The Conflicts of Interest Policy, Explained 18:33, October 9, 2016

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The Conflicts of Interest Policy, Explained

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Most large organizations have a conflicts of interest policy and associated rules. Knowing what a conflicts of interest policy includes and how it should be followed is a compliance imperative.

Background

For many, conflicts of interest rules can be found in a company’s code of conduct, which typically outlines ethical behavior within the workplace. Generally, conflicts of interest arise when someone is in a position to put their personal interests above and against the organization they work for. These individuals can be anyone who owes a duty to an organization, but companies should be most concerned about employees, officers, and board members. There are many common conflicts of interest situations, such as moonlighting for a competitor or doing business with another company owned by family or friends.

What A Policy Should Include

Company leaders develop conflicts of interest policies. They are necessary for nonprofit organizations, including any foundation arm of a for-profit company, as they “are frequently subject to intense public scrutiny, especially where they appear to have inappropriately benefited their officers, directors or trustees,” according to the Internal Revenue Service. “A conflict of interest policy is intended to help ensure that when actual or potential conflicts of interest arise, the organization has a process in place” to handle the conflict appropriately.

The same message is directly applicable to for-profit companies. For example, the Conflicts of Interest Policy of Novartis, a global healthcare company, is comprehensive. It applies to all “[d]irectors, officers, managers and employees.” It broadly defines a conflict of interest (it can be potential, perceived, or real), provides examples of what can constitute a conflict, and requires appropriate disclosure if one exists. Expectations that management will lead by example, and that all employees will ask for guidance when necessary, are facets that help stakeholders make good decisions for their company. Other conflicts of interest policies can be seen folded into organizations’ codes of conduct, as seen with Microsoft’s Standards of Business Conduct. In whatever form, it is critical that employees understand, learn to avoid, and appropriately respond to conflicts of interest.

Maximizing Policies

As we have stated previously when discussing medical conflicts of interest, having and, more importantly, implementing a conflicts of interest policy helps organizations foster an environment with high ethical standards. As emphasized by Michael Volkov, a lawyer and compliance thought leader, conflicts of interest damage a company’s culture. “Ethical lapses are often the result of weak conflicts of interest controls and training. To ensure that a culture of integrity is protected, CCOs have to be vigilant in promoting a conflict of interest compliance policy and investigating potential violations of such policy.” Promotion and implementation of policies into everyday behavior and practice is critical and can be accomplished by fusing workplace culture with a company’s compliance program.

Training can greatly help this process. LawRoom offers online compliance training in conflicts of interest, code of conduct, and ethics. To learn more, download our white paper on Crafting Tools for Ethical Action, or go to LawRoom.com.

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Douglas Kelly
Douglas Kelly is EverFi's lead legal editor. He writes on corporate compliance and culture, analyzing new case law, legislation and regulations affecting US companies. Before joining EverFi, he litigated federal and state employment cases and wrote about legal trends. He earned his JD from Berkeley Law and BBA from Emory University.

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