Conflict of Interest – 101

The test [for a conflict of interest] is:

• whether you could be (not whether you are) influenced by your private interest in carrying out your official duties, or
• whether people are likely to believe that you could be influenced.

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If the public suspect the worst, your reputation and that of the council will be damaged, however sure you may be of your ground. So, even if you are certain your motives and actions are beyond reproach, you should avoid involvement in anything that could be construed as being influenced by personal interests. [my emphasis]

Dealing with Conflicts of Interest: A Guide for Councillors and CEOs
Leaflet, Queensland Crime and Misconduct Commission

The NSW Independent Commission Against Corruption and the Queensland Crime and Misconduct Commission have produced a number of jointly published booklets relating to conflicts of interest in the public sector. While these booklets relate primarily to public sector officials, they put a substantial amount of effort into defining conflicts of interest and explaining why they ought to be avoided. To this extent are useful guides for other organisations – or at least for other organisations which aspire to similar or better ethical standards. The following quotes are from the booklet Managing Conflicts of Interest in the Public Sector Guidelines:

The perception that conflicts of interest are not being managed properly can undermine confidence in the integrity of public officials and public sector organisations. (@7)

As a result, public sector employees are expected to:
• restrict the extent to which a private interest could compromise, or be seen to compromise, their impartiality when carrying out their official duties …(@9)

A perceived or apparent conflict of interest can exist where it could be perceived, or appears, that a public official’s private interests could improperly influence the performance of their duties – whether or not this is in fact the case… The critical factor is that public officials must not only behave ethically, they must also be seen to behave ethically. (@10)

The primary goal of systems to manage conflicts of interest is to ensure that decisions are made – and are seen to be made – on proper grounds, for legitimate reasons and without bias. (@11)

I have chosen these quotes to underscore the main quote extracted above. That is, whether a conflict of interest actually has some effect is beside the point. A conflict of interest may have no provable effect (see below) on outcomes and yet it should still be avoided. It should be avoided because it creates an adverse perception which an organisation, if it values its integrity, will want to avoid (the booklet also warns that conflicts of interest if not managed effectively can have more serious adverse outcomes over the longer term).

There is also a practical aspect to it – unless the person subject to the conflict admits that the conflict has influenced their behaviour an actual effect cannot be proven (“Influence me squire? Nah, neh-vah. He is my bruvva, but I would’ve made that decision anyway”). It is therefore understandable if members of the public are willing to infer an influence arising merely from the fact of a conflict of interest.  [Note 19 February: To illustrate the point, the ABC is reporting today that a council planner was having sex with developers, but that it didn’t influence her judgment: “Ms Morgan has told the inquiry she had sex with three developers, but it did not influence her decisions.” – Sex didn’t affect my judgement, former council planner says]

In the legal world conflicts would normally be managed by the person affected declining to act in the relevant circumstances (the booklets above stress the need to “manage” conflicts of interest and suggest different approaches). Whether a particular approach to management of a conflict is appropriate would depend upon whether it affected the basic perception tests above. For example, if people “are likely to believe that you could be” influenced by an interest, is that likely to change simply because you say you will be acting in a certain capacity/ you will endeavour to not be influenced by the interest/ etc?

Just in case you think the ICAC are a bunch of nondescript fringe dwellers on the ethical landscape, here are some extracts from some other ethical Codes of Conduct, Google has many more. For example:

“disclose, and take reasonable steps to avoid, any conflict of interest (real or apparent) in connection with APS employment” – the Australian Public Service Code of Conduct

avoid real or apparent conflicts of interest and act in the best interests of the people of New South Wales – NSW Code of Conduct and Ethics for Public Sector Executives

Perceptions of a conflict of interests are as important as actual conflict of interests. The onus is on you to identify a conflict of interests, whether perceived or real, and take the appropriate action to resolve the conflict in favour of your public duty. The Model Code of Conduct or Local Councils in NSW

Heavens, even the AWB’s Code of Conduct prohibits perceived conflicts of interest:

Conflict of interest can also be defined as an issue that may occur when personal interests, the interests of an associate, or relative, or a duty or obligation to some other person or entity, conflict or have the potential to conflict with obligations owed to AWB Group (ie. Competing against the company or its clients directly or indirectly). It is sufficient that if AWB Group believes conflict exists or potentially exists [my emphasis], it may instruct the staff member to act or cease to act in a certain way.

Potential direct or indirect conflicts of interest of employees or those acting on behalf of AWB Group (or their family, relatives, friends or agents) are to be avoided unless specific written consent has first been obtained from your General Manager.

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Q. My brother has recently been appointed to a senior position for a contractor that provides transport services to AWB Group. My work for AWB Group involves managing some of AWB Group’s transport contracts. What should I do?

A. There is the potential for a conflict of interest here which must be avoided. You should inform your supervisor and request that you not have any involvement with the contract between AWB Group and your brother’s employer.