It is very important to respect the rights of the employees to privacy in their personal activities and affairs. However, management needs to make known that the employees’ transactions and relationships with outside parties must be conducted at all times on a highly ethical basis and at arm’s length.

In conducting those relationships and transactions, the sole or primary consideration must be the best interest of the company. To achieve this, we need a Statement of Policy for this.

Append below is a sample which should be able to assist us to make known to the employees:

• the importance of conflict of interests,
• different kind of circumstances which can directly or indirectly leads to conflict of interest,
• the consequences in the event of violation.

Some companies would like their employees to sign off the Annual Statement of Conflict of Interest. I have also attached such Annual Statement in the ” Sample of Agreements Category.”

Meanwhile,append below is an SOP on Conflict of Interest.

Sample of SOP on Conflict of Interest

Policy

Each ABC Ltd employee must be free from the influence of any interest, investments, associations or relationships which conflict, or which may appear to conflict with his or her responsibility to act in the best interest of ABC Ltd at all times.

Policy Statement

1. For the purposes of this policy:

a. ‘ABC Ltd’ includes any subsidiary of ABC Ltd;

b. An ‘Affiliated Firm’ includes any firm which has a current or prospective interest in doing business with ABC Ltd as a customer, vendor, supplier, sales agent, dealer, manufacturer’s representative, distributor, contractor, lender or otherwise;

c. A ‘Competitor’ means any competitor of ABC Ltd;

d. A ‘Family Member’ includes an employee’s spouse and relations by blood or marriage; and

e. A ‘Household Member’ includes any person living in the same household as an employee.

2. Conflicts of interest may arise under a variety of circumstances. Generally, a conflict of interest exist when an employee’s personal activities or financial affairs may adversely influence his or her judgement in the performance of his or her duties as an employee to ABC Ltd. Unless otherwise specifically indicated in this policy, a conflict of interest could arise whether the activities are engaged in by an employee directly or indirectly through a firm or enterprise in which one he or she has an interest, by a family member or by a household member.

3. The situations set out below are examples only and do not describe all situations in which a conflict of interest may occur. When in doubt whether a particular activity may qualify as a conflict of interest, refrain from the activity until clarification is obtained. An employee should report promptly to his or her manager or relevant officer any activity, which may be a considered a conflict of interest on the “Conflicts of Interest Annual Statement”. (see Policy CM-1a attached) In general, a conflict of interest would arise as a result of:

a. Competing directly or indirectly with ABC Ltd by an employee or a household member, such as by sale, servicing, design, distribution or promotion of products or services which compete with those of ABC Ltd or which could be provided by ABC Ltd or its subsidiaries. A conflict of interest may arise if a household member is an employee, director, agent or consultant of a Competitor. Personal consumption or use of a competitor’s product or services is not a conflict of interest.

b. Doing business directly or indirectly with ABC Ltd by an employee, a family member or a household member such as by the purchase from, sale to, license, lease or other furnishing to ABC Ltd of any materials, supplies, equipment, property or services. A conflict of interest may result if a family or household member is an employee, director, agent or consultant of an affiliated firm if the employee is in a position to make or influence ABC Ltd’s business judgment with respect to ABC Ltd’s dealings with the affiliated firm or if the family member is directly involved in the firm’s dealings with ABC Ltd or is a key employee of the affiliated firm. Purchase by employees of ABC Ltd’s stock or merchandise through ABC Ltd-sponsored programs is not a conflict of interest.

c. Ownership of a direct or indirect financial interest in a competitor by an employee or a household member unless

i. the interest is in a class of securities which is listed on any Stock Exchange

ii. at all times the securities represent, in the aggregate, less than one percent (1%) of the total capitalization and voting power of the Competitor. For this purpose, securities owned by the employee and by any household member will be aggregated.

d. Ownership of a direct or indirect interest in an affiliated firm by an employee, a family member or a household member unless

i. the interest is in a class of securities which is listed on any stock exchange

ii. at all times, the securities represent, in the aggregate, less than one percent (1%) of the total capitalization or voting power of the affiliated firm. For this purpose, the securities owned by the employee and by any household member will be aggregated,

e.       Outside services performed by employees as an employee, consultant, officer, director or agent of a competitor or of an affiliated firm. Similarly, a conflict of interest may exist when an employee undertakes to engage in an independent business venture or to perform work or services for another business, civic or charitable organization to the extent that the activity prevents the employee from devoting appropriate time and effort to his or her duties as an employee.

f.       Acceptance of gifts or favors in any form by an employee or a household member from any affiliated firm or competitor. For this purpose, a ‘gift’ or favor includes but is not limited to any service, loan or other extension of credit, discount, money or article of value, entertainment, attendance at social events, use of recreational facilities or transportation which is gratuitous or which is not being made available to members of the general public on the same terms. It does not include meals, transportation and entertainment in conjunction with business discussions and consistent with local business custom. However any gift or favor which is of such value as to imply more than merely the cultivation of goodwill would create a conflict of interest and should be declined.

g.    Disclosure or use of confidential information by an employee except as authorized by ABC Ltd for any other purpose other than ABC Ltd’s business, such as ABC Ltd’s confidential trade secrets, financial data, formulae, processes, “know how”, inventions or any other information concerning ABC Ltd not otherwise known to the public. Examples would include but are not limited to trading in shares of ABC Ltd or another company while in possession of material inside information, or sharing the information with another person who trades in ABC Ltd’s stock, and unauthorized use of ABC Ltd’s confidential technical information. Such conduct may also be proscribed by relevant local statutory regulations.

h Misappropriation of an ABC Ltd business opportunity by an employee, such as disclosing or using except as authorized by ABC Ltd, for any purpose other than ABC Ltd’s business, any venture or opportunity, actual or potential about which such employee learns or develops during his or her employment and which is related to any current or prospective business of ABC Ltd.

i. Use of one’s position or influence with ABC Ltd for the purpose of obtaining personal benefit or advantage for one’s self or a third party other than one’s own compensation paid by ABC Ltd

4. Any failure to comply with this policy, including failure to complete the annual statement accurately is a serious violation of ABC Ltd policies and may subject the violator in appropriate cases to sanctions, including but not limited to dismissal, civil suit and/or criminal persecution.

5.      In order to avoid an actual or potential conflict of interest, ABC Ltd may require employees to act promptly to eliminate the source of the actual or apparent conflict. This may be by the disposal of securities of a competitor or affiliated firm, by terminating a business relationship which may give rise to a conflict or by relinquishing to ABC Ltd a gift or favor

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Related Entries

• Sample-An Annual Statement of Conflicts of Interest