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CONFLICT OF INTEREST - ORGANIZATIONAL DUE DILIGENCE AND PROTECTION

Brad Holman
Executive Vice President & Chief Operating Officer 

The development and implementation of concrete and sustainable conflict of interest guidelines and policies is fundamental to the integrity, trust and health of an organization. The lack of such guidelines can lead to internal financial manipulation, corruption, unfair business practices and a loss of public trust and market share.                      

The development of organizational conflict of interest policies is not always given appropriate attention, especially when the potential ramifications, threat and risk of inadequate polices are taken into consideration. Moreover, the lack of adequate guidelines makes it difficult to effectively deal with conflict of interest violations. As a result, it usually requires the assistance of an investigational service specializing in conflict of interest or corruption investigations.

It is important that an organization’s culture be consistent in an understanding of what constitutes a conflict of interest.  While each public and private sector organization has varying requirements, a pervasive societal definition of what constitutes a pecuniary conflict of interest is common.

For example, Chris MacDonald, Michael MacDonald and Wayne Norman, “Charitable Conflicts of Interest”, Journal of Business Ethics 39: 1-2, 67-74, August 2002 (pg. 68) stated:

“We can define a conflict of interest as a situation in which a person has a private or personal interest sufficient to appear to influence the objective exercise of his or her official duties as, say, a public official, an employee, or a professional.”

“A conflict of interest occurs when an individual or organization is involved in multiple interests, one of which could possibly corrupt the motivation for an act in the other.”

The Office of the Conflict of Interest Commissioner for the Province of Ontario defines a conflict of interest as:

“Any situation where a public servant’s private interests may be in conflict with his/her public service responsibilities; public servants are in a position of trust and are accountable for fulfilling their duties with integrity.”

Organizational values such as: honesty; integrity; professionalism; trust; commitment; competency; excellence; and credibility are fundamental in the development of effective conflict of interest guidelines and policies.

For an organization to fully understand the ramifications of inadequate conflict of interest or ethical guidelines, it is important that a comprehensive risk and threat analysis be completed. This includes a review of existing policy, guidelines, organizational culture, legislative and employee expectations. Once completed, the development of an action plan designed to mitigate the risks can be undertaken.

Additionally, organizational culture must foster an environment where all employees, from the CEO to the frontline worker, are expected to avoid situations of conflict and immediately and willingly disclose any pecuniary interests, direct or indirect, which may be construed as prejudicial in any way, in fact or perception, to the judgment of the employee in conducting their responsibilities. This is particularly important in the fields of finance, securing contracts, procurement of any goods and services, and human resources where nepotism can be problematic. The acceptance of gifts from clients is also an area saturated with potential problems.

The lack of such effective conflict of interest policies and organizational culture can be problematic from a human resource perspective regarding new employees who theoretically commence work while being totally unaware of corporate requirements. This lack of policy could complicate difficult human resource decisions which may be required following a conflict of interest indiscretion.

The Investigative Research Group’s Special Investigations Unit enjoys considerable experience and expertise at the corporate and municipal governance board level and with governmental threat, risk and managerial audits regarding conflict of interest.  Further, policy development designed to protect corporate assets, reputations, and conflict of interest standards is a strong suit of the Elite Investigative Team.

The Special Investigations Unit is a highly skilled and experienced group of former senior law enforcement experts who can be deployed to proactively conduct a high level, effective and discreet investigation should your company become the victim of a conflict of interest of corruption related wrongdoing.