Conflicts of interest require people to act with integrity

I was talking to a farmer not that long ago about an issue he was dealing with. As I listened, it appeared that he had found himself caught between a rock and a hard place. We’ve all been there. As I thought about this though, it made me wonder where the saying came from.

Apparently, it was used in the early 1900s to describe a dispute between miners and mining companies in Arizona. The miners demanded better working conditions. The companies refused to provide them. That left the miners with two unpleasant choices: continue to work in the same miserable conditions (a rock), or face unemployment and poverty (a hard place).

Today, the saying refers to dilemmas where there is only one choice but no obvious right answer.

What about situations where the choices include a potential for conflict of interest? Wikipedia defines conflict of interest as “a situation in which a person or organization is involved in multiple interests, financial or otherwise, and where serving one interest could involve working against another.”

This pertains to circumstances where the personal interest of an individual or organization might adversely impact on the responsibility of the individual or organization to make a decision for the benefit of a third party. In other words, a conflict of interest arises when what is in a person’s best interest is not in the best interest of another person or organization to which that individual owes loyalty. It is not possible to be on both sides of the fence at the same time.

A simple example. A sales representative is paid a base salary with bonuses that depend on achieving established sales targets. A farmer is asking about a certain product or service. The sales representative knows that if the sale is made, his or her bonus will kick in. The farmer asks whether the sales representative thinks the product or service will benefit the farmer and is worth the investment. The sales representative is in a conflict of interest.

Clearly, being in a conflict of interest in and of itself is not necessarily a bad thing. In the example above, the sales representative is not at fault for being in a situation where his or her compensation is tied to the number of sales. Countless business transactionswill include some element of the potential for conflict of interest.

Where it becomes an issue are situations where the person, or organization, is aware of the existence of a conflict in interest and proceeds to act in a manner that disadvantages the third party (in the case above, the farmer) in favour of their own interests. Conflict of interest, therefore, becomes an issue when the matter at hand includes inappropriate actions or behaviour.

Common core personal and business values are integrity, trust and honesty. These values speak indirectly to the matter of conflict of interest. A person or organization can find themselves in conflicts of interest but effectively manage the situations by holding fast to core values.

In the example above, the sales representative could have acted with integrity and stated to the farmer that the benefit of the product or service may not be worth the cost. The sales representative would have missed the opportunity for personal gain stemming from the bonus payment but acted in a way that the conflict of interest, even though existing, was not a factor.

I’m not aware of any regulation that mandates the declaration of a conflict of interest. The guideline to me has always been simply what is the right thing to do. Certainly, the person or organization, finding themselves in a conflict of interest situation, can declare the conflict. The other party (farmer above) would then know and can act accordingly. The farmer could have accepted that the conflict existed and proceeded with the transaction or determined that it was in his or her best option to find an alternative arrangement where no such conflict existed.

In some circumstances, the conflict of interest can include significantly greater impacts and consequences to either party. The onus is on the person or organization finding themselves in conflict to declare that, in fact, they are in conflict and cannot act without bias. The only way to avoid scrutiny associated with the conflicts of this magnitude is to recuse oneself from the situation.

Terry Betker, PAg, is a farm management consultant based in Winnipeg. He can be reached at 204-782-8200 or terry.betker@backswath.com.

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