Sneha is a Senior Manager working for a big reputed hospital chain in a mid-sized city. She has been made in-charge of the new super speciality center that the hospital is building with state-of-the art equipment and world class medical facilities. The building has been reconstructed and she is starting the process of procurement for various equipment and machines. As the head of the committee responsible for procurement, she has invited bids from all the interested reputed vendors dealing in medical equipment. She notices that her brother, who is a well-known supplier in this domain, has also sent his expression of interest. Since the hospital is privately owned, it is not mandatory for her to select only the lower bidder. Also, she is aware that her brother’s company has been facing some financial difficulties and a big supply order will help him recover. At the same time, allocating the contract to her brother might bring charges of favouritism against her and tarnish her image. The hospital management trusts her fully and would support any decision of hers.

→ The not binding company procedure → My knowledge of the owner of X being nephew of my superior → Following rules in letter, not in spirit → Conflict of interest of superior

These issues require an analysis and appropriate course of action based on business ethics.

Such a form of transaction between two private parties comes under the scope of business ethics and personal ethics. This can also constitute a conflict of interest as depicted below

↳ Detrimental to company interests if firm X is awarded contract without due procedure

Although my superior is shareholders of the company, but still he does not represent all other shareholders. Thus by awarding the contract to firm X, he is being dishonest to his co-shareholders, and also to other applicants for the contract.

Although this transaction seems private, but involves the larger interest of the firm (in which other shareholders also have stake). Thus it falls into ambit of conflict of interest - with my superior caught in two conflicting roles

→ private personal role of his duty towards his nephew → professional role as a shareholder working for profit maximisation

In cases such as above, contracts can be awarded following a certain fixed procedure -

(1) The company management can draft flexible but binding guidelines for awarding contracts, get them approved by shareholders.

(2) A provision for recusal of the person who faces a conflict of interest should be there.

(3) Objective parameters of bidding and auction, or outsourcing can be laid out.

Making the contract awarding more strict has certain merits such as

↳ Effective corporate governance ↳ Upholding shareholder interest ↳ Preventing situations with excess discretion ↳ Avoiding conflict of interest ↳ Increased efficacy of the company ↳ Better work culture

But such procedure can make some delays and thus financial losses, also it might reduce efficiency of the company as well.

A better outcome course of action will include mandatory disclosure of any conflict of interest faced by a person of the company, and his recusal from a position of power.