conflict_of_interest

conflict of interest for employees of hospitals and members of committees and boards of management

introduction

  • conflict of interest is a conflict between a person’s public duty to act in the best interests of the entity and his or her private interests and/or duty to another organisation. A conflict of interest can arise from attempting to avoid personal losses, or gain personal advantage – whether financial or otherwise.
    • public duty is the duty of all persons is to put the public interest and the interest of their employer above their private interests when carrying out their official duties or reasonable duties as an employee.
  • conflict of duties in this context, is conflict arising from an individual person having multiple public duties. These conflicts may arise as a result of membership of multiple boards, and are also particularly acute for a person appointed as ‘representative’ of particular interest groups, or by virtue of their membership of a profession, or their position as a public servant. Reference to conflict of interest is usually deemed to include conflict of duty.

types of conflict of interest

  • conflicts of interest can be actual, potential, or perceived, and may relate to private interests or public duties:
    • actual conflict of interest:
      • a real conflict between a person’s public duties and responsibilities, and their private interests.
    • potential conflict of interest:
      • arises where a person has private interests that could conflict with their public duties in future.
    • perceived conflict of interest:
      • can exist where a third party could form the view that a person’s private interest could improperly influence the performance of their public duties, now or in the future.

private interest

  • anything that can have an impact on an individual or group.
  • includes not only a person’s own personal, professional, or business interests of individuals or groups with whom they are closely associated.
  • this can include relatives, friends or competitors.
  • private interests can be divided into two types:
    • pecuniary
      • involve an actual, potential, or perceived gain or loss.
      • money does not need to change hands for an interest to be pecuniary
      • people have a pecuniary interest if they (or a relative, or close associate) own property, hold shares, have a position in a company bidding for government work, or receive benefits such as concessions, discounts, gifts, or hospitality from a particular source.
    • non-pecuniary
      • interests which do not have a financial component.
      • they may arise from personal or family relationships, or involvement in sporting, social or cultural activities.
      • they include any tendency toward favour or prejudice resulting from friendship, animosity, or other personal involvement with another person or group.
      • if personal values are likely to impact on the proper performance of public duty, then these can also lead to a conflict of interest.
      • enmity as well as friendship can give rise to a conflict of interest.

guiding principles

  • most organisations have guiding principles to assist in dealing with these issues.
  • these generally include:
    • protecting the public interest
    • supporting transparency and accountability
    • promotion of individual responsibility for integrity and impartiality
    • building a supportive organisational culture

general principles applying to Directors on the Board of Directors for an organisation

  • Directors are expected to avoid conflicts of interest involving any matter pending before the Board
  • a Director, other than the CEO and the elected staff members shall not also serve as an employee of the organisation, nor shall a Director receive any compensation for services rendered to the organisation, other than as a Director;
  • the Board shall not enter into any contract with any of its Directors or with a firm in which a Director has a controlling financial interest;
  • a Director shall not:
    • disclose or use confidential information acquired in the course of official duties as a means to further the Director’s personal financial interests of the interests of a member of the Director’s immediate family;
    • accept a gift which would tend to improperly influence a reasonable person, or which the Director knows or should know is primarily for the purpose of a reward for official action;
    • engage in a substantial financial transaction for private business purposes with an employee of the organisation;
    • perform an official act that directly confers an economic benefit on a business in which the Director has a substantial financial interest or is engaged as a counsel, consultant, representative or agent.

usual practice when there is conflict of interest at Board meetings

  • all decisions will be made by a vote, with a simple majority required
  • a quorum must be present for the discussion and decision; interested parties will not be counted in determining whether the meeting has a quorum.
  • all decisions taken where a director has a conflict of interest will be recorded by the Responsible Officer and reported in the minutes of the meeting. The minutes must record:
    • that the conflicted director left the meeting prior to the discussion commencing and that the conflicted director re-jointed the meeting following the matter being considered;
    • the nature and extent of the director’s conflict;
    • whether the conflict was material;\
    • the actions taken to manage the conflict; and
    • an outline of the discussion and decision take (if any).
  • Where the option for managing a conflict of interest has been adopted, the minutes must record the:
    • reason for adopting this option;
    • mechanism used by the Board to monitor the conflict; and
    • extent to which the conflicted director was involved in any discussions or decisions made by the Board on the issue.

declaring conflict of interest at the START of meetings

  • The Chair or Responsible Officer will ask if any director or person in attendance has an interest (i.e. private interest or duty to another organisation) with respect to any matter on the agenda at the start of each Board or Committee meeting.
  • If a director or person in attendance has an interest with respect to any matter on the agenda, they will declare both the nature of the interest and the conflict that results or may result from that interest. This is required even where the interest has already been declared by the director or person in attendance and is recorded in the Register of Interests.
  • The Chair or Responsible Officer will also ask all directors and persons in attendance whether previously declared interests or duties are complete and correct. The Responsible Officer will ensure that the Register of Interests is brought to each meeting for reference if required. If there are no changes, the minutes will record that ‘all directors and persons present affirmed that their entry in the Register of Interests remained complete and correct’.

determining whether a conflict is material

  • If a conflict of interest is declared the following factors assist to determine whether the conflict is material:
    • the nature and functions of the organisation;
    • the issue that is to be discussed and determined by the Board, Committee or at the meeting;
    • the nature and extent of the conflict;
    • whether it is real, potential or perceived;
    • the amount, scope and likelihood of the expected benefit;
    • the degree to which the interest could compromise, or reasonably be seen to compromise the person’s ability to make an impartial decision.
    • the overall likelihood that there will be a public perception of a conflict of interest and the extent to which this may affect public confidence in the Board or the functioning of the organisation.

managing conflicts of interest

Whether or not a conflict is material, it will usually be in the public interest for the person with a conflict to:

  • leave the room at the start of the relevant agenda item and not return until the start of the next agenda item;
  • not discuss the matter with any other Board member or person (either in the meeting or elsewhere); and
  • not participate in any decision in the matter.

This procedure should be followed unless the Board or the Chair of any committee determines and documents clear reasons why it would not be in the public interest.

If taking into account all the relevant factors, it is considered that it is not in the public interest to exclude a person from all discussions and decision making on the conflicted issue, one or both of the following options to manage the conflict will be adopted, if appropriate:

  • monitor the conflict to ensure that it does not escalate and require stronger action; and/or
  • restrict the person’s involvement in discussions and/or decision making in relation to the issue, to the extent that promotes the public interest.

Where members of the public could reasonably form the view that a person’s conflict of interest is on-going, unacceptable and may damage the reputation of the entity, it may be necessary for the person to:

  • relinquish their private interest;
  • resign or temporarily stand down from the other organisation to which he/she has a duty; or
  • resign from the Board of WH or depending on the circumstances, resign from the organisation.
conflict_of_interest.txt · Last modified: 2013/11/15 12:14 (external edit)