COMMENT A conflict of interest is like a cold is like a cold

Everyone at some point in their lives finds themselves in a conflict of interest. It could be a personal or a business situation, but in either case it can affect your judgement.

Chris MacDonald, Ph.D., spoke on the subject of conflict of interest in business at a breakfast in downtown Toronto in April. MacDonald is with the Clarkson Centre for Business Ethics at the Rotman School of Management in Toronto. The breakfast was part of a regular series given by the Canadian Centre for Ethics and Corporate Policy.

MacDonald said there are no easy answers for individuals who find themselves morally torn between the interests of themselves, their companies, their clients or the greater public good.

He gave three real life examples — all from an aeronautical company. One was a board member who owned shares in a major supplier. Another was a junior engineer who was moonlighting in an IT security business. A third was a manager who chose her lover as a candidate for a job.

Most of us think that a conflict of interest involves someone who stands to gain financially from a situation. But a person can also be influenced by their own sense of pride and ambition, and by the friendships they make. Whatever the motivation, the result is that your decision, or the advice you give your client, is no longer impartial and objective. For professionals, of course, this can be a fatal flaw.

Engineers have the Iron Ring ceremony (see Kim Farwell’s views on this tradition, page 46). They also have the code of ethics they sign onto when becoming licensed. But do these oaths protect them from dangerous and compromising situations? Not really, answered MacDonald, because engineers can find themselves in a “conflict of obligation.”

The most important thing to remember, he said, is not to think of a conflict of interest as an accusation. It is a situation you find yourself in, and it is often not your own fault or doing. “It is like a cold. It’s something you’ve got. Being in the situation is not blameworthy. But mishandled, it can be.”

Faced with an ethical conundrum, what can individuals do? The standard solutions aren’t always helpful, MacDonald said. A person could disclose their conflicting interest, but where does that leave the other parties? He or she could remove themselves from the decision-making process. But in many situations, MacDonald said, there are so few experts in a specialized field, often even that’s not possible. The Golden Rule doesn’t always help either: what if declining a project means you have to lay off staff?

What can companies do to avoid conflict of interest problems? First, they should ensure they have a good — readable — ethics policy. Often policies are far too legalistic to be effective, said MacDonald. Enron had an ethics policy 65 pages long, but its executives still spiralled into jail.

What’s more important, said MacDonald, is the company’s culture, because that will dictate how the policy is interpreted: “Culture will always trump policies.” People must feel comfortable bringing ethical issues up for discussion around the table. In some companies, you bring up the “e” word and everyone “turns and runs” he said. Bronwen Parsons