by Rebecca Walker
The compliance officer of a client called me a few years ago to relay a tough situation: The company’s head of Procurement (“CPO”) had recently lost his wife to pancreatic cancer. The CPO turned to charitable work in his grief, creating a non-profit to fund cancer research. The non-profit was planning its first big fundraising event – a dinner and auction – and the CPO wanted to invite employees from the company’s suppliers. The CPO considered these supplier employees to be his friends. He had been working with many of them for years. The leadership team at the company wanted to support the CPO in his grief. And the conflicts of interest policy didn’t mention this fact pattern specifically. What should they do?
Many of us support non-profits in various ways, and supporting them can be an important and meaningful part of our lives. However, soliciting on behalf of charities can create conflicts of interest (COI) issues when done in the workplace. While it may make compliance professionals feel a bit mean-spirited, creating clear policies for employee solicitation of suppliers for their personal charities is a good idea – and one that many companies have not yet undertaken.
So why shouldn’t employees be permitted to solicit suppliers on behalf of charities they support? There is a risk that an employee’s decision-making related to suppliers will be impacted by a supplier’s charitable donations. An employee may, for example, favor a supplier who donated to her charity over one who did not. That could create both cost and quality concerns. Solicitation of suppliers could also result in employee perceptions that supplier decisions are not made in an objective fashion, which could have a negative impact on the greater culture of compliance at an organization. Lastly, such solicitations could cause suppliers to believe that the Company’s decision-making may be impacted by the supplier’s contribution, placing undue pressure on suppliers to donate, and having a corrosive effect on how suppliers view the organization’s culture of compliance and the fairness of the procurement process.
With solicitation of suppliers, there is a risk of both bias in how employees make decisions on behalf of the company, and the appearance of bias, which can damage the culture of compliance and ethics at an organization.
On the other hand, many organizations understandably wish to support their employees’ charitable and community activities and causes. Organizations may also have their own foundations and charities for which they solicit suppliers, in which case a prohibition on solicitations may be perceived as creating a “double standard” with respect to the employee’s chosen charity. And conflicts can often be managed with appropriate controls – such as removing the conflicted employee from decision-making with respect to the relevant issue. (Although sometimes creating appropriate controls is nearly impossible. In the fact pattern relayed above, for example, it would be impractical to remove the head of Procurement from decisions involving any of the suppliers whose employees had been invited to the CPO’s fundraiser.)
On behalf of another client, my firm recently conducted benchmarking research on the question of whether companies allow employees to solicit charitable donations from company suppliers for charities that the employees personally support. (By “charities that the employees personally support,” we intended to exclude those charities that the relevant corporation itself supports.) It was a more difficult question to explore than we thought, largely because the majority of companies that participated in the benchmarking exercise do not directly address this question in their codes or policies. (As an important aside, we are very fortunate to be part of a profession where folks are so ready and willing to participate in benchmarking. Yay for Compliance and Ethics!)
Of those companies that do address the question in their policies, the majority prohibit such solicitation. For those companies without a policy covering this scenario, our conversations with the relevant compliance professionals indicated that most such companies have prohibited or likely would prohibit employees from soliciting the company’s suppliers for charitable causes personally supported by employees. (We reviewed a total of 41 COI policies and spoke with 29 compliance professionals during our research.)
A table indicating the responses to benchmarking is below.
Regardless of how an organization chooses to manage this potential conflict, it may save you a lot of future anxiety if you formulate a policy governing this situation before it arises, when everyone can be a bit more objective in how the policy is approached.
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