Published on November 7th, 2007 by Alan L Sklover
“A man with one watch knows what time it is. A man with two watches is never quite sure”
- Lee Segall
ACTUAL CASE HISTORY: Edna, a Senior Account Executive at a large advertising agency headquartered in Minneapolis, knew her career was moving forward “on all cylinders.” She was her agency’s chief liaison with its largest client, she was known for her sharp business savvy both inside her firm and among the advertising community, and she was a frequent and favored speaker at advertising industry conferences and forums.
At one such industry forum, Edna was a member of a Panel leading a discussion of industry trends. That evening Edna had dinner with Jeannette, her primary contact at her second-largest client, a sports equipment manufacturer. During their dinner conversation, the two reviewed that day’s Panel discussion, including an industry trend toward the use of “blind auctions” by advertisers to place new advertising business. Edna offered to send Jeanette a draft memo her staff had prepared for her, including its “pros” and “cons.” Jeannette thanked Edna for her kind offer, and asked her, as a matter of simple courtesy, “Edna, you are always so gracious. Is there anything I can do to return the many courtesies you have shown me over the years?” Without much thought, Edna responded, “Jeannette, come to think of it, there is one small favor I might ask of you . . . my nephew, Connor, a junior in college, is having a hard time getting a summer job; he’d just love an internship with a company like yours.” Jeannette told her to “Consider it done. Every year we offer internships to lots of college kids.”
It was four months later that Edna was asked to come to a meeting with her boss and an HR representative, and once there was told there was a “problem.” “What problem?” Edna asked. She was then told that her sharing purportedly “confidential, proprietary information” about the use of the auction system with a client had come to light. It seems that one of Jeannette’s colleagues had used information from it to negotiate against a team headed by one of Edna’s colleagues. That colleague was incensed to find out that arguments assembled by Edna’s team had been used to negotiate against him. When asked if Jeannette had offered Edna anything in return for it, Edna said, “Of course not.” She didn’t connect her nephew’s summer employment, because in her mind there simply was no connection. Eventually, though, Connor’s summer employment did become known, and was characterized by General Counsel’s office as a “clear and compelling conflict of interest, strictly prohibited and a very serious act of misconduct.” The matter was being referred to the Board Audit Committee.
Edna was speechless, in fact, almost breathless. She viewed what had happened with Jeannette as entirely harmless, and in no way a conflict of interest. Neither she nor Jeannette had gained personally by the two small favors. Neither Edna’s company nor Jeannette’s company had gained or lost anything in the process. Both courtesies were common gestures of good will that took place between business people, she thought, on a daily basis. Not a penny changed hands. She had even paid for her dinner. “How could such a harmless thing,” she thought, “be elevated into such a serious allegation?” How could anyone be swayed into thinking she had given away valuable secrets in return for a summer internship?
A week later, Edna was given a choice: being fired for “cause,” or being “permitted to resign.” Edna chose the “resignation,” but in exchange for being permitted to resign, Edna was required to sign an agreement by which she had to agree to keep the matter entirely confidential and refrain from providing any services to competing firms or her former clients for 12 months. Edna’s financial losses included her annual bonus and significant stock options that had not yet vested. Edna’s greatest loss was to her reputation, and to her career, as the fact that “something bad had happened” was all over the industry. All for a simple exchange of small favors, nothing more than simple courtesies. Or so it seemed to Edna.
LESSON TO LEARN: Conflicts of interest – actual or perceived – can cause great harm to your career, your finances, and your reputation. It is not a remote possibility that a conflict of interest may somehow come into your work life; in truth, it is an inevitability that, sooner or later, you will find yourself faced with a conflict of interest at work that could cause you great harm. Considerable care and attention needs to be given to avoiding conflicts of interest, and to addressing them should they nonetheless arise.
The one real key to avoiding the serious damage that a conflict of interest at work could cause you is developing and maintaining a healthy “sensitivity” to the potential problem. In this context, a healthy “sensitivity” means (a) understanding the concept of conflict of interest, (b) being able to spot a conflict of interest in your midst, and (c) knowing how to remove or diminish the dangers a conflict of interest represent.
The material below is a short course in “what you need to know about conflicts of interests at work.” The rest is up to you.
WHAT YOU CAN DO: Here are the essential points you need to know about conflicts of interest, and avoiding the harm they pose to you:
1. Understand what a “Conflict of Interest” is. A workplace conflict of interest can be defined as: “(1) Any circumstance, relation or arrangement (2) whether intentional or accidental, (3) that presently does or might in the future (4) serve to tempt a person to address, pursue or promote (5) interests contrary to those of the persons’ employer (6) other than contrary interests knowingly consented to by the employer.” Sure, that could describe a lot of situations, but that’s the point: a lot of situations can be characterized as “conflicts of interest,” and it is important that you understand the concepts underlying conflicts of interest, and bear a watchful eye for them.
2. These are some examples of Conflicts of Interest at work. Prevention is the best cure for most problems. Consider what you do at work, and what you do that is related to your work, that might make other people think that you might be acting, or tempted to act, against your employer’s interests. These examples might help:
a. Your owning part of a business that sells goods or services to your employer. Might you be tempted to have your employer order the goods and services of a company you own, instead of using an alternative vendor? Might you be tempted to pay your own company a bit more for its goods or services, or negotiate with less ardor? It makes no difference that the goods obtained from your part-owned company are the best and least expensive; the conflict is there, and real.
b. Your hiring a relative to fill a vacant position. Might you have hired your relative instead of another more-qualified applicant? It makes no difference whether your relative was the most qualified applicant; were it not for your relation, you might have placed another help-wanted ad.
c. Your sharing confidential information with a client or competitor . Might that sharing have made your own relationship with the client closer, or tempted a competitor to hire you in the future, at your employer’s expense?
d. Your accepting a favor or a gift from a client. Business gifts are given and received all the time. Understand, though, that they may be intended to sway your judgment, or viewed by some as potentially doing just that. Many companies have maximum permitted values for gifts, commonly $50 or so. A gift worth $10,000 would surely seem to suggest an expectation of a return “favor,” and thus, a conflict of interest.
e. Your employment by, or doing business with, a competitor in any capacity. Loyalty is an implied promise by employee to employer. A person with two competitive “masters” simply can’t avoid the resultant conflict.
f. Your doing any kind of business with a relative, or a company in which a relative has an interest or a job. Consciously or subconsciously, it’s hard to be objective when it comes to doing business with loved ones.
g. Your entering into an agreement with a vendor or client to go to work for them (or do business with them) at a future date, yet continuing to do business with them in the meantime. This has happened to several of our clients. Each has seen their actions as innocent and without evil intent; each has learned that others see such conflict situations as obvious bad faith with evil intent. Don’t forget that perspective is a function of position.
h. Your sharing information in an interview about your employer’s activities or plans. Think about it: that is giving something valuable that belongs to your employer to someone who you are seeking something valuable from. Surely sounds like your placing your interests above your employer’s interests, and in fact trading one for the other.
i. Your taking advantage of information learned on the job for your own benefit, such as trading your company’s stock, or the stock of a competitor. Information is valuable because it can bestow advantage in business to its holder. Information learned on the job that is related in any way to your employer’s business is valuable property – to your employer. You cannot take it, borrow it, or use it, without clear, knowing, written consent. Consider information to be like computers; you can’t take them home, either.
j. Your taking personal advantage of a business opportunity that your company might have pursued, itself. Business opportunity is just like business information: it is advantageous, valuable, and the property of your employer. Taking an opportunity that should be made known and available to your employer is surely a conflict of interest.
3. Know your employer’s “Conflict of Interest” policy. Many large companies have a formal Conflicts of Interest policy, with designated procedures and a designated person to speak with about the subject. In financial institutions and securities firms conflicts are generally overseen by the Compliance Department. Many governmental bodies have Conflicts of Interest Boards to oversee such issues. Look into what your employer’s conflicts of interest policy may be, and whether a person or department is designated as the “go to” on the subject. You might start your search on your employer’s internal website or employee manual.
4. If you’re unsure whether something is a Conflict of Interest, seek guidance. Conflicts of interest are often matters of perception and perspective, and more subjective than objective in nature. For this reason, it would not be surprising to find yourself unsure of whether a particular circumstance or relationship constitutes a conflict. If unsure, seek guidance. First, consider speaking with someone in your company’s Compliance Department, Office of General Counsel or Human Resources department. Second, consider outside ethics advisory panels set up by many professional organizations, disciplinary authorities, even state licensing agencies. Finally, consider obtaining the confidential advice of legal counsel, preferably an attorney familiar with your industry. Better to know you have a problem than not to know. And better to assume a conflict exists than to assume it does not. Chances are, if you have the slightest inkling that a conflict exists, it probably does, or at the very least could be claimed by someone “not on your side.” It’s wise to always be on the safe side of the issue.
5. If you are tempted to enter into a Conflict of Interest, seriously consider (a) Disclosure, (b) Consent and (c) “Safety Systems.” Imagine that one of your employer’s providers of office cleaning services asks if you want to invest in her firm, and you are tempted to do so. You would be wise to first disclose the invitation to your employer, as the invitation, alone, could be viewed by some as improper. Then, consider asking your employer for written consent to enter into the investment, with full disclosure of all details on your part. You would be wise, too, to propose installation of a “check-and-balance” on any temptation you might have to favor that cleaning services firm in the future, such as a requirement that you not have any input on decisions regarding it, or a periodic review of its cost and quality by someone entirely independent of you.
6. If you’ve inadvertently entered into a Conflict of Interest, either (a) remove yourself, or (b) request written consent to continue it. Quite simply, if you’re already in a conflict situation, your best course of action is to get out of it, and the sooner the better. Alternatively, if you have a strong enough motivation to warrant remaining in the situation, seek consent to the continuation of the relation, with 110% full disclosure of any and every fact, with nothing left out. As noted above, installation of “safety systems” are suggested.
7. Don’t assume “This is too petty to worry about .” In this context, “size does not matter.” No matter how meager a conflict may seem to you, as the saying goes, “The principle is more important than the principal.” Though stealing postage stamps may be a smaller crime than stealing postage meters, both will get you fired, and your reputation tarnished. Even a small conflict of interest can torpedo a smooth-sailing career.
SkloverWorkingWisdom™ emphasizes smart negotiating – and navigating – for yourself at work. To ensure that you are not accused of being on the “other side’s side” – whether intentionally or inadvertently – it takes sensitivity to the issue of conflict of interest, and a measure of prudence to protect yourself. There’s problems and difficulties in every aspect of life. Intelligence in preventing and resolving them may make or break your career. Gaining maximum rewards without unnecessary risks is what business is all about. But it takes more than luck to make that happen. It takes forethought, care and prudence, the essential ingredients in good negotiating.
Always be proactive. Always be creative. Always be persistent. Always be aware. And always do what you can to achieve for yourself, your family, and your career. Take all available steps to increase and secure employment “rewards” and eliminate or reduce employment “risks.” That’s what SkloverWorkingWisdom™ is all about.
A note about our Actual Case Histories: In order to preserve client confidences, and protect client identities, we alter certain facts, including the name, age, gender, position, date, geographical location, and industry of our clients. The essential facts, the point illustrated and the lesson to be learned, remain actual.
© 2009 Alan L. Sklover, All Rights Reserved.