This is an excerpt of Steinecke Maciura LeBlanc’s “Governance for Regulators” handbook. To view additional sections of the handbook, click here.
a. Conflicts of Interest
One of the most fundamental fiduciary duties is that Board and committee members cannot act when in a conflict of interest. A conflict of interest arises when a Board or committee member has a competing consideration that could reasonably affect their ability to make a decision based solely on the public interest mandate of the regulator.
Acting in a conflict of interest harms the reputation of both the regulator and the individual, can nullify the decision made and, where done in bad faith, can bring legal liability to both the regulator and the individual.
Conflicts of interest can take many forms, including financial, personal relationships, affiliations with other organizations and employment. Some examples include the following:
- Holding a leadership position with an organization, such as a professional association, that has a mandate inconsistent with the public interest mandate of the regulator;
- Participating in a decision (e.g., approving a contract) where the Board or committee member or someone close to them has a financial interest;
- Applying for an employment position with the regulator while still being a Board or committee member;
- Participating in a decision, such as making a regulation or policy, that has a larger than usual impact upon one’s own practice of the profession;
- Receiving gifts or hospitality (beyond the trivial such as refreshments during a meeting) because of your status as a Board or committee member or from someone who is affected by the decisions made by the regulator;
- Using one’s position with the regulator for personal advantage, such as referring to one’s position in the signature block used in one’s own practice;
- Running for public office where one’s position with the regulator is used to promote the candidacy or where statements made in the campaign can affect one’s role with the regulator;
- Assisting individuals or even one’s employers in their dealings with the regulator; and
- Failing to provide relevant and important information to the regulator, such as where one learns of allegations of serious misconduct even though the information was learned outside of one’s duties for the regulator.
Of course, whether there is a conflict of interest depends on the circumstances. Take the example of a client disclosing to a Board member, in the course of the Board member’s practice of the profession, information about the misconduct of another practitioner. The duty of confidentiality to the client may prevent the Board member from reporting the misconduct to the regulator unless a legal mandatory reporting obligation exists. Similarly, noting one’s position on the Board in one’s CV as a community involvement in a manner that is not promotional would likely be acceptable. Including reference to one’s position on the Board in an advertisement is unacceptable.
Also, some conflicts of interest are absolute and some are relative. For example, having a leadership position in a professional association prevents a person from serving as a Board member of the regulator. However, employment with a major corporation may not preclude a person from serving on the Board, but may prevent them from participating in decisions that have an undue impact on the employer.
Because of this ambiguity, Board and committee members should respond appropriately to any circumstance that might conceivably involve a conflict of interest. One such approach is to follow the three “D’s”:
- Discuss any potential concerns with the appropriate person (e.g., the President, the chair of the committee, the staff person supporting the committee, the CEO). Talking through the concern may either provide reassurance that there is no concern or confirm that something more should be done.
- Disclose the potential concern to the Board or relevant committee. The Board or committee can give more definitive guidance as to whether the concern is a problem or not. In a situation where the concern obviously constitutes a conflict of interest, disclosure is preparatory to the third step.
- Declare the conflict of interest where one appears to exist. This formal step should be recorded in the minutes. The Board or committee member would then leave the room (even if the meeting is public) and make no effort to influence the discussion or decision on the issue.
There is nothing wrong with having a conflict of interest. Often the conflict arises simply through a confluence of circumstances beyond the Board or committee member’s control (e.g., someone the Board or committee member knows is tendering for a contract with the regulator). However, failing to respond appropriately to the conflict of interest and acting while in a conflict of interest is a serious matter.
Conflict of Interest Scenario
Ernie Eager is assigned to a panel of the discipline committee hearing an allegation against a practitioner related to sexual harassment of a colleague. After making a finding against the practitioner, the practitioner files letters of good character from multiple colleagues. Ernie recognizes one of the letter writers as a close friend. Ernie had no idea that the friend knew the practitioner. What should Ernie do?
Ernie should first discuss the situation with the independent legal counsel supporting the discipline panel. That would prevent Ernie from tainting the other panel members, for example, by commenting on the credibility of the letter writer. Approaching the President or CEO in this case is likely not appropriate since the regulator is one of the parties at the hearing presenting the case. Independent legal counsel will almost certainly advise Ernie to disclose the connection to the letter writer to both parties at the hearing itself. Independent legal counsel can assist Ernie in wording the disclosure so that it does not taint the rest of the panel. After hearing the submissions of the parties, Ernie will decide whether he should declare an appearance of bias. An appearance of bias is another name for conflicts of interest that is commonly used in adjudicative settings like discipline hearings. If Ernie declares a conflict, he will leave the room and have no part in the decision on sanction. The appearance of bias likely does not affect the finding of professional misconduct itself because that finding was made before Ernie was aware of the connection.