Beware of conflicts of interest
ABC Publisher is a medium-sized textbook publishing company, which spends as much as $50 million on printing a year.
John, the head of ABC's production team, is responsible for sourcing and selecting suppliers and service providers. His close friend, Peter, is the owner of a printing company. Because of fierce competition and shrinking business prospects, Peter wanted to get printing orders from ABC by the backdoor.
Peter started to frequently treat John to sumptuous meals and entertainment at nightclubs. Following these social outings, Peter made known his true intention. He asked John to help him obtain printing jobs from ABC and offered him rebates. Being "softened" by the free meals and entertainment provided by Peter, John yielded to Peter's offer.
As the new school term was coming, the publishing company launched a new textbook, and invited quotations for a printing contract for 50,000 copies worth about $2 million. John was entrusted with the responsibility of sourcing printing companies.
John then asked Peter to submit a quotation. To ensure that Peter's company would get the contract, he disclosed to Peter the content of quotations submitted by other printers. With John's blessing, Peter's company managed to beat all other rivals.
The management subsequently received a complaint, alleging that John might have been bribed to favor his friend's printing company. The management summoned John and asked for an explanation. While admitting that the successful bidder was his friend, John defended himself saying that there was nothing wrong in not disclosing their relationship because the company did not have any rules requiring him to declare conflicts of interest.
John also admitted having accepted rebates from Peter, but stressed that he was not aware of any company regulations forbidding staff to accept advantages in relation to the company's business.
The management subsequently decided to refer the case to the ICAC for investigation. They also approached the Advisory Services Group of the Corruption Prevention Department of the ICAC for advice to improve the company's procurement and internal control systems.
What went wrong?
First, the company lacked clear guidelines spelling out the standard of conduct expected of its staff.
Second, the company's policy on acceptance of advantages had not been properly promulgated to heighten staff awareness of the need to prevent corruption.
In addition, procedural controls were also inadequate: for example, quotations received had not been kept confidential.
For enquiries about this article or corruption prevention advice to private sector companies, please contact the Advisory Services Group of the ICAC's Corruption Prevention Department at (tel) 2526 6363, (fax) 2522 0505 or (e-mail address)
asgicac@netvigator.com. Our service is free and confidential.
To report corruption, call the ICAC 24-hour Hotline at 2526 6366.
Tips for the management
a) Code of conduct
- The company should issue a code of conduct covering its policy on acceptance of advantages, declaration of conflict of interest and handling of confidential information, etc.
- The code should state the consequences of non-compliance with the code. For example, the company may take disciplinary action against the employee and refer the case to the relevant authority for follow-up action.
- Scenarios on conflict of interest in the workplace should be included in the code. For example, if an employee responsible for procurement is related to a supplier, or if an interviewer is related to a job applicant, they should inform the company of the situation in writing.
- An employee who has declared a conflict of interest should, where possible, refrain from making decisions in the process concerned.
b) Corruption prevention training
- The company should regularly provide corruption prevention training to staff with a view to cultivating a culture of probity and alerting them to the need of preventing corruption.
c) Procedural guidelines
- The company should set out procedural guidelines to give staff clear instructions on workflow and control measures.
Tips for employees
Employees should always comply with existing laws, including the Prevention of Bribery Ordinance. They should also:
a) Follow the company code of conduct and guidelines
- Employees should always observe and follow company rules and regulations, such as the code of conduct and internal guidelines.
b) Avoid conflict of interest or being "sweetened up"
- Employees should be alert to and avoid any actual or perceived conflict of interest or "sweetening" process. For example, they should not accept frequent or lavish entertainment from parties having official dealings with the company.
c) Seek company advice
- If in doubt, employees should seek advice from staff designated by the company.