Quarter of organisations ignore dangers of conflict of interest

18 January 2010

19 January 2010 | SM100, Jake Kanter  

Many organisations do not have rules to prevent staff participating in deals where they have a conflict of interest, the latest SM100 poll has revealed.

The survey of international buyers found 24 per cent were not subject to regulations that prevent them awarding contracts, even if they benefitted personally from the deal.

A large number of respondents described conflict of interest as being a situation where an employee can influence a business decision for personal gain, for example, awarding a contract to a family member.

One buyer, who wished to remain anonymous, said:  “We don’t currently have a policy, though we definitely should. I know that conflicts of interest exist within the business, but not in purchasing.”

Other survey respondents who were not subject to conflict of interest rules said they were trusted to declare when they should not participate in a tender. Some purchasers added that they would be expected to admit to conflicts under separate organisational policies.

Samir Boutamdja, head of logistics outsourcing procurement (Europe) at Swiss perfumery and flavour manufacturer Firmenich – which doesn’t have formal rules – said: “A policy should be introduced and even signed by new employees. It should be explicit enough to put the fear of God into them by delineating the risk.”

But consultant Alex Strange argued that these rules cannot always prevent fraud and corruption. “Only an individual’s moral beliefs will prevent them from conflicting interests. If they are intent on making personal gain, then there is no way they will observe conflict of interest rules.”

However, 76 per of the respondents said their organisations had strong policies on such issues.

“We were not encouraged, we were obliged, to sign rules,” said Sandrine Segers, contracts manager for air traffic control body Eurocontrol. “Signing it makes buyers more aware of their responsibilities within their function and helps prevent fraud, but of course it’s never 100 per cent foolproof. If you break the rules then there’s disciplinary action.”

David Smith, head of procurement for Walsall NHS, pointed out that conflict of interest policies fall under the CIPS code of professional ethics. “Procurement professionals should be impartial to this type of issue and be able to see where others are being fraudulent,” he said.

 

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