Work-Ethics.com: Business Ethics Auditing and Human Resource Management

Combating Conflicts of Interest

"But I thought it wasn't a problem! I'm an honest person, how could you believe that my sideline web site design business would interfere with our e-commerce consulting business? All I ever do is help out a customer that really isn't big enough for the services we provide…."

You've heard these musings, either at the aerobics class, or waiting in the lounge for your connector flight in Atlanta. Conflicts of interest are more than headlines that blurt, "Politician caught in conflict of interest " or "professional denies conflict of interest allegations in the auto industry. " Did you ever wonder if you should be thankful that you haven't been the object of a business section newspaper story for conflicts of interest violations? Or, are you wondering about what to do to forestall such a story making you an interesting tidbit for one of the financial news services? Read on if you've wondered what exactly is a conflict of interest, why such conflicts are ethically significant, and what you can do to avoid being in one.

Definition

You know you're facing a conflict of interest if you (or in some cases your organization) have a private or personal interest sufficient to appear to influence the objective exercise of your duties. Restated, if something you do might be construed as something that can turn your decision-making away from your obligations towards serving your narrower, personal interest, then you are confronting a conflict of interest.

Three elements must be present to for us to determine if we're facing a conflict of interest: First, one must express a private or personal interest. That is, something we value (it doesn't necessarily have to be financial) has to be pursued (even passively) in such a way that there is an obviously expressed vested interest. Singularly, there is nothing wrong with pursuing private or personal interests, for instance, changing jobs for more pay or helping your daughter improve her golf stroke.

The problem comes when this private interest comes into conflict with the second element of recognizing the existence of a conflict of interest: that is your acting within or because or in conjunction with--an "official duty." Your official duty quite literally exists as the duty you have because you have an office, position, responsibility, authority, or are directed to act in an official capacity. The concept of obligation is paramount to this element. As a professional you take on certain official responsibilities, by which you acquire obligations to clients, employers, or others. These obligations are supposed to trump private or personal interests.

Interference with your position's obligations or your professional responsibilities is the third element in determining the existence of a conflict of interest. We look for indications that the interference exists with specificity, namely, by interfering with objective professional judgment.

A major reason clients and customers value professionals and consultants (such as business practice consultants, attorneys, or financial investment analysts) should be that they expect these individuals to be objective and independent. Factors, like private and personal interests, that either interfere or appear likely to interfere with objectivity are then a matter of legitimate concern to those who rely on professionals -- be they clients, employers, professional colleagues, or the general public.

Avoid apparent and potential as well as actual conflicts of interests. This is a straightforward direction to manage individual ethical behavior, but it is key to avoiding conflicts of interest. What can we use as a meter of apparent, potential or actual conflicts of interest? Well, an apparent conflict of interest is one that whereas a reasonable person would think that the individual's judgment is likely to be compromised. A potential conflict of interest involves a situation that may develop into an actual conflict of interest.

Categorizing Conflicts of Interest: A Tool for Typecasting

Let's move towards a brief listing of typical conflicts of interest. This is not an exhaustive list, but it does provide lenses through which to view suspected conflicts of interest with which you may be wrestling:

Vested self-interest: For example, you work for a network installation company, and use your official position to secure a contract for a private consulting website development company you own.
Unearned gratuities: For example, bribery; or valuable [non token] gifts are another. Remember, something of value means that it matters to the one who receives the benefit. For example, you are the purchasing agent for your department and you accept a flat-screen monitor from a major supplier.
Persuasion: Or, quid pro quo; the professional solicits benefits in exchange for using her influence to unfairly advance the interests of a particular (internal or external) party.
Private use of another's good (property): Stealing. The classic example is taking office supplies for home use. Or it might be a bit subtler, through the act of using software that is licensed to your employer for private consulting work of your own. As an important distinction, in the first case, if the employer grants permission, conflict is eliminated; while in the second, a broader scope exists, and the employer is not empowered expand the umbrella that the license provides.
Confidentiality: You are obligated to behave under the cloak of trust. A blatant conflict exists if while working for a private client, you learn that the client is planning to buy a start-up competitor, and you quickly rush out and buy stock in your partner's name, or pass along this 'tip' to another.
Fractured commitment: You have the skills, knowledge, and contacts to enable you to establish a venture on the side that is in direct competition with your employer, and you move forward while still in their service. Your obligation is fractured, and your commitment to the one who is providing you with the time, money, and opportunity is eroded.
A marshmallow landing: An area in which government has actively legislated. An individual with a specific skill set, defined lines of authority and responsibility, and a well honed network of contacts departs their employer to go to work for a supplier or competitor. The marshmallow landing negates the risk of striking out on one's own.

Senior executives through first line supervisors should be empowered to determine whether a situation they confront is likely to interfere or appear to interfere with the independent judgment. The line of defense against conflict is better modeled on the idea of "defense in depth."

How do you determine if you are in a conflict of interest, whether actual, apparent, or potential? Well, test to determine if obligations are met: would relevant stakeholders [my employer, my clients, professional colleagues, or the general public] trust my judgment or feel that I was maintaining my duty to obligation if they knew of the situation? Obligation (and the duty to maintain an unfettered commitment to it) is at the ethical heart or core of this issue. Conflicts of interest involve the abuse, actual or potential; of the obligations people have in our practices, relationships, and independence.

Therefore, what is paramount to consider in any of these deliberations or confrontations is that conflicts of interest not only injure the relationships that are the glue of our commitments, but they also injure and taint the whatever profession or service that is involved by reducing the trust that people place in our commitments to obligations.