It sounds simple. Tell employees to disclose potential conflicts, wait for them to do it, then decide if the conflict is a problem. But the execution of the process is often not that simple, especially if you have a small team or no technology to help.
No one solution will work for every company. But there are considerations and alternatives that can help you to apply a risk-based approach to conflicts management so your program moves smoothly.
This is the first blog in our series about managing the conflicts of interest disclosure process. Here we will look at how to use a risk-based approach in choosing who should be in-scope for the disclosure process.
Questions to Consider for Scope
The first question to ask is who is in scope for disclosure. While “everyone” is the safest answer, frequently that will be impossible.
Besides, for many jobs, there is a very low possibility of conflicts and an even lower probability of significant conflicts. Ask yourself these questions:
- Do we have factory, retail, or hourly workers? And if so, are any of them likely to have significant conflicts?
- Who has the power to bind the company to contracts?
- At what seniority level do people at the company begin to have the power to spend budgets or manage more than a couple of people?
- At what seniority level do people at the company begin to be asked to be on boards?
These questions should help you to determine who should be in-scope.
Categories of Types of Likely Candidates
If the scope of your program isn’t “everyone,” there are various types of people that are frequently in-scope for conflicts of interest disclosure. These include Board members, C-suite and senior-level managers, new hires, and everyone else who needs to disclose on an ad hoc basis.
Board members: Regardless of the size of your conflicts disclosure program, members of the Board of Directors should be in-scope. Indeed, under US and UK law, Board members have a legal obligation to avoid conflicts of interest, and disclosure is the best way to manage those potential conflicts.
There are typically only a handful of Board members, so this should be a relatively easy process.
C-Suite and Senior-Level Managers: Members of the C-Suite and senior-level managers are the employees most likely to have conflicts. Senior-level employees are often on Boards of Directors, especially if you work at a very large or publicly-traded company.
These employees frequently have many direct reports and manage large budgets, including procuring goods and services. If possible, they should be in-scope.
New Hires: Many companies ask new hires to fill out a conflicts disclosure, especially if there is only an ad hoc process after commencing work. Since new hires typically fill out mountains of paperwork, and HR is creating a personnel file anyway, it’s often the perfect time to root out conflicts.
It can be easier to manage conflicts at the beginning of employment since the individual hasn’t been in the position long enough to embed bad behaviors.
Everyone Else on an Ad Hoc Basis: At the very least, you should have a process whereby people can disclose potential conflicts of interest proactively as they arise.
Utilizing a Risk-Based Approach
When determining who is in scope, be sure to use a risk-based approach. If your company has tens of thousands of employees, managing the conflicts disclosure process with a team of three could be impossible, and you don’t want to put yourself in a position where it takes an entire year just to get through the conflicts review process.
Consider the resources you have: technological, budgetary, and human. It may be beneficial to start small and to expand the disclosure scope over time once a small high-risk population has been reviewed.
As always, be sure to document your thought process in choosing the in-scope employees/Board. It’s always easier to defend yourself later if you write down your thoughts today before a problem arises.
Our next blog will cover the various tools that can be used for disclosure along with the benefits and drawbacks of each. But for now, to scope for success, consider all your options, then narrow them to the one that makes the most sense given your capacity.