23 May 2013

What does conflict of interest really mean?

This is business as usual

But if you wear too many hats

Or if you are both the left and right hand

You're really playing games with public funds

Conflict of interest is very easy to understand, very easy to identify

Here's the egghead definition and its restatement into simple English, courtesy of the Journal of Business Ethics (39:1-2, 67-74). It is:

"...a situation in which a person has a private or personal interest sufficient to influence the objective exercise of his duties as say, a public official, an employee, or a professional.

Simply put, a conflict of interest occurs when your obligations to a party or the greater public could be influenced or compromised by self interest, a prior commitment, competing loyalties, or an inability to be objective."

On the very specific issue of town councils, the Victoria state ombudsman says in its 2008 report "Conflict of interest in local government": 

"Those interests may be pecuniary... or non-pecuniary, such as the interests of the official's family or other close associates, or organisations to which the official belongs."

That is to say, conflict of interests occur when you:
Give contracts to friends, party members, or family members;
Are both the drafter/approver of contracts as well as the bidder for a contract;
Are both an employee of local government as well as a shareholder or director in a company engaged by local government; or
Oversee for the town council the work you carry out for the town council.

To put it even more simply: conflict of interests happen when you wear too many hats; or when you are both the left and the right hand when the key principle in corporate governance is never let the left hand know what the right hand is doing.

To put it for dummies: conflict of interests happen when you're not independent.

So what happens when there is a conflict of interest? The standard advice given in all governance textbooks is to recognise it; disclose it; then remove yourself from the decision making and ideally from the entire discussion.

No exemptions for the PAP and WP; or, a plague on both your houses!

We do not wish to rehash the details of the AIM saga, the FMSS saga, or the Jurong town council saga. But here's what happens when we apply everyday standards of corporate governance, as well as international norms (as represented by the Victoria ombudsman's report on conflict of interest in local government) to Singapore's town councils.

AIM: owned by party members - conflict of interest
FMSS: owned by "friends" and supporters - still conflict of interest

FMSS: directors and shareholders are also employees of town council - conflict of interest

AIM: awarded contract by party member, precisely because he knew AIM was party owned - conflict of interest

Esmaco Town Management Services. GM of town council is MD of company hired as estate manager - conflict of interest!

It does not matter if he was appointed GM after his company got the contract. In corporate management, all we are interested in is whether 1. he reported the conflict of interest and 2. whether he reported the conflict of duty, and 3. whether he has recused himself from evaluation and overseeing the work carried out by Esmaco.

Still more conflict of interest issues in WP's AHTC?

Khaw Boon Wan raised (13 May 2013, Straits Times) and Sylvia Tan acknowledged (14 May 2013, Straits Times) that FMSS is owned and operated by party supporters, not party members.

Leaving aside this very clear-cut textbook conflict of interest, we'd like to ask WP three more questions.

1. Can WP confirm that no party member or their family or associates have ever been awarded a WP town council contract or sub-contract?

2. The shareholders and directors of FMSS are also employees of the town council, who is their client. Leaving aside the conflict of interest, can WP tell us who at the town council then oversees and supervises the work of FMSS?

3. As town council managing agent, has FMSS sub-contracted to any party who has a conflict of interest - i.e. any WP member; relatives of WP members; FMSS shareholders and directors themselves; town council members; relatives or friends of FMSS shareholders and directors; relatives or friends of town council members?

1 comment:

Anonymous said...

Is there a perceived conflict of interest when the wife of the Prime Minister is also appointed the CEO of a company tasked with investing the country's funds?

Is it inmaterial when the Prime Minister says he has nothing to do with it?