Is a Board Position a Conflict of Interest?

Here’s an story (in which I was quoted) by Paul Turenne, in the Winnipeg Sun: Gerrard slams WRHA manager’s ‘moonlighting’.

The story is basically about a senior executive (Brock Wright) at the Winnipeg Regional Health Authority (the public body responsible for administering hospitals in and around that city) who took a position on the Board of Directors of a small American medical technology company. Critics (like Opposition leader Gerard, named in the headline) called that a Conflict of Interest.

Now, a conflict of interest is basically any situation in which a person has a private or personal interest sufficient to appear to influence the objective exercise of judgment in his or her official duties.

So, to figure out whether there’s a problem here, a few elements need to be considered.

1) Does taking a Board position constitute an “personal interest” in the relevant sense? The one that’s usually (but not always) at stake is an interest in money. Well, And corporate board membership isn’t typically volunteer work. It involves a significant stipend, along with a good deal of personal prestige.

2) What bits of judgment might Wright need to exercise on behalf of WRHA that might be jeopardized by his board membership? The most obvious one is his involvement in purchasing decisions for the WRHA. In that regard, a spokesperson for the WRHA says:

This is a company the WRHA has no business relationship with. We have not purchased anything from them. If at any time they were to try to sell us something, Dr. Wright would of course remind us of his relationship with them and recuse himself from any discussions. Having said that, he’s not in a position to make decisions like that. We have a very strict policy about the tendering process

The bigger issue (though perhaps not insurmountable) is the judgment that Wright (or any employee) needs to exercise with regard to his own time management. Being a member of a corporate board isn’t an honourary thing: it comes with real responsibilities, and can take considerable time. So the question I would want to ask, if I where the WRHA, is how Wright plans to satisfy his duties as a member of the TearLab board (including possibly several trips a year to attend meetings in California) without diminishing the quality of his work in Winnipeg. If there’s reasonable plan to make that happen,

3) Finally, it’s worth noting (again and again) that being in a Conflict of Interest isn’t automatically unethical. (So it’s not, contrary to the headline used in another newspaper’s story about this issue, an accusation.) It is possible to end up in a Conflict of Interest through no fault of your own. And, finding yourself in a COI, what matters is what you do about it. Disclosing the COI to the person or organization relying on your judgment is usually considered step 1, and removing yourself from key decisions, if possible, is another standard move. But COI is at least sometimes worth tolerating, if managed appropriately. That does mean, though, that we should all be expected to think carefully, before putting ourselves into a Conflict of Interest, whether the risks are manageable, and whether in the end those risks are sufficient to constitute a disservice to those who rely upon our judgment.

2 comments so far

  1. Pat on

    Sins of omission can be just as harmful as sins of commission – especially in the case of “willful blindness” where personal benefit can be obtained by turning a blind eye to responsibilities or to acquired knowledge within the context of the position held.

    Board nesting has the potential for extremes that can harm not only shareholders, but entire companies and the employees who work for those companies.

    Dangling employees on the threads of uncommitted, uncaring or negligent board members is not a pretty sight.

  2. […] in this post on the Business Ethics Blog, Chris McDonald notes that serving on a board typically involves significant compensation (and […]

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