Successful organizations understand people are their greatest asset. But they can also pose a significant liability to the business. Adding a human element into any situation poses somewhat of a wild card – Decisions are rarely purely objective and personal interests can muddy the waters in business dealings.
Conflicts of interest (COI) arise when an individual’s personal interests could compromise their judgement, decisions, or actions in the workplace. Conflicts are caused by friends and family, financial or social factors, and can be detrimental to the business.
While not all conflicts of interest are illegal, they can still be damaging. Common consequences of COIs include negative impacts to corporate culture and reputation, confidential information disclosure, steep fines, and legal recourse.
Creating policy around addressing and managing COIs is a complex task with many nuances to consider. Starting with a comprehensive COI policy that aligns with your company’s core values is a natural first step. Mandatory disclosures and appropriate controls help to shape the policy, and consistent communication and enforcement is key to ensuring all employees act in adherence with conflict of interest protocols.
Creating and enforcing a comprehensive conflict of interest policy might sound straightforward, but in practice, many struggle with the execution.
Identifying a COI can be challenging for many reasons, one of which is reluctance to speak up. Many employees are nervous about potential consequences of reporting conflicts. It’s an easy logical leap for anyone to make; “If I have a conflict of interest, I must be doing something wrong, therefore I’ll face consequences.”
In reality, they may be correct. Corporate cultures vary greatly, and responses and outcomes may be less than desirable for the employee in question. Addressing how these issues are handled is a whole separate topic, but it is clear that allowing a safe space for employees to come forward is fundamental to addressing COIs. Having a COI is not always bad or unethical – but failure to disclose one is.
Again, it is a nuanced conversation. People are less likely to come forward to solve for a conflict if they fear the repercussions for disclosing it.
Management of COIs is another aspect that needs examination. How are reports being collected, reviewed, tracked, and addressed consistently and fairly? For example, global organizations must maintain consistency in policy, investigation, and management of COIs. How should a company address cultural differences that would pose a COI in the United States, but may be a common practice in other countries? Bottom line: the entire process can get messy if not handled properly.
Conflicts of interest can take many forms and involve multiple stakeholders. Addressing the broad scope of risks they can pose to the business is fundamental in maintaining and ethical and compliant workplace.
Join Rebecca Walker, Partner at Kaplan and Walker, and Christopher Miller, Lead Counsel – Compliance and Regional Compliance Officer, North America at GM as they discuss conflicts of interest in more depth at the NAVEX Next Virtual Conference, On October 6th.
