Resolving conflict of interest in government

Tuesday, April 12, 2016

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A conflict of interest arises where personal self-interest has the potential to undermine a person’s impartiality in the execution of professional or public duty.

Individuals serving in public positions are duty-bound to put the public good above their own self-interest. Public positions, which are positions of trust, include service as board members, senators, ministers of government, and government advisors and consultants.

The frailties and foibles of human nature are such that people are driven by self-interest, and it is a remarkable person who can objectively disregard self-interest.

Where there is a conflict of interest situation and the individual cannot be impartial, one of three courses of action should be considered. We illustrate with a hypothetical example using an appointee to the board of the Bank of Jamaica, but who owns shares in a private financial institution which could be affected by central bank policy measures. First, he/she must recuse him/herself from the matter at hand after declaring that self-interest serves as a disqualifier from participating in the decision-making process. Second, decline the appointment if the conflict of interest will be a recurring problem. Third, resolve the conflict of interest by disposing of the private interest, eg selling the shares in the financial institution and/or resigning from the board of the private financial institution.

The issue is further complicated when there is need to meet the ‘justice must not only be seen to be done’ test. For example, judges should recuse themselves from sitting in cases where one of the parties is known to be a close friend or member of their family or is a ‘brother’ of a special kind by virtue of membership in an organisation.

Some private sector players may find themselves in a situation where they get access to privileged information ahead of others with whom they may be in competition and the general public, thus raising the issue of insider trading.

The problem poses a serious dilemma because those most knowledgeable of a particular industry or issue are usually in the best position to serve on the boards of regulatory or supervisory institutions that are in need of their experience and expertise.

The question arises: Should a cocoa farmer serve on the Cocoa Industry Board; should a major real estate developer be on the board of the Urban Development Corporation; should a senator who owes a public financial institution a large debt pay this off before taking a seat in the upper chamber of the legislature?

This is an issue for all countries and all governments. As we strive to improve the quality of governance and to make government more transparent and accountable, it is important that all those to be appointed to serve in positions of trust be asked to resolve such possibilities of conflict of interest.

A set of criteria must be developed by an impartial body and enforced by the Government. There is guidance to be found in the OECD Guidelines on Corporate Governance on State-Owned Enterprises. Also, the impartial body may then organise a course on what are the duties of directors and make it compulsary for all new broad directors.

We cannot rely on the noble side of human nature because there is too much evidence of the lack thereof over time and across the world.

The revelations from Panama are just the latest evidence that human beings will be human beings.

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