Compliance &Ethics - Society of Corporate Compliance and Ethics

y Peter FazioConflict of interest:It’s not so bad if I don’t getany benefit out of it. Right?»»Familial relationships among employees can create real conflicts of interest.»»Conflicts of interest related to employee interactions have a tangible cost to the organization.»»Conflict of interest risk management should be addressed as a component of the organization’s overall anti-fraud program.»»Disclosure of conflicts of interest to a higher level tends to increase the trust of the discloser without the intended increase in the levelof professional skepticism for the integrity of the transaction.»»The real challenge with conflicts of interest is the manner in which we react to them or ignore their impact on the integrity of our work.FazioThe title of the article is an excerpt froma discussion that I had with a client.The discussion focused on brandingprofessional interactions between two employeeswith a familial relationship as creating aconflict of interest. Let me just say upfront thatthe nature of the working relationshipbetween the two parties has neverbeen associated with any wrongdoing.My client’s comments created areal dilemma for me. I wondered if apotential conflict of interest is reallyanything to worry about. Hopefullyin the next few paragraphs, I can providesome insight into why the typicaldismissal line “No harm, no foul” does notapply to a conflict of interest.The Society of Corporate Compliance andEthics (SCCE) defines a conflict of interest asexisting “…when one’s personal interest competeswith the interests of another to whomone owes some duty.” In a business setting, theduty owed is to the employer, and that dutywould most typically take the form of loyaltyto the employer, abiding by the employer’scode of conduct, safeguarding the employer’sproperty or sensitive information, and ensuringthe integrity of business communications.Determining if a conflict exists is difficult, dueto the large number of personal interactionsthat (given a certain context) could constituteboth a conflict and the absence of one.One example of a conflict of interest thatI have encountered multiple times is a familialrelationship between two employees whowork for the same company. If the employeeswork in two different departments with notransactional interactions on a professionallevel, then it would be highly unlikely that aconflict of interest would arise in the workplace.When there is a transactional interactionbetween the two related employees, such as inthe example below, the potential for the existenceof a conflict of interest rises.ExampleBrian in Marketing creates a purchase orderfor marketing materials from a new vendorthat his friend recommended as having verycompetitive prices. Brian’s cousin Harold is thepurchasing manager for the same company.Harold reviews the purchase order from BrianCompliance & Ethics Professional May/June 2013+1 952 933 4977 or 888 277 4977 www.corporatecompliance.org 71