A Workable Conflict of Interest Law

My January 28 post on conflict of interest complained that the laws of many countries were unduly vague making it next to impossible for officeholders to know what constitutes an unlawful conflict of interest.  Matthew noted in his comment that lawmakers commonly face a dilemma in such situations.  They can either write a rule that clearly specifies what is prohibited, but which can then be easily circumvented, or draft a broadly drawn standard that covers a wider range of conduct but at the cost of vagueness.  (Click here for more on the rules versus standards dilemma.)

Matthew asked how legislators can resolve the tension between these two conflicting objectives. I recommend that the law distinguish between two types of conflict of interest.

The first type would be obvious, easy to specify, “hard core” conflicts the violation of which would be a criminal offense.   Examples would include an official awarding a contract to him or herself, a spouse, or a child; hiring a spouse or child; requesting or accepting a gift from anyone doing business with the official’s agency; representing a person or entity in a dispute with the official’s agency; secretly negotiating for a job with an entity that does business or is regulated by the employee’s agency; and having an undisclosed interest in a company regulated by the agency.  The harm that can arise from these situations is clear, and the rules banning them can be stated in plain language. (Click here for a nice, two-page example a plain language statement).

All other circumstances where government employees would have the opportunity to put their “personal” or “private capacity” interests above their duty to advance the public interest would be handled administratively.  Employees would have an obligation to disclose to their manager any facts that might bear on their ability to exercise impartial judgment or that citizens might think would affect their ability.  Examples are when an employee is appointed to a committee evaluating bids submitted on a government contract or asked to audit a taxpayer, or decide whether to issue a license or permit.  As soon as the employee learned, say, that one of the company’s bidding on the project was owned by a friend, he or she would be required to disclose that information to the manager.

The manager would then decide whether the circumstance were such that the employee should recuse her or himself from participating in the decision.  The factors to be weighed would include: (1) the nature of the interest involved, how close, for example, is the “friendship”; (2) the effect non-recusal would have upon the interests of any other person or firm involved in the relationship creating a potential conflict; (3) the nature and importance of the employee’s role in the matter, including the extent to which the employee is called upon to exercise discretion in the matter and whether the employee is part of group making the decision or is the sole decision-maker; (4) the sensitivity of the matter including its political sensitivities, a particularly important consideration when ethics issues have become politicized; and (5) the availability of another employee with sufficient expertise and experience to take the conflicted employee’s place, an issue of significance in small countries with limited talent pools.

Guidance on what should be disclosed should be freely available in the form of brochures, training sessions, and hot-lines or ethics counselors.  To ensure employees remain alert to the need for disclosure, they can also be required before sitting on a tender panel or participating in significant decisions to sign a form stating they understand their duty to report facts that could influence their decision and are unaware of any that would in this particular instance.  A nice example of such a form is contained in annex one to a 2013 report issued by the European Union’s Antifraud Office, Identifying Conflicts Of Interests In Public Procurement Procedures For Structural Actions: A Practical Guide For Managers.

 

2 thoughts on “A Workable Conflict of Interest Law

  1. I think there is still a bigger challenge in addressing the issue of conflict of interest in a developing country environment where extended family system – not just confined to husband, wife, sons and daughters but to generations of in-laws and relatives come into operation. I suppose some kind of “end-result” criteria be used to evaluate conflict of interest situation than attacking the process leading to conflict of interest.

    • A big problem in developing countries is the size of the talent pool. If it is small, then often there will be family or personal ties among policymakers and those who stand to benefit from decisions they take. If you start ruling out anyone related to a potential beneficiary, you may have no one left, or no one qualified left, to make the decision. Disclosure is the best that can be done in such cases.

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