“While employed by a pharma company, is it a conflict of interest to be on the Board of a ‘nutriceutical’ company?”

Question: I am working as an Executive and Board Member in the Egyptian affiliate of a multinational pharmaceutical company. On the side, I have invested in a local “cosmeceutical” [that is, medications for cosmetic purposes) and “nutriceutical” (that is, medications for nutritional purposes) company. Recently, I was nominated to be on the Board of Directors of this local company. Is it a conflict of interest to do this?  If so, should I notify my current employer?

Cairo, Egypt

Answer: Dear Philip: It may or may not be a conflict of interest. But whether it is or it is not, the safest thing to do is to notify your present employer, and seek its consent. Allow me to explain:

1. As an executive and Board Member of your employer, you must obey a “fiduciary” trust and loyalty to the company, which is the highest degree of trust and loyalty there is. When we affiliate with other people or organizations, we sometimes take on certain responsibilities, just by the affiliation. Many times we don’t realize it.

For example, if I act as someone’s lawyer, just by doing so I must keep what they tell me in confidence. So, too, for someone who becomes an executive or Board Member of an organization: by doing so, they promise to be totally loyal and trustworthy to that organization, and look out for its interests over and above other, competing organizations. It is the highest level of trust. That is part of your relationship with your employer because you are an executive and a Board Member.  

On the other hand, if you were a clerk for your employer, you would not have such a relationship, but being an executive and Board Member makes you have a fiduciary relation. And, too, as a new Board Member of the local nutriceutical company, you must obey a “fiduciary” trust and loyalty to it, also.

It is something like being the father of two children at the same time: they both look to you for loyalty and trust. Yet, sometimes we feel “torn” by not being able to give them both our time, energy and resources. That is a natural conflict of emotion and parenthood, not of interest.  

2. The real question is this: might it be possible that their interests, now or in the future, conflict? The question is this: can you be “totally loyal” to both (i) your present employer, and (ii) the nutriceutical company, under all possible circumstances?

As examples: Might they both want to take advantage of the same great business opportunity? Now or in the future, is it possible? Might they both want to hire the same skilled person? Now or in the future, is it possible? Might they both want to buy the same hard-to-find raw materials? Now or in the future, is it possible? Might they both want to invest in the same company? Now or in the future, is it possible? These are the questions – and there are many more – that would determine if it is a potential conflict of interest to be a Board Member of both companies at the same time.   

3. Don’t be too sure that you can give a confident answer to that question, because even apparent – in addition to those that are actual – conflicts of interest are problematic. If you have read my blog posts on this subject, you will know I use this wonderful saying to illustrate conflicts of interest: “A person with one watch always knows what time it is. A person with two watches is never sure.” Sometimes, what seems to one person to be a “clean” absence of conflicting interests seems to another person a “clear” conflict of interest.

In fact, I can see how your pharma company employer (a) might have nutriceutical or cosmeceutical companies as affiliates, (b) might sell chemicals or pharmaceutical agents to nutriceutical or cosmeceutical companies, (c) might sell licensed research to nutriceutical or cosmeceutical companies, or (d) might, without your knowing it, have plans already in progress to enter the growing fields of nutriceuticals and cosmeceuticals.

Like I said, “Don’t be too sure.”  

4. Just the fact of your devoting significant time and energy to being a Board Member of another company – all by itself – could be viewed as a conflict of interest with your employer. As a general rule, janitors and clerks work about 40 hours a week, and are free to do as they please on their “time off.” As a general rule, executives are expected to devote their full time and energies to their employer, other than time devoted to such things as family, health, recreation, religious and community affairs. Your giving another profit-making company your time and energy – that you could be devoting to the interests of your full-time employer, could be characterized as a conflict of interest.

5. The safest course is always the same four steps: (i) Disclose Your Desire, (ii) Answer All Inquiries, (iii) Seek Consent, and (iv) all by Email Correspondence. By taking this approach, you are doing many positive –and risk-avoiding – things, including: (i) avoiding any concern that you are not being honest or forthcoming, (ii) disclosing “how many watches” you are wearing, and even “what kind of watches” they are, (iii) permitting your employer an opportunity to ask more questions and make further inquiries, (iv) letting your employer consider things you may not be aware of, including their still-secret strategic plans, (v) letting someone else decide if there is a conflict of interest, and, perhaps most importantly, (vi) making a permanent, written record that you have done so, to who, and when.

If you are denied consent, it might be disappointing, but it would be so much less disappointing than it would be to be unexpectedly fired at some later time for alleged misconduct.

Philip, you are wise to be concerned and careful. I hope you have found this information to be of value to you in your considering what to do, and how to do it, what we call navigating and negotiating to success and security.    

Al Sklover 

We offer Model Memo
“Addressing a Conflict-Of-Interest at Work.”
To Get a Copy, Just [click here.] 

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© 2012 Alan L. Sklover, All Rights Reserved.

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