Conflicts of Interest – How to not get rolled by your role!
Public officials globally, including in many local governments here domestically, have been beset in recent years by numerous scandals relating to the misuse of public office and resources. This, of course, is not a new issue but is an age-old dilemma stemming from the fact that some people confuse their privileged public role with their individual, personal circumstances, and in many cases…a misplaced sense of entitlement.
The key here is understanding that there is a very distinct and important difference between the person and the role they have been duly appointed to fill. It is a matter of accountability versus responsibility. As a public official, the accountability one holds is to remain fully at arms-length from the information, associations, opportunities, and resources for which the role requires one to be responsible. In this context, all government personnel are considered public officials irrespective of their level or title.
This means that taking any personal or private interest or benefit from the commercial operations with which one might be engaged as a consequence of their public office or role is absolutely inappropriate – and in most cases, is also against the law.
In legal terms, this is called a conflict of interest. The conflict exists when a person takes personal advantage of the commercial relationships inherent in their role. Whenever these private interest conflicts occur, they are generally intentionally hidden because the ramifications of disclosure or discovery are often quite severe and dramatic – and are most certainly professionally damaging.
In Australia, the Federal Government clearly defines conflicts of interest in Section 5.1 of their ‘Ethics, Integrity and Professional Standards Policy Manual’ as follows:
“A conflict of interest arises where a public official has private interests which may or do improperly influence the performance of their official duties and responsibilities. Conflicts of interest can arise in relation to financial interests such as shareholdings, employment opportunities, real estate and trusts, as well as private interests such as relationships and other interests that can conflict with public duties and responsibilities. Conflicts can include not only the interests of individual employees and contractors but also the interests of their immediate family (such as spouses, children or other dependents) and the interests of their business partners or associates.”
It is important to note that not all personal relationships that have parlayed into a commercial setting become conflicted. It is only the taking of personal advantage of those relationships, either immediately or even via a promise of future benefit, that is the problem. It is fine to have personal connections outside of the work setting – so long as they do not cross that line of personal gain or interest. Having friends is an essential part of the human experience. Leveraging them using the authority or influence associated with your public role is not.
After meeting with many local government staff around the country, and judging by numerous news reports highlighting crossed boundaries and shameless self-promotion, it is clear there is still a substantial need for more understanding and awareness of how to both avoid and resolve conflicts of interest.
Part of the problem stems from the fact that there are three types of conflict, namely:
- Actual,
- Potential, and
- Perceived.
Sometimes that list is simplified and reduced to just real or apparent. In the eyes of those with authority to investigate them, all conflicts are basically the same. This is is simply through the question – do they reveal some sort of interest or benefit that has been or is likely to be gained inappropriately.
So what should we do?
Option 1: Disclose & Document
In the first instance, this approach meets a large number of potential or perceived conflicts.
Like the Federal Government, most organisations will have a policy position that obligates and encourages staff, elected officials, and even suppliers to initiate the disclosure of conflicts of interest. Such disclosures are supposed to be documented using some sort of template which is then also added to a register usually held by internal audit or the procurement function.
The disclosure and documenting of potentially conflicted personal and professional relationships alone is helpful and extremely valuable, but in some instances can be insufficient or ineffective in deterring or preventing the nature of the conflict from transitioning from apparent to real.
Option 2: Mediate, Disclose, Document
A more robust and effective way to deal with the more significant disclosures of a conflicted relationship is to have all parties actually meet together with an independent third party whose role it is to broker a shared understanding of:
- The nature of the conflict, and
- The seriousness and consequences for acting on that conflict.
By having a neutral, independent, third party act as the facilitator of this type of discussion, it completely removes the clandestine element of the conflicted relationship and puts each party on notice regarding their private and commercial behaviour.
Experience has shown that this is the most effective way to deal with a disclosure of significant conflicts of interest. Just filing paperwork is known to be an ineffective approach to policy compliance.
How can this help you?
In the first instance, reviewing the organisation’s existing approach and success in managing conflicts of interest is essential. If there is evidence of past breaches, an internal lack of visibility and understanding on the policy and consequences for breaches, or even just a poor attitude to disclosure and reporting, then it is certainly in the interest of the organisation to launch an initiative to strengthen all those weak points.
It is important however to still encourage having people within an organisation that are well-connected or has useful networks. These relationships are actually invaluable, so that should certainly be encouraged. Solid networks help organisations to access better capability, reduce time and save on project delivery costs which can easily build credibility and reputation. However, when the line is crossed from public interest to private interest the negative impact is also incalculable.
If your organisation needs help to review or strengthen its management of the conflict of interest policy then please get in touch. We would love to share more of what we know and help you protect your staff and your organisation.