The All-India Postal Employees' Union (Group C) recently accused Veena Srinivas, Chief Post Master General of India Post (Maharashtra Circle), of using her official position to persuade (postal) employees to buy her husband's bakery products. The Union also accused her of using her office cabin to sell imitation jewellery and jasmine garlands during festive occasions. Following the accusations, Veena Srinivas went on leave, and Ganesh Sawaleshwar filled in her position. This incident is a classic example of a conflict of interest at the workplace.

What is a conflict of interest? A conflict of interest occurs when an employee's (personal) interests interfere with their professional obligations, sufficient to compromise their duty to act in the company's best interests. It is a situation where an employee's self-serving interests trump their professional responsibilities. Conflicts of interest can raise doubts about an employee's objectivity and professional judgement- two attributes that companies value greatly. The appearance of a conflict of interest holds the same weight as an actual conflict of interest, and hence employees must make a prompt and full disclosure should any such situation arise.

Types of conflict of interest situations:

There is no exhaustive list of situations that qualify as conflicts of interest; however, there are a few instances where such circumstances could typically arise:

• Self-dealing - This occurs when employees use their official position or company resources for their personal betterment at the company's expense. For example, a director uses his position to secure a contract for his private consulting firm.
• Nepotism - When employees provide unfair advantages to people with whom they share a personal relationship, they propagate nepotism. This is primarily seen in hiring practices where supervisors or managers may employ their relatives for certain positions even when they don't meet the job criteria.
• Financial interests - Employees may have vested monetary interests, like owning shares of another company to which they direct contracts to reap the profits. They may also engage in insider trading and leak confidential corporate information to competitors.
• Gift exchanges - External parties may give employees gifts to crack a favourable deal. In some cases, this may also be viewed as bribery which is punishable by law.
• Moonlighting or outside employment - Employees may pursue a side gig during working hours, diverting their valuable time and attention from their regular employment.
• Using business resources - Utilising company resources to further personal gains is a conflict of interest situation. For example, using company-paid software to work on private consulting projects.
• Personal Relationships - Personal relationships between employees in the workplace can lead to favouritism and compromised performance reviews.
• Business opportunities - Starting a line of work that competes with the employer's business is a conflict of interest.

Role of a Code of Conduct in tackling conflicts of interest:

A well-drafted Company Code of Conduct (CoC) comes in handy to apprise employees of certain predicaments they might find themselves in. It must contain a separate section that deals solely with ‘conflict of interest’ and must clearly state the company's expectations from its employees and the consequences of engaging in activities that compromise its interests. The CoC must also specify the individuals to whom this section applies: employees, directors, contractors, etc. The CoC will have a more significant impact if practical examples are also included in the same. Companies can go the extra mile and supplement the Code of Conduct with a detailed Conflict of Interest Policy. A company can also develop a Conflict of Interest questionnaire to be filled in by employees whenever they face potential conflicts or encounter a change in existing conflicts, which the concerned authority can then review.

In Conclusion Conflicts of interest can harm a company's reputation if not addressed in time. Employees may need help recognizing these situations since private interests often cloud their objectivity. This necessitates a comprehensive Code of Conduct with clear guidelines on conflict of interest situations. Timely resolution of conflicts of interest is critical to good corporate governance.

Rainmaker's latest offering Employees must be familiarised with their company's Code of Conduct through adequate training to deal with conflict of interest situations. Rainmaker has recently launched its Code of Conduct e-module, WorkWAY, which covers various topics, including conflict of interest. It is a dramatised e-module that includes real-life scenarios that are engaging and enlightening at the same time. Through this e-module, your organisation's employees can understand the conflict of interest issues they may face and how they could respond ethically when placed in such situations. We also offer customised training programs and subject-matter expert-led workshops on Code of Conduct.

Watch the trailer of WorkWAY below:

Author: Muskaan Alvi, Research Associate-Law, Rainmaker Directions and Contributions: Akanksha Arora, AVP-Legal, Rainmaker

References [1] Maharashtra postal chief busy selling cakes, claims union: The Free Press Journal

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