unavoidable conflicts of interest.
Business Culture: The company
board must strive to create a
climate and culture not only at
board level but throughout the
entire company that promotes
trust, integrity, accountability,
independence and professionalism.
In addition, promoting a culture
in which directors and staff are
comfortable enough to openly discuss
any conflicts they may have will also
contribute to manage conflicts of
interest more effectively.
Continued Training and
Development to Directors and
Staff: We live in a very changing
world where a certain approach for
identifying and handling conflicts
of interest may vary over time. Not
only is it important to revise and
update existing policies but to offer
continued training to directors and
staff to keep them well-informed of
any such developments.
Record Conflicts of Interest: A
director facing a conflict of interest
should be obligated to disclose any
such situation immediately, rather
than trying to handle the situation
personally. Not only is it important
to disclose the existence of a conflict
of interest, be it to fellow directors
or to another person or group created
to that effect, but it is also advisable
to update such records at least once
a year, keeping track of any changes
that may affect the concerned
director.
advisable to consult with a lawyer in
order to better navigate and resolve
any unclear or complex conflict of
interest situation.
conflict of interest requires a previous
analysis of the conflict itself. When
analyzing a conflict we must pay
attention to its seriousness, directness
and significance.
We must analyze factors such as the
importance of the particular decision
or transaction affected by the conflict
situation, the director's personal interest
at play, and the extent to which the
director is involved in the relevant
decision or transaction. The dimension
and interrelation of these elements will
be the determining factors to select the
best alternative to mitigate the conflict.
Setting obligations at board level to
disclose and record a conflict of interest
will often not be enough to actually
mitigate the effects of a conflict of
interest. Recommended measures by
governments and public institutes to help
manage and mitigate conflicts of interest
affecting public officials often include
the so-called "Six R's." These can also
be used to manage conflicts of interest in
any company.
for conflicts of interest that represent
the lowest possible risk for a given
transaction or situation, where disclosing
and recording a conflict of interest can
be enough to preserve transparency.
transaction or situation only partially,
restricting the involvement of the
director in the decision-making process
can be an option. Often times, restricting
the involvement of a particular director
in the voting of a transaction may be
easier or more advisable than entirely
removing that director.
not advisable, for instance, in a small
operation where all the expertise is
needed or where removing a director is
a third independent party for voting or
overseeing the transaction and bringing
objectiveness to the decision table can
be an optimal alternative.
considerable, and in cases where all
other options would prove inadequate,
removing a director with opposed
personal interests to those of the
company may be the only alternative
to preserve the board's integrity and
credibility and the company's reputation.
continued conflict of interest that is
likely to affect the company's reputation,
for instance, where a director's external
professional duties are a concern and can
be perceived as barring him from acting
impartially, then the best alternative may
be to require that director to relinquish
such external professional duties.
the most extreme option and will be
advisable in cases where there is a
severe collision of interests and no other
remedy can be effective.
involving a director can not only
discredit the director, but also damage
the reputation of the company. Because
directors are active members of their
communities and may be involved
or have connections with several
organizations, it is imperative for
companies to be adequately prepared
to take action to effectively identify,
manage and mitigate the effects of
director's conflicts of interest.