I don’t know that we’ve spent a lot of time talking about conflict of interest issues. For that reason, I’m glad we’re getting the chance here. I believe there’s a takeaway for everyone in today’s article. An HR Bartender reader writes:
Five years ago, I was hired by city government in the building department. When I signed my new hire paperwork, there was a policy statement that all new hires after 2011 were not allowed to sell real estate in the city due to conflicts of interest.
I have a real estate license. Employees hired before 2011 are still selling and are allowed because they were ‘grandfathered’ in. Since it’s a conflict of interest, is there such a thing?
I actually do not see the conflict unless we use our positions to gain the listing and selling of real estate. There is actually a city ordinance stating nobody can ‘represent’ as agent in any real estate transaction, but the department wanted to create a stricter policy specifically dealing with selling real estate. Please give me your thoughts on this. Thank you.
Conflict of interest situations exist in both the public and private sector. They happen in our professional and personal lives. We’re not going to do a deep dive into government conflict of interest rules today, but I wanted to get some insights about dealing with conflict of interest matters at work.
I asked our friend Kate Bischoff to share her knowledge. Kate is an employment attorney and HR consultant at tHRive Law & Consulting LLC. She’s shared her experience with us on several occasions. One of my favorites are her comments in this article about the “Ageism in the Workplace”.
Please don’t forget that Kate’s comments should not be construed as legal advice or as pertaining to any specific factual situations. If you have specific detailed questions, they should be addressed directly with your friendly neighborhood labor attorney.
Kate, thanks for sharing your thoughts today. I feel like we need to start with a definition. Is there an easy way to define conflict of interest?
[Bischoff] Not really. Merriam-Webster defines a conflict of interest in a situation like this as ‘a conflict between the private interests and the official responsibilities of a person in a position of trust’. So, if I’m the town mayor and I determine who gets the recycling contract and I also own a recycling company, it would be a conflict of interest if I consider my company for the recycling contract for my town. I’d get a personal benefit because I grant contracts for my town.
In private employer settings, a conflict of interest would be similar. For example, if I’m the chief financial officer (CFO) I’m considering my wife’s certified public accounting (CPA) firm as the company’s external auditor. My wife could get a bonus because of the work, and that benefits me personally. So, a conflict of interest exists.
While these seem like pretty straightforward examples, often when an employer is contemplating a conflict of interest situation, the facts aren’t as easy as these and it takes time and fact finding to figure out if a real conflict exists.
In my opinion, I have to agree with the reader that it doesn’t seem very logical to “grandfather” people into a potential conflict of interest. Are there circumstances where this might make sense?
[Bischoff] I’m struggling to figure out why grandfathering is a good idea. In HR, we don’t typically make policies and grandfather in some people unless it is benefit related. (And, we make grandfathering decisions a lot when it comes to benefits.) Best I can figure is that one city employee still wanted to sell real estate and thought it was unfair to make them stop.
In general, policies are designed to be universal and exceptions are rare, if any. If we grandfather, we need to have specific, documented reasons why we’re doing it. We do this because grandfathering is specifically allowing people to be treated differently, creating risk. This is an easily avoidable risk.
In my experience, I’ve seen situations where organizations decide that something which was considered “okay to do” is no longer “acceptable”. Can organizations explain those types of changes in ethics and how can they do it?
[Bischoff] Absolutely. It can appear that we’re ‘cracking down’, but often if we’re transparent about why we’re doing something, people are more likely to understand why and accept the change. It doesn’t mean they’ll like it, but they don’t have to.
Often, our changes have to do with being ethical and consistent. Take for example reimbursement for alcohol while on business travel and our policy is silent on the topic of alcohol. We’ve been reimbursing for alcohol for years. The company decides to donate a large sum to Mothers Against Drunk Driving (MADD) as a part of our annual giving. Our donation doesn’t seem in line with our reimbursement practice, so we alter the policy to explicitly say we will no longer reimburse for alcohol. We then have to go into communication mode about being consistent externally and internally.
Speaking of ethics, I like to think we’ll agree that organizations need to have an ethics standard and conduct some sort of ethics training. What are 2-3 things that should be in an ethics program?
[Bischoff] I agree! Here are three things to consider:
- Explain WHY these are our ethics. How did the organization develop them? (Hopefully, not cutting and pasting from another company.) Why are these ethical practices what we selected?
- Provide EXAMPLES of how the organization lives them. For example, if veracity is one of our core ethics, showing how when someone finds an error in a document, instead of glossing over it, the organization rewards the people who found the problem and then worked to fix it.
- Hold employees ACCOUNTABLE to the ethics. The examples should come with questions to the group about what they believe the organization should do in this situation to hold people accountable.
Last question. I realize that we could write volumes about this, but how can an employee confront a conflict of interest issue in their organization?
[Bischoff} Talk with leaders in the organization. Ask questions about what is or could be or even as this reader suggests, challenge the reasoning behind rules. Challenging the reasoning allows an organization to be more self-aware of issues, alter where necessary, and be able to better articulate why certain rules are important and effective.
A huge thanks to Kate for sharing her knowledge with us. Please be sure to check out Kate’s blog for more insights and, of course, her other articles here on HR Bartender.
None of us wants to face (or be involved in) a conflict of interest situation. Kate’s points about transparency and consistency are spot-on. Not only do organizations need to practice ethical behavior but they need to create the psychological safety that will allow employees to bring ethical questions to the surface. Practicing ethics is good for our wellbeing and the company’s bottom-line.
Image capture by Sharlyn Lauby while exploring the Wynwood District in Miami, FL15