What happens when you own a business and hold a political position or serve on a non-profit board and you have to make a decision in one of those positions that could affect your business? Can you remain objective? Can you serve competing interests? Should you recuse yourself from decisions that could affect your business? You may have unknowingly put yourself in the middle of a conflict of interest and your response to the situation could determine whether a benign situation turns into a full-blown scandal.
A conflict of interest arises when a person has two duties that conflict. Black’s Law Dictionary defines a conflict of interest as “a real or seeming incompatibility between one’s private interests and one’s public or fiduciary duties.” A conflict of interest may arise when one runs a business and also holds a public office, or sits on a non-profit board, where decisions may direct business to you. Some high-level conflict of interest “scandals” have included: Enron and Arthur Anderson, FDA scandals involving advisory panel members who had financial ties to drug companies. More common situations happen on a local level when a business owner may hold a political office or serve on a local non-profit board and decisions must be made in those positions that may help or hurt your business. So what do you do if you find yourself in a situation where others claim that there is a conflict of interest?
1. Get Legal Counsel. If there is concern that you are involved in a potential conflict of interest your first step should be to retain legal counsel to provide confidential advice and to assist you in responding to the issue. Accusations involving conflicts of interest can vary as to their level of severity, but they can all have potential civil and even criminal consequences, so obtaining legal advice should be the first step taken.
2. Direct Press to Legal Counsel. After you have retained legal counsel all inquiries from the media should be directed to your legal counsel. Too often the target of a conflict of interest scandal thinks that they can handle the issue on their own. Unfortunately, that is seldom the case and trying to respond to media, which is often looking for a scandal, only fans the flames.
3. Develop Clear Talking Points and Stick to Them. When you do address any inquiries relating to claims of a conflict of interest you need to have a clear message in response to any allegations of impropriety and you need to stick closely to the message. If you change your position or change the facts it will only hurt your defense against allegations of a conflict of interest.
4. Disclose As the Law Requires. Depending on the situation, and the industry or profession that you are employed in, there may be any number of local, state, or federal regulations and laws that require disclosure of information relating to a potential conflict of interest. As soon as it becomes clear that there is, or was, a conflict of interest disclose that fact fully as required by law. Any attempt to cover up a conflict of interest will only make the problem worse.
5. Consider Resignation. After consulting with an attorney, dealing with the press, and making any necessary legal disclosures, the final step in handling a conflict of interest scandal may involve resigning from the position that created the conflict of interest, whether that means stepping down from a board position or a political appointment, taking the step of resignation may be necessary to eliminate the conflict of interest and put you back into a situation where your loyalties are not being pulled in two separate directions.
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