Ethical dilemmas: a conflict of interests?

How a bid caused a dilemma for an ex-public sector worker. By Danielle Cohen, ethics manager, CIMA.

Danielle Cohen

Insight’s series of case studies based on calls to CIMA’s ethics helpline (see below) has been designed to demonstrate how ethics work in practice. In the last article in the series we look at what happened to DF whose dilemma we highlighted in the June edition. As always, names have been changed to protect identities.

CIMA member DF worked for eight years as a finance manager in a large public sector organisation, including a stint as a manager in the department responsible for procurement, contracts and bids.

She recently moved on to become head of finance at a private supplier of catering services, Gruelco. Gruelco mainly provides catering services to the public sector and one of its major contracts is with DF’s former organisation. This contract is now up for renewal, and the company is required to put together a competitive bid to have the contract renewed. DF’s team will be responsible for putting together a significant proportion of the bid, and she has been asked to project manage and sign off this element. At Gruelco, management salaries are subject to a performance-related bonus.

Breach of confidentiality?

Having worked until fairly recently for the public sector organisation’s department that will be assessing the bid, DF is concerned that she will be breaching confidentiality if she carries out her duties. She is sure that part of the reason she was hired for her current job was because of her knowledge and experience with the public sector organisation. But section 140.1 in part A of CIMA’s Code of Ethics states:

‘The principle of confidentiality imposes an obligation on professional accountants to refrain from:
(a) disclosing outside the firm or employing organisation confidential information acquired as a result of professional and business relationships without proper and specific authority or unless there is a legal or professional right or duty to disclose; and
(b) using confidential information acquired as a result of professional and business relationships to their personal advantage or the advantage of third parties.’

Duty of care

DF was right to be concerned about the implications of her situation, as there were several ethical issues at stake.

She had a duty of care to her current employer, Gruelco. This is made explicit in Section 300.4 (part C) of the Code of Ethics, which states: ‘A professional accountant in business has a responsibility to further the legitimate aims of their employing organisation.’

Gruelco hired DF knowing that she had experience of working with one of its major clients and, like most employers, expected to benefit from her industry experience. The bid was an important and legitimate part of its business activity, and she was not being asked to take part in anything underhand or illegal. Did her duty of care to her new company extend as far as using the knowledge that she had gained while at her former employer about how such bids are assessed?

The principle of confidentiality (section 140.1, part A) precludes accountants from using confidential information acquired as a result of professional and business relationships. This applies when it is for their personal advantage or for the advantage of third parties. In this case, Gruelco stood to benefit from the confidential information about how bids are assessed if DF had shared this with them. The principle would not have been breached if DF was in possession of information that was in the public domain or if she had simply used her experience, so long as that did not extend to confidential knowledge that she had acquired as a result of her employment.

The principle of confidentiality also obliges accountants to refrain from disclosing confidential information outside the firm or employing organisation after the period of employment is over. Even though DF was no longer working for the public sector organisation, she still had an obligation to maintain confidentiality of information she gained there.

Personal interests

There was an added complication. Whether DF decided to be involved with the bid or not could have affected the performance of the team and so whether or not she received a bonus as their manager. There was therefore a self-interest threat (see Code of Ethics section 100.10) to DF’s professional judgement, because of the performance-related bonus at stake.

How CIMA helped

CIMA discussed ways that DF could try and remove or reduce the threats to the principles presented by being involved with the bid. She agreed that it was impossible to completely ignore the knowledge she had. She decided in conjunction with CIMA that it would be best for her to discuss the situation and her obligations as a CIMA member with her new employer and ask for her involvement in the contract bid to be limited. In particular, she did not feel comfortable being responsible for sign-off. Gruelco was happy for her to contribute only to the aspects of the bid that she did not have extra, confidential knowledge about from her previous employment.

She also raised with her seniors the issue of the bonus being dependent upon the team’s performance, and the difficult situation this had put her in. They agreed to re-examine their remuneration and bonus criteria for management and look at implementing an internal policy to help other employees raise similar conflicts.

For further information about other potential conflicts between an employing organisation and the fundamental principles, see section 310 (part C) of the Code of Ethics.

CIMA ethics helpline

0800 358 7663 or +44 20 8849 2303, ethics@cimaglobal.com
This free, confidential helpline offers guidance to CIMA members and students who are facing an ethical conflict. The helpline can also provide clarification on aspects of the Code of Ethics and how this can be applied. The helpline is staffed by the professional standards department between 10am and 4pm, Monday-Friday.

Whistleblowing advice line (UK only)

0800 358 7665, helpline@pcaw.co.uk
A confidential service offering advice on making a public interest disclosure. If you are unsure whether or how to raise a concern, you can contact the independent charity Public Concern at Work. Its lawyers can give you free, confidential advice on how to raise a concern about serious malpractice at work.  

Legal advice line (UK members only)

0800 092 1980
Provided by LAW Express, this helpline offers unlimited low cost professional telephone legal advice for all personal, commercial and employment issues. There is no restriction on length of calls, and the service extends to your spouse or partner and any dependent children under 21 years. For further information please see the Member Benefits section of My CIMA.

July 2006