[00:00:00] Speaker A: You've got questions and we've got answers. I'm Julia Boyes, and this is BELA Asks.
The Business Ethics Leadership alliance, or BELA, as we like to call it, is a community of organizations committed to maturing their ethics and compliance programs and strengthening their speak up cultures. They do this a myriad of ways, through roundtables, resources, and sharing best practices. And whereas we believe that every organization can benefit from being a BELLA member, we believe that there is no competition in compliance and we are not interested in gatekeeping best practices.
So we developed BELA Asks, an Ethicast podcast in which we can take time to answer BELA members most pressing questions.
Today we are so honored to be joined by Erica Salmon Byrne, Ethisphere's Chief Strategy Officer and Executive Chair of BELA. Hi, Erica.
[00:01:00] Speaker B: Hi, Julia. Thanks so much for having me back. And thank you to the BELA member who sent in today's excellent question.
[00:01:06] Speaker A: All right, Erica, today's question.
We are reviewing our approach to service on external boards, both governing and advisory boards. In particular, we are considering circumstances in which we would or would not allow compensation for service on such boards.
[00:01:22] Speaker B: Yep. So this is a conflicts of interest question. So for, for those of you who are playing along at home wondering what, you know, wondering why Julia and I selected this particular question, this is a conflicts of interest question. And the, the fundamental thing that this particular BELLA member needs to ask themselves is why do we care about service on external boards? Right. What is the ways in which this could potentially create a conflict? And with service on external, there's two potential ways you could wind up in a conflicts of interest situation. One's going to be the time commitment. So how much time am I going to be spending doing this service work? And is there any chance that's going to conflict with my job responsibilities here at the organization that is giving me a paycheck? And then the second piece is, is there any way in which my work on the external board could potentially be seen as causing me to put somebody else's interests, my own or the organization I'm serving for, ahead of the interests of the organization that I'm primarily employed by? So those are the fundamental questions that this particular organization needs to think through.
And they need to think about both. They need to think about it from the perspective of both an actual conflict of interest and a perceived conflict of interest. So often external board service is something that employees are eager to share that they are doing it right. It's a, it's a, either a way of giving back to the communities that they work in or It's a way of bolstering their own professional resume. Right. There's a reason outside of compensation that you are looking to say yes to this board service.
And so one of the things that you as the organization need to ask yourself is, is there any way in which this is going to cause the perception inside my community that this person is biased in favor of this organization and that favoritism reflects upon the organization that they're representing? So those are sort of the fundamental questions you need to ask yourself.
For most organizations, disclosing board service is something that you do with your manager and then you and your manager have a conversation about whether or not this is a particular board service that is okay.
You know, you're probably disclosing it to the compliance program as part of their conflicts of interest disclosure process.
And then you talk about potential mitigation activities. Because many conflicts are mitigable, right? You can mitigate many conflicts if you disclose them ahead of time. It's one of the things I always remind people, particularly when it comes to close to conflicts of interest, when in doubt, disclose. Right. Tell me you're doing it. We can figure out a way to make it work.
The, the compensation piece is another piece to think through. So, and this is going to be very organization dependent. Let's say you are a software company and you have an employee that is interested in serving on an advisory board and for a startup and as part of the advisory board service they are going to get options in the startup.
Well, this has a lot of vectors where we could potentially run into a conflict of interest. What if this particular employee is somebody who gets to decide who goes on the M and a target list for your business?
What if this particular employee is an employee who gets to decide what software suppliers are we potentially going to pursue as people who are going to be providing a service and oh, look at this, they just happen to recommend the company for whom they're serving on the advisory board. Right. Those are the things you have to get out in front of. When you think about advisory board service, when you think about external board service, whether there's compensation involved or not, that
[00:05:07] Speaker A: is really, really helpful. Erica, I do have a quick follow up.
[00:05:12] Speaker B: Yes, please.
[00:05:13] Speaker A: You know, on the EQ, we talk about sort of like the timing of disclosures, if it's right upon hiring, if it's upon promotion for something like serving on a board, is this something that would require repeat disclosure or should a company do it once and done?
[00:05:32] Speaker B: It's a really good question, Julia, because it really depends upon the potential, the board you're looking to serve on and you know what kind of potential issues it might rise from, it might raise rather from a conflicts perspective. So most organizations, and you're quite right, we've asked about this for years in the ethics quotient. And so BELA members can log into the sphere and see this data if they're interested.
Many organizations will say you disclose annually or you disclose upon hire or you disclose when your circumstances change. Some companies have moved away from mandatory annual disclosures and instead wrap it into their code of conduct certification, you know, whatever cadence they're doing that on.
But you should certainly when you get the request to serve, that's a disclosure moment, right? You go to your manager, you use the disclosure system, you disclose what it is you're looking to do. It's then vetted in terms of redisclosing it.
There's a lot of different ways that you can potentially address that that issue.
Some organizations will say as long as it's something that continues to be mitigated, you don't have to redisclose it. But if your circumstances change, you need to.
Some companies have you re certify as to your continuing potential disclosed conflicts every year. So they give you like, hey, here's what you know. You disclose that you had a cousin that worked for a supplier, you have a sister who works in another department and you're on an external board. Right. Those are your three disclosed conflicts.
And are those all still the case? Yes. No update disclosure, move on with your day.
So whatever you know. And it's very risk specific like again to pick on the poor software companies.
If you're somebody who is sitting on a lot of advisory boards of startups, you're going to want to have a more robust disclosure process than you are if you're someone who is in human resources division at a small insurance company. Right. You've got to fit your disclosure process to the risks that, that your organization faces from conflict situations. It's going to be a really key piece of the puzzle.
[00:07:40] Speaker A: That is great advice, Erica. Thank you so much for spending time with us today.
[00:07:43] Speaker B: Absolutely, Julia, it's 100% my pleasure. And to all those Bella members out there listening, keep the questions coming so that I have a chance to come back and answer more.
[00:07:52] Speaker A: For more conversations like the one you heard Today, visit our YouTube channel or subscribe wherever you get your podcasts.
For more resources, please visit ethisphere.com/resources for a library of resources pertaining to conflicts of interest and many other topics if you are interested in more information about a BELA membership, write to us at
[email protected] and most importantly, if you have a question that you would like featured on a BELA Asks episode or write to us. We want to get you the information that you need. And maybe, just maybe, Erica will get to answer your question on an episode. I'm Julia Boyes and this is BELA Asks.
