The business world is far different than it was half a century ago—or even half a century ago! Today, we live in an age of unparalleled access to information. The ubiquity of the internet and social media platforms have made it possible for consumers, competitors, and regulators alike to know more than ever before about a company and the people who work there. With that level of omnipresent digital scrutiny, it’s more important than ever for businesses to maintain their integrity and ethical transparency. Businesses guiding their employees through how to disclose conflict of interest is vital to this mission.
Conflicts of interest, or situations in which an employee’s personal or financial interests conflict with their responsibilities to their employer, are often at the center of business ethics discussions. Besides the serious ethical ramifications conflicts of interest can createfor a business, undisclosed or unaddressed conflicts can also cause serious reputational and, in many cases, legal damage to a corporation.
The best way to manage potential conflicts of interest in the workplace is to monitor them and mitigate any dangers they may pose, but that’s a multi-step process, and one that’s easier said than done. Luckily, ComplianceBridge is here to help. In this article, we’ll break down how to disclose conflict of interest in the workplace, what that disclosure process should entail, and best practices around reaching a resolution on workplace COI.
How To Disclose Conflict of Interest: Laying the Foundation
When considering how to disclose conflict of interest within your company, consider what the best disclosure process for your workplace looks like. Early disclosure and identification of potential COIs is crucial to identifying and mitigating risks, but how to disclose conflict of interest and how that disclosure is managed may vary from business to business depending on number of employees, existing policies, industry regulations, and other factors.
Many businesses, when faced with deciding how to disclose conflict of interest within their organizations, utilize customized conflict of interest disclosure forms to distribute to relevant employees. For example, ComplianceBridge has a checklist of 29 questions that serve as a guideline on how to disclose conflict of interest.
That checklist, and similar forms for workplace COI disclosure, provide a thorough template for addressing various types of conflict that help ensure transparency during the disclosure process, and pave the way for proactive conflict mitigation. They can also serve as a form of legal protection if an issue arises in the future.
What’s in a Disclosure Form?
The exact contents of an organization’s form for how to disclose conflict of interest tend might depend on the business, but generally, a COI disclosure form should have the following sections:
- Timing and Duration: Participants should provide dates of when the potential conflict began and when it ended (if applicable). For example, if the conflict in question concerns former employment, the employee would include the dates of that job. Employees should also note whether the conflict they’re disclosing is ongoing, or was a one-time occurrence.
- Nature of the Conflict: Participants should also include detailed information about the nature of the conflict being disclosed. Most COI tends to fall into one of the following categories: Financial interest, business interest, personal or family relationships, gifts or favors, and use of company resources or intellectual property (IP).
- Employee steps toward mitigation: After giving information about the nature of the potential conflict, the employee should also have the option of relating any actions they may have already taken to address the conflict that they have disclosed. They should also outline any additional steps they think should be taken, or at least considered, to further manage the disclosed conflict.
- Affirmation statement: The employee affirms their commitment to acting in the best interests of the company, acknowledges that they have read and understand the company’s conflict of interest policy and code of conduct, and confirms that they will promptly disclose any potential conflicts of interest that may arise during their employment. There should be a line for the employee’s signature and date to validate the affirmation statement.
Waiver: When Disclosure Isn’t Enough
So you’ve instructed employees on how to disclose conflict of interest in the workplace. Good for you! Now let’s say an employee uses the proper channels to disclose something that poses a potential conflict of interest.
For example, imagine that your company has decided to hire somebody to manage IT security, and one of the potential candidates for the position is the sibling of the company VP.
What happens now?
The answer to this question depends on whether the conflict is permissible or not. Maybe, in the above scenario, the VP has disclosed the potential conflict, recused himself from the hiring process, and, after thorough review, the company has decided that the sibling in question is the most qualified person for the job.
If, as in this hypothetical case, a company is made aware of a potential conflict and has deemed it permissible, the next step may be to formalize that decision with a conflict of interest waiver. This waiver is a formal legal document serving as proof that an employee has made all necessary parties aware of the potential conflict. Its function in the workplace is to acknowledge and disclose conflicts of interest, obtain informed consent from all parties involved, and establish safeguards or mitigation strategies to ensure transparency and ethical decision-making when conflicts arise.
When to Use a Waiver
During the disclosure process, as detailed above, workers should give detailed, actionable information about any potential conflicts. Once all of this information is taken into account, the company may decide to provide a conflict of interest waiver, acknowledging that all parties are aware of the situation and allowing the employee to continue their work duties while recognizing and mitigating the issues the potential conflict may create.
Pros and Cons of Using a COI Waiver
Does your business need the option of a COI waiver? Like with most things, there are possible benefits and risks to making COI waivers part of your organization’s procedures for how to disclose conflict of interest.
On the benefits side, granting a conflict of interest waiver to employees with potential conflicts demonstrates the faith your company has in the honesty and integrity of its employees, helping to build trust. Because a COI waiver represents both open disclosure about a potential conflict and a promise to find a potential solution, they can be crucial in both retaining key talent and in encouraging open, transparent, decision-making.
There are also some possible downsides, however. One potential risk is that granting a waiver may create a perception of favoritism or unequal treatment in the eyes of other employees. If the distribution of COI waivers is not handled with transparency and consistently, it could cause a potential erosion of trust in the company’s commitment to fairness and ethical conduct.
Additionally, even with a mitigation plan in place, conflicts of interest may still influence an employee’s actions or their decision-making process. If the steps outlined in the conflict of interest waiver are not followed to the letter, this bias may compromise the integrity and impartiality of the employee’s role within the company. There are also risks to the organization if the conflict of interest becomes publicly known; besides the possibility for reputational damage, there could also be legal implications, such as potential fines or lawsuits, if the conflict violates regulatory or legal requirements.
How to Structure an Effective Waiver
If your organization does make COI waivers part of its procedures for how to disclose conflict of interest, make sure that the language used in the document is as clear and comprehensive as possible. Like with disclosure forms, the exact contents may vary from company to company, but your organization’s waiver should include these components:
- Definition of terms: Clearly define what constitutes a conflict of interest, and outline company policies around how to disclose conflict of interest.
- Consequences of noncompliance: Inform the employee of the consequences of failing to disclose conflicts, or of a failure to act with integrity in the face of a potential conflict.
- Guidelines for compliance: To that end, the waiver should also include questions about what steps are being taken to monitor the existing conflict. Emphasize the importance of maintaining confidentiality, and the need for ongoing monitoring and review of existing conflicts.
- Affirmation statement: Close out the waiver with a statement of acknowledgement and informed consent, indicating that all relevant employees understand and will comply with the document’s outlined terms and conditions.
Resolution: Addressing Conflicts Fully
Once your employees know where, when, and how to disclose conflict of interest so they can be fully investigated, then comes time to consider options for resolution. Possible strategies for an employee with a conflict of interest could include recusal from certain decision-making processes, or, if the COI is a financial one, having the employee divest or sell the holdings that are creating the conflict. They might also need to transfer certain responsibilities to one or more of their colleagues.
If a conflict of interest cannot be completely avoided, instead consider creating a mitigation plan, possibly in conjunction with a COI waiver to ensure full transparency. An effective plan for mitigation could include setting up blind trusts, creating ethical walls, or establishing oversight committees to monitor certain decisions.
These and any other relevant strategies for conflict of interest resolution should already be clearly stated in your COI policies. After action has been taken on addressing the conflict, explain to all relevant parties why the decision to take certain courses of action was made. Clear communication is imperative to effective implementation!
Don’t Forget Documentation
Remember: It’s only science if you write it down! Throughout the conflict of interest resolution process, your organization should make sure to keep comprehensive, organized documentation on how to disclose conflict of interest, the conflict itself, what steps were taken to address it, and the results and consequences once those steps were applied practically.
Good record-keeping is always necessary for ensuring both accountability and compliance. Besides taking thorough notes throughout the process, your company should also maintain copies of documents like disclosure forms, COI waivers, investigation reports, and resolution agreements. These records and documents can also serve as a useful reference tool should similar problems arise again within the organization.
Enhancing Effectiveness Through Technology: A Successful COI Process Needs ComplianceBridge
Effective COI management is about mroe than just ensuring employees know how to disclose conflict of interest, you also need to have a process in place for addressing and mitigating the impacts of a conflict. At ComplianceBridge, we understand how crucial COI management is for an organization, which is why we’ve created the best tools possible for the job; a centralized software solution designed to create the best disclosure process possible for your business.
Use our conflict of interest software to create questionnaires to digitally distribute to employees, with the option of creating custom question sets and tailoring distribution to fit certain departments, groups, or locations. You also have the option of scheduling regular disclosure periods, so the process can adapt with your employees and business. Because our software automates everything, including distribution, you can be sure that no employees slip through the cracks, and that no information gets lost in the shuffle.
Our software also lets you see reporting in real time, making it easier for management to collect data and identify problem areas that may need further investigation, and also has the ability to flag certain responses or trends for closer inspection. Once collected, you can also use COI data to generate reports and export them for further study. And all of this is fully documented and stored in a centralized, secure location, so you never have to worry about not having access to important information.
Want to learn how to disclose conflict of interest in the most efficient way? Discover why ComplianceBridge is the best solution and contact us today for a demo.
