– requiring that any approvals be in writing and sought before engaging in a conflict-based transactions;

– providing and publicizing avenues for supervisors to ask questions of the C&E function when performing COI reviews; and

– including the issue of COI reviews in supervisor training – or, if this is impractical, providing written guidance (e.g., FAQs)  regarding such reviews.

Finally, companies should check on the supervisors’  actions in reviewing or approving COIs, such as through audits.