ECI COI Slides

Conflicts
of Interest:
An ECI Benchmarking Group
Resource
Jeffrey Kaplan, Kaplan & Walker

Mark Snyderman, Laureate Education, Inc.
October 19, 2016

About the Ethics & Compliance Initiative (ECI)
Our Mission
ECI empowers organizations to build and sustain

High Quality E&C Programs (HQPs).
2 ethics.org | © 2016 Ethics & Compliance Initiative

About the Ethics & Compliance Initiative (ECI)
The Ethics & Compliance Initiative (ECI) is a best
practice community of organizations that is
committed to creating and sustaining high
quality ethics & compliance programs. With a
history dating back to 1922, ECI brings together
ethics and compliance professionals and
academics from all over the world to share
techniques, research and, most of all, exciting
new ideas. www.ethics.org
3
ethics.org | © 2016 Ethics & Compliance Initiative
The Problem
§ Conflicts of interest (COIs) are pervasive, and difficult to
capture
§ Management requires hard work and thoughtful
approaches
§ If not appropriately handled, COIs can negatively affect
the sense of organizational justice generally in a company
§ Effective COI management is essential to having an HQP
4
The Process
§ Research Working Group (RWG) formed
§ Major COI topics identified
§ ECI Member survey designed and deployed
§ 34 members join RWG
§ RWG members form sub-‐committees to analyze survey
results and prepare first drafts of the report on their
respective topics
§ First drafts reviewed by entire RWG
§ Drafts revised and consolidated into final report, which
includes various sample materials from companies
5
Overview
1. Defining Conflicts
§ Code and policy provisions
2. Preventing Conflicts
§ Training and communications
3. Identifying Conflicts
§ Mechanisms for identification and disclosure
4. Dealing with Conflicts
§ Procedures for investigating, managing, and resolving
conflicts
6
Defining Conflicts: Codes and Policies
§ 88% of ECI members believe their codes and
policies provide clear guidance
§ COIs commonly addressed include:
§ economic and family relationships with vendors,
customers, and competitors
§ gifts, meals, entertainment, and travel
§ hiring or supervising family members
§ Variations across organizations tend to be based
on how likely a given type of COI is to occur, how
harmful it is likely to be, and how difficult to
identify and manage 7
Best practices for tough COI situations include:
§ Rotational schedules for sales or procurement
functions
§ Prohibition of family members from working in
the same chain of command, or independent
oversight and performance reviews
§ Tracking, disclosure, or approval forms to provide
insight on gifts and hospitality offered or received
8
A TABLE OF COI TYPES
The following table describes common conflicts of
interest noted in Codes and policies, examples of
the potential conflict, and the risk the organization
seeks to mitigate in managing the conflict.
Situation Examples Potential Risks
9
Preventing Conflicts of Interest:
Training and Communication
§ Key because lack of understanding/appreciation pervades
this area
§ Common to train all employees -‐ but often it is through
code of conduct training
§ Best practice organizations do not limit training to delivery
of a single COI course, but view education more broadly,
using multiple channels to deliver and reinforce key
messages, such as embedding COI elements in formal
Code training, posters, anonymized cases from the E&C
office files, focused leadership training and periodic
messages from leaders
10
Training and communication
§ Frequently training tied to certification
§ Content to consider in developing general training
§ Overview of types of COIs – and nature of harm for
each
§ Disclosure: why, what, when and to whom – including
changes of circumstances requiring recertification
§ Consequences of non-‐disclosure
§ Consider added training/communication for
higher risk functions – not just procurement but
also controls one (e.g., investigators)
§ Be alert to cultural differences
Training and communication
§ Frequency: map out a multi-‐year training and
communication cycle that includes timing, media,
and who is responsible for preparing and
delivering each element of the plan
§ This is a good idea for any E&C area – but can be
particularly useful for COIs, given the complexity of the
topic
§ Measure efficacy – what areas do employees
struggle with in interactive course, survey results
(post training), number of disclosures

Identifying Conflicts of Interest
DISCLOSURE AND CERTIFICATION
80 percent of ECI respondents use self-‐reporting
certifications
§ WHICH EMPLOYEES?
§ Organizations may target specific groups to
complete certification based on risks such as job
type, geographical location
13
§ WHICH RISKS?
§ Organizations may track only certain types of COIs
§ gifts and entertainment
§ financial interests
§ family relationships
§ outside employment
§ volunteer and charitable activities
§ Certifications should be limited to comply with
applicable restrictions on self-‐reporting
14
§ When?
§ A conflict can arise, change, or disappear at any
time
§ Organizations may capture COIs at various points
in the employment life cycle
15
§ COI Certification (COIC) best practices include:
§ Using a written or electronic COIC instead of simply requiring
disclosure
§ Providing guidance and training to assist employees
§ Requiring new hires to sign or complete a COIC
§ Evaluating the need for additional customized COICs (i.e., COIC
specific to risk area or employee group)
§ Distributing a COIC annual report or summary to senior
executives and governance committees
§ Establishing expectations and a schedule for periodic
recertification (semi-‐annual, annual, ad hoc self-‐reporting)
16
Tracking Mechanisms
§ Over 63 percent of Survey respondents use some
type of computer-‐based system to maintain and
track their disclosures.
§ Consider on-‐line system that provides disclosure
review by various levels within an organization.
§ Consider system that allows employees to provide
additional or modified information to a
submission.
17
Risk Assessments and Auditing
§ Only 57 percent of respondents are confident
they are identifying and addressing all reasonably
likely COIs
§ Risk assessment should ask both “how” and
“why” conflicts may occur
§ “How” looks at business practices and relationships
that may give rise to conflicts
§ “Why” focuses on the motivations employees or others
have in circumventing controls
18
Risk Assessments and Auditing
§ COI audits are difficult because conflicts often

arise through unobservable personal relationships
§ Basic auditing relies on trained staff to ask

questions of specific groups of employees, e.g.,
procurement
19
More sophisticated audits may include:
§ Reviewing employees’ activities on social media
§ Looking for matches between vendor and employee addresses
§ Looking for matches between vendor and employee bank
accounts
§ Matching vendors’ corporate ownership records against
employee names
§ Examining employee email, telephone, and expense records for
interactions with vendors and customers
§ Identifying suspicious patterns of vendor pricing that suggest
favoritism by a purchasing employee
20
Dealing With Conflicts of Interest
§ Organizations should ensure they have a process through which
disclosed conflicts are reviewed quickly and thoroughly by
persons who have sufficient training and experience to
accurately assess the COI risk
§ Where disclosure is made to someone other than an
employee’s manager, notifying the manager that the employee
has disclosed a conflict, or that a potential conflict is being
investigated, will help ensure that the investigation is thorough.
§ Appropriate notice also facilitates monitoring and
implementation of any mitigation plan
21
Dealing with conflicts of interest
§ Remediation – possibilities include (depending on
applicable circumstances)
§ Segregation of the individual from relevant decision-‐making
§ Transfer of supervisory roles over relevant employees to other
members of staff or transfer of role to a different area
§ Disposal of assets that cause the COI
§ Termination of the external activity that causes the COI
§ Agreeing to a protective contractual clause with third parties
§ Declining to proceed with the matter or engagement when no
resolution is possible
§ Otherwise prohibiting continued involvement in the activity that
creates the conflict
§ Some companies have standard mitigation plans which
can be useful; but important to tailor to the situation

Questions?

jkaplan@kaplanwalker.com
mark.snyderman@laureate.net
http://ethics.org/research/conflicts-‐of-‐interest

ECI COI Slides

Uploaded by

Document Information

Original Description:

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

ECI COI Slides

Uploaded by

Copyright:

Available Formats

Conflicts

Jeffrey Kaplan, Kaplan & Walker

October 19, 2016

ECI empowers organizations to build and sustain

2 ethics.org | © 2016 Ethics & Compliance Initiative

Situation Examples Potential Risks

ethics.org | © 2016 Ethics & Compliance Initiative

§ COI audits are difficult because conflicts often

§ Basic auditing relies on trained staff to ask

ethics.org | © 2016 Ethics & Compliance Initiative

ethics.org | © 2016 Ethics & Compliance Initiative

You might also like