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When a prospective client contacts my law office about representation in a legal action, one of the first things my staff does is conduct a “conflicts check.” As an attorney, I am ethically bound to provide my clients with the best advocacy. This won’t be possible if I have a real or perceived conflict with them or their case.
For business people, the possibility of a conflict is no less critical. Whether hiring staff, negotiating agreements or seeking counsel, entrepreneurs should feel confident that the person on the other side of the table will have their best interests at heart.
As professionals, our primary mission should be to face conflicts with integrity, ensuring we honor our commitments to our clients and ourselves.
What is a conflict?
For lawyers, the most prominent kind of conflict is representing both sides in a dispute. Imagine a divorce attorney agreeing to represent both the husband and wife in their divorce: It simply wouldn’t happen unless there was a full written disclosure of the conflict and a knowing waiver by both sides. The legal code of ethics says that if I have a relationship with or have worked for a party on the other side in a dispute, I cannot possibly provide my prospective client with unbiased representation. I should refer them to another attorney.
Not all conflicts are so apparent, however. Even when there isn’t an obvious overlap, there could still be bias or some personal agenda that colors how the lawyer — or any other professional — views or will handle the matter before them. Judges, for example, are expected to recuse themselves (step away from a case) if they have any type of interest in a party or matter before them. They may have invested money in a company, played golf with the company’s president or sat on the church board with one of the parties, and this could cause them to favor that party over the other for reasons other than the facts or the law.
For business people, some conflicts are clear-cut. You would probably not want to work with a consultant who provided the same services to one of your direct competitors. You might also have good reasons not to hire someone married or related to a key person at a competitor.
But what about a potential investor? A C-Suite candidate? At what point could an interest, relationship, or connection with that other party become hazardous to your business?
Why are conflicts bad?
In my legal role, if I have had any kind of relationship with the other party, I probably know too much about them – their strategies, finances and other internal matters – to be able to offer unbiased insights to a new client. I might even put my first client at risk by inadvertently disclosing trade secrets or other confidential information. Even if I strongly believe that I can distance myself from the prior engagement, the very appearance of conflict should be enough to stop me from agreeing to take on the new case.
The same holds true in business transactions. A clear conflict of interest threatens to expose confidential information such as processes, formulas and customer lists, but bias or personal interest can also taint the information and advice we receive from others. Despite the best intentions of the consultant or contractor, the risk is high that they could compromise your business or otherwise not act in your best interest.
Any time an individual has a personal interest in a matter, whether it’s a financial investment, a friendship, or even a religious or political belief, it can affect how they view it. Although the person may truly believe he can set his interests aside, it is the rare individual who can actually remove the tinted glasses from his eyes.
How do you identify conflicts?
It starts with asking questions. Unlike law offices, businesses aren’t legally or ethically required to check for conflicts whenever a client or vendor walks in. But this doesn’t mean that checks shouldn’t be performed.
Before hiring a worker or engaging a contractor, take the time to learn about where they have worked and what they have done. Not only will this protect you against negligently exposing your information, but it may prevent your company from unknowingly learning another company’s trade secrets.
Nondisclosure agreements are important tools for ensuring that your confidential information is respected and protected. Still, the bottom line is that once a trade secret has been shared, the barn door can never be closed. It is far better to keep the door shut first than seek damages after the horse has escaped.
In the best-case scenario, the contractor, consultant, or job candidate will be candid and up-front during your introductory meeting, putting their cards on the table so you can make an informed decision. But they may not always recognize potential conflicts, so the onus is on you to ask questions until you feel satisfied that you know what you need to know.
The bottom line
Although you cannot ask your workers to share legally protected information — medical or family history, politics or religion, gender identity — the more you know about their prior work, priorities and values, the better informed your decision will be.
If, at any time during their tenure with your company, you identify a real or potential conflict, address it immediately. Share your concerns with the other party and ask for information to confirm or rule out any conflict. Contractors or consultants with real or perceived conflicts can be phased out and replaced if necessary. For conflicted employees, document your decision and conduct an exit interview to remind them of their obligation to maintain trade secrets and other protected information.
Remember, the journey of business is fraught with competition and conflict. The truly successful entrepreneur will navigate these issues proactively, ensuring that any real conflicts are outside rather than within their own walls.