In 2015, we introduced the Conflict of Interest Procedure to our robust Compliance programme in TOTAL. It was a necessary procedure the company needed at the time to save us from unnecessary law suits and biased business practices. Today, I will discuss on how Conflict of Interest can help Start-Ups achieve good governance and systems.
In Africa, Conflict of Interest has been relegated to a Legal Department issue and ignored in the operations of a company. It is mostly only stated during court proceedings, negotiation dealings or contracts however Conflict of Interest issues contribute to over 60% of dangers to businesses today. Lack of Conflict of Interest policies in workplaces has nurtured nepotism, sub standard products/services, fraud, law suits etc. And may I say this is partly why systems suffer in Nigeria today?
Let's consider a scenario,
Your company has opened bid for contractors to handle a project and you are in charge. Your brother bids for this project and on the day of negotiation, you identify your brother in the negotiation process but even after you declare your conflict of interest, no steps were taken to isolate you from the process. Your brother wins because his company is the best fit however the other vendor who lost finds out that he was your brother and sues your company to court.
How do you plead? In this scenario, either your reputation or your company goes down with a huge fine slam.
Now, in the era of entrepreneurship and startups, we find entrepreneurs have ignored the importance of compliance in their business operations. The basic Start-Up kit includes Tech, branding, product/service, business development and marketing. When Legal comes in, its only about equity, company registration or shares. I've seen several startups built to fail from the onset because its structured around non-compliance procedures.
Conflict of Interest Issues affect recruitment of new team members, bringing on board qualified & best practice contractors, in-house fraud, bad company cultures, biased judgement among partners and public officials, law suits, sub standard products & services, over spending etc.
Here's a case study of a distribution and warehousing company
Company XYZ ran a successful business through imposed profit (buy-sell difference) sale and distributing commissions. The CEO's friend drove one of the distribution trucks but could not explain his fuel expenditure playing the age mate friendship card to avoid declaring it. On the other hand, another friend worked pro bono to manage the company in the CEO's absence however 'sometimes slept' with the receptionist in the CEO's house nurturing a late resumption time.
Now let's begin to calculate the loss Company XYZ has lost and the bad company culture that resulted. Finally both were sanctioned and sacked.
So how do you avoid Conflict of Interest in your Start-Up
- Get every team member including yourself, the CEO, to sign a Conflict of Interest Form at least every year. Also, introduce a policy where each team member declares a conflict of interest once it arises.
- Isolate team members from negotiations where they have potential conflicts of interests and introduce mitigation measures to vendors/partners who have a potential conflict either within their company or in relations to your company.
- Have each employee sign a confidentiality form on behalf of the company.
- Extend a tailored Conflict of Interest Form to your Advisory Board and Directors.
- Train your team on Anti-Bribery Compliance including Conflict of Interest.
I personally wish that Nigerian Government would install a robust Compliance Policy into our Systems.