Conflicts of Interest and the Workplace

Every business should have a plan for employees to disclose potential conflicts of interest and a way to resolve them. As an example, if your business is selling paint products do you want an employee who sells paint as a side business? Probably not. A...


Every business should have a plan for employees to disclose potential conflicts of interest and a way to resolve them. As an example, if your business is selling paint products do you want an employee who sells paint as a side business? Probably not. A definition of a conflict of interest is any activity, financial investment, interest, association, or relationship, (including relationships with family members, relatives, friends, and social acquaintances), that conflicts with an employee’s independent exercise of judgment concerning their employment. Although it is not possible to identify all possible situations, reasonable business judgment should be sufficient to evaluate most situations.


Managing a potential conflict of interest starts with the employee notifying an immediate supervisor that the potential for conflict exists. I've told employees, submitting potential conflicts, my job is to help guide them through the process, and come to a conclusion that is fair to all concerned.
 

Many of the conflicts I have resolved can be attributed to the employment of relatives working for the same company. Many businesses place restrictions on relatives working for the same company or, at least, the same business location. A basic rule to follow is a direct relative, including sibling, parent, Aunt or Uncle, even a First Cousin, should not work in the same location. Notice, I did not say that direct relatives should not be employed within the same company. At the district or higher level, a manager should never be in the position of supervising a relative either directly or indirectly. Although a manager may not be the immediate supervisor, a potential conflict exists, as he or she could be involved in deciding disciplinary action, or the evaluation of job performance. At all costs, an appearance of a conflict of interest must be avoided.


When a direct relative conflict is discovered, and employees have already been hired, it may be possible to relocate one of the employees to a nearby store. Where relocation is not feasible, restrictions must be placed on their business conduct. An example is a father and son working in the same business unit. They should not be allowed to ring sales or supervise each other. These restrictions would be effective as long as both relatives worked for the same company.

An example of a direct employment conflict, that I am currently aware of, is a chain of department stores that allows spouses to work in the same business unit. In one such store the Executive Manager directly supervises their spouse whom, in-turn, directly supervises the rest of the management staff. This has created an air of distrust throughout the store as employees “feel” there is preferential treatment. Whether or not preferential treatment exists there is an appearance of an impropriety.

Some additional areas of potential conflicts include:

• The acquisition or ownership of stock or bonds of a company that is a customer. This would not include nominal or non-controlling interest in holdings of bonds or securities.

• Maintaining outside employment with or providing consulting services to any competitor, vendor, or customer. Policies on this range from not allowing outside employment by full-time associates to case-by-case approval by a senior member of management. Some companies’ limit providing consulting services for one year after your employment terminates. In a service related environment, consider the employee who also works for one of your best customers. If your other customers know of this employment relationship, they may think that the contractor is getting a better price on their purchases than they are.

• Soliciting, demanding or accepting gifts, gratuities, services or anything of value from or to any person in conjunction with the performance of their duties or competing with your employer’s vendors or customers. Some companies place a dollar value limit on receiving gifts ($25 - $100 - $200). Others allow accepting gifts and gratuities of single bottles of liquor, tickets to professional sporting events, etc.

• Authorizing, or causing another to authorize, a business transaction with a relative or any business organization with which the employee or relative is associated. One investigation, I conducted, involved a store associate who called another store, telling the employee to give a customer, a relative, his employee discount. The product purchased was used for his Cousin's commercial business.

• Taking advantage of a business opportunity that belongs to your company, such as, diverting a client to another company you work for or have a financial interest. Throughout my career in law enforcement and retail security, I have received and dealt with thousands of potential conflicts.

The following is just a very small sample of some of the conflict of interests I have received over the years

• From an Asset Protection associate, “I have accepted a position with (XYZ) Company and I want to know if this is alright.” He had already accepted a position in security, at another company, and wanted to work two jobs.

• From a manager, “I want to borrow a company paint sprayer to paint my house.” “I’ll just use it over the weekend.” There were provisions for employees to rent paint sprayers, at a discount.

• From a store manager, “I have a moving business on the side and want to use a company box truck.” The response from me was obvious.

• From a cash office employee, “I’m short on cash and would like to borrow money from the safe - I’ll write an IOU.” The answer was no and this employee was later prosecuted for theft.

• From a store manager, “A vendor wants to give me a $300 logo leather jacket – can I accept it”? My response was, No – unless the vendor wants to give every one in the store a jacket. The vendor declined to spend $30,000 on leather jackets.

Later I'll write more on how to establish an Conflict of Interest program.

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