Managing Conflicts of Interest at the Workplace

“Central goal of conflict of interest policies is to protect the integrity of professional judgement and to preserve trust rather than to re-meditate bias or mistrust after it occurs.” – Institute of Medicine of the National Academics 2009

Conflicts are a very real part of life and definitely in professional settings. Too many of these can be counter-productive and can adversely affect employees, customers and all those associated with a company. The worst type are, conflicts of interest where the employees of the company have financial and other personal interests with customers or other business partners of the company and these ‘interests’ could seriously compromise their judgement and decision making, adversely affecting the company.  Conflicts of interest result in reduced productivity, shoddy customer service and possibly even litigious situations. Such negativity and bad publicity never works in favour of a company and hence companies must actively and consistently put in place stringent measures and policies that will keep conflicts of interest away from their company.  As history will show, getting completely rid of the effects, of conflicts of interest and the resultant unpleasantness is never possible, and companies spend a lot of time, money and effort on rectifying the repercussions.

Many companies have, as part of their business plan and strategy, a method by which employees can upon joining and even during their employment disclose probable conflicts of interest. Immediate disclosures from the employee / s help the company, to better plan and formulate strategies to keep the repercussions at bay. For example, this employee worked in the HR department of a very large retail chain. While in employment, his wife started out her own venture of a recruitment consultancy. The employee, her husband, immediately declared this and the company ensured that all the necessary regulations and checks were followed while considering the lady’s consultancy for their recruitment requirements. In another example –a new vendor of office supplies was hired. It was a large firm and the consumption of office products was obviously high and the administration manager was responsible for the negotiations and supplies. What the company did not know was that this vendor was a friend of the manager and each bill approved meant that some commission was reaching the pocket of the manager. Soon this nexus was busted but not before other vendors accusing the company of fraudulent practices and not getting contracts because they didn’t pay up. The employee and the vendor were fired after a number of hours spent in gathering proof.

 Just like any other aspect of business, even conflicts of interest cannot always be known or predicted. Therefore companies must, to start with, make disclosure mandatory and failure to do so resulting in immediate termination of the employee and the third party involved.  It would behove a company to have robust business policies to be able to evaluate and deal with situations that could be classified as conflicts of interest. The managing of such situations is the prime responsibility of the company but employees must also be made aware of the potential risks of conflicts of interest and the repercussions non-disclosure would have on their professional life. It is crucial that employees understand the importance and refrain from entering or not disclosing such alliances. If a company comes to be known as one which does not take conflicts of interest seriously, it’s customers would sooner than later switch to a company with higher morals and integrity. In addition, dishonest employees would also not be concerned with customer service resulting in customers breaking away and as such a reputation spreads, a company might as well just shut itself down.

Many companies enforce and reinforce their policies around conflicts of interest by not allowing people related to each to be either employed in the same department nor have any kind of reporting relation. If the spouse of the employee is a vendor with the company, the employee would not have any role in the dealings with the said vendor. Many companies discourage office affairs and if a relationship does develop, at least one of the involved persons would need to leave the organization. Even an appearance or possibility of such conflict is not taken lightly. Conflicts of interest, is a very serious matter, which if left unchecked could leave a company struggling to survive.

Have you had instances of conflicts of interest in your company? How have you handled them and what do you believe constitutes conflicts of interests? Some instances are very clear – for example a husband wife duo working in the same department and either one as the supervisor of the other. Every other employee is bound to feel insecure and there would always be the feeling of favouritism and preferential behaviour. It is the company’s responsibility to ensure that such a situation never occurs and if such a situation arises because the two employees got married post their employment with the company the company must immediately rectify the reporting relationship. There have been instances of conflicts of interest at the very highest level too. If the top person buy shares or stocks of a company, who is also a customer, would mean that in order to get information and preferential treatment, this top person would ensure that special ‘benefits’ are given to the customer company. This is clearly a breach of trust of the company they work with.

In order to earn more, some employees also indulge in providing professional consultancy or other services, with their knowledge of the company that employs them. Their ‘customers’ could include vendors, customers and the worst of all, people from competing companies. This is extremely unhealthy and a potentially dangerous situation for the company as the employee could well be disclosing information about the company that could jeopardise its security and very existence. It is quite tough to keep a check on what employees do in their time outside the company, but still the company must get all employees to sign an undertaking that would state that their employment would be terminated immediately if proved guilty.

Some of the largest and most successful companies have become so because their policies on conflicts of interest are non-negotiable and fall within the no-tolerance zone. No one in these companies is allowed to accept or ask for gifts, favours, service or anything from vendors, customers or other third party business partners. Engaging in such activity puts the employee and the company at a disadvantage as these third party persons could ask for a ‘return’ of the favours / gifts in ways that could be potentially detrimental to the company. Irrespective of the position of the person and occasion or reason, these actions are and should be severely punished.

To mitigate the risks and reduce the number of conflicts of interest, companies must make it a practice to have robust and exemplary employee and customer policies. When companies take care of their employees and customers, they are able to build commitment and loyalty in the minds of these two very vital ‘partners’, which in turn leads to a successful and sustainable business.  Showing these two sets of people that your company cares about them must be part of the corporate culture but still there must be stringent policies to uphold the interests of the company and safeguard it from any potential malefactors or malicious intent.  Managing and locking out conflicts of interest is a challenging task for any company but yet it is crucial that companies maintain the balance of the relationships between their customers, employees and other third parties.

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