Resume dan Latihan Soal

Chapter 4
Identifying (and Handling) Conflict of Interest

Fakultas Ekonomi Bisnis

Universitas Airlangga

Nama:

Catra Adi Perkasa (041511333104)

Yudhi Mahendra (041511333180)

Almira Zuniga S (041511333209)

Antonius Agung K (041511333215)

Defining What Conflict of Interest Means
A conflict of interest is simply a situation in which you have competing interests
that can interfere with your obligations to various people and organizations. The mere
existence of a conflict of interest doesn’t mean that you’re bound to make an unethical
choice, or even that the ethical choice is unclear. But if you’re in a situation that involves
a conflict of interest, you may find it harder to make the right choice.
So how do you know if you (or your co-workers) are facing a competing interest that
could lead to unethical business practices? You have a conflict of interest if both of the
following are true:

✓ You’re in a position of trust with another person or organization that requires you to

exercise judgment in that person’s or organization’s service.

✓ You have personal interests that could interfere with the proper execution of your

responsibility to that person or organization.

Dealing with Common Conflicts of Interest That May Cause Problems

Most people encounter conflicts of interest every day. Family obligations often
compete with professional duties, for example, and responsibilities of good citizenship
can conflict with self-interest. Even so, in many (and maybe even most) cases, conflicts
of interest don’t result in unethical behavior.

Considering the profit motive

Perhaps the most common type of conflict of interest — or at least the one that
grabs the most headlines — involves money and is called the profit motive. Self-dealing
is one of the most common ethical lapses as far as money is concerned; it’s the act of
taking advantage of your position to benefit your- self rather than the people you’re
supposed to be working for. Self-dealing involves a breach of fiduciary duty, which is
the legal obligation that a trustee, corporate officer, or other designated representative
has to act in the best interests of the people he represents. Corporate executives and
directors have a fiduciary duty to stockholders, trustees have a fiduciary duty to the
beneficiaries of their trusts, and so on.

Helping friends and family

Categories of the conflict of interest helping friends and family:
- Favoritism: Showing a general preference toward a person or organiza-tion based
on something other than performance, such as friendship or romantic ties
- Cronyism: Giving preferential treatment to friends and
- business or personal associates
- Nepotism: Hiring, promoting, or otherwise favoring relatives
Favoritism, cronyism, and nepotism create ethical dilemmas because your
personal relationships can tempt you either to reward your friends and relatives even if
they haven’t earned it or to let problems slide because you don’t want to confront them.
When rewards go to personal connections rather than to others who actually
merit them, company leaders risk sabotaging employee morale and the ethical culture
of their company. All these forms of offering preferential treatment to personal
connections violate the basic ethical rule of fairness.
Companies can’t eliminate people’s connections with each other, and they
can’t expect everyone on their staffs to operate in solitary confinement. However,
companies can take measures to reduce the incidence of preferential treatment. Other
practices that can help eliminate various forms of favoritism include the following:

- Establish reasonable minimum qualifications for all positions within

the company so that friends and family members must have the same
quali-fications as any other applicant to be considered for a job

- Set measurable goals to determine eligibility for raises, bonuses, and

other incentives.

- Set up review processes that put distance between connected

individuals.
 - Establish disclosure requirements to ensure that managers and execu-

tives are aware of any relationships that may present ethical challenges.
(See the section “Going for transparency: Full disclosure” for more
details on practicing full disclosure.)

Keeping business ties together

Symbiotic relationships can present ethical challenges, too. In biology, a

symbiotic relationship is a long-term, close association between organisms of different
species; such relationships can be (but aren’t always) beneficial to all the organisms
involved. In business, symbiotic relationships imply mutual benefit or dependence.
Most people don’t consider a third party to be “independent” if you pay that third party
to perform a service for you.
Empirical studies have shown that people are influenced by small gifts and
favors, even if they think those things don’t affect their attitudes or color their ethics.
For this reason, many news outlets have established policies that prohibit reporters and
editors from accepting even token gifts from the people and organizations they cover
in their stories.

Conflicts of interest overflowing into the Gulf

Lack of independence — or even perceived lack of independence — can shake people’s
confidence in an organization’s intentions and integrity.

Giving a quid, getting a quo

Quid pro quo is a Latin phrase that means something for something and it is the basic
of every economic transaction in business and politics. In politic, the example is
political patronage that gives public service jobs to those who help elect you to office
or buying votes, so the something-for-something exchange in these cases are campaign
cash for government job. In business, the example is bribing and providing kickbacks
in exchange for approval on a specific contract or vendor or any other situation in which
your personal interests are advanced at the expense of established policies and
procedures.
The difference between quid pro quo with unsavory ones is openness, because
something-for-something exchanges are generally fair trades that benefit both parties
without harming other individuals.

Eliminiating the Risks Related to Conflict of Interest

Conflict of interest is difficult to be eradicated entirely, but you can remove the danger
that unethical behavior will arise from conflicting interests by taking a precationary
measures. There are two ways to handle this like full disclosure and having a plan to
deal with conflict of interest.

Going for transparency : Full disclosure

Transparency is the quality of being open and accountable by dislosing all relevant
information – goes long way toward reducing opportunities for unethical conduct. For
example, a company asks job applicants whether they’re related to anyone working for
the company or have any relationship with contract partners to know whether a job
applicant has any potential of interest.
In late summer 2010, the newly formed Bureau of Ocean Energy Management,
Regulation and Enforcement issued a new conflict-of-interest policy for its employess :
- Tell their supervisors about any potential conflict of interest.
- Submit formal requests not to be assigned any work involving their potential
conflict of interest.
- Ask to step down when their assigned duties involve a company that employs a
family member or close friend.
- Wait at least two years before they can perform inspections or other work involving
former employers.

Other ways to improve transparency include independent audits, financial disclosure

statements and a commitment to making as much information as possible available to
employees and to the public. If a company doesn’t implement an internal dislosure
policy, it might be blacklisted with a handful of other nontransparent businessses. Some
defines transparency as making information about a variety of company practices, from
employee benefits to philanthropic initiatives, publicly available.

Planning ahead: Having an exit strategy

Disclosure policies can help a company identify possible conflicts of interest, but it also
needs policies that help its leaders deal with problems when they do arise. In the
following sections, we look at two common strategies for lessening or eliminating
conflicts of interest. The first is forcing distance between the interested parties; the
second is removing the conflicted person entirely from the situation.
Using the arm’s length rule
An arm’s length transaction is one in which the buyer and seller are unrelated and
unaffiliated with one another. Businesses use arm’s length strategies all the time to
reduce potential conflicts of interest. Example, your company, where you’re a senior
executive, needs new office space and wants to consider buying your building. As the
building owner, you naturally want to get the highest sale price possible, but, as a senior
executive in your company, you have a duty to stockholders to get the lowest price
possible. To remove that conflict of interest, your company should hire an independent
third party to determine the fair market value of the building. The operative word in
using third parties to put an arm’s length between the involved parties is independent.
Removing the conflicted person from the decision making
Recusal (removing oneself from a situation in which personal interests threaten the
ability to carry out professional duties) leaves the decision making to someone who
doesn’t have conflicting interests, thus reducing the risk of misbehavior. In business,
any employee with decision-making authority, should recuse himself — or be recused
from — any situation that presents a conflict between the employee’s professional
obligations and his personal interests.
Exercises
1. Agung gave $25,000 in scholarships to four of his affair children. Instead of
providing educational opportunities to kids who actually qualified for the scholarships,
Agung gave the scholarships to kids whom he knew were ineligible to receive them in
the first place. This is an example of
a. Self-awareness
b. Self-balancing
c. Self-centered
d. Self-dealing
The answer is D, because self-dealing is one of the most common ethical lapses as
far as money is concerned; it’s the act of taking advantage of your position to
benefit your- self rather than the people you’re supposed to be working for

2. Agung and yudhi work at the same company, and yudhi discover that agung has been
falsifying his expense reports. If you turn your friend in, you likely sacrifice the
friendship, but, if you look the other way, you may be disciplined for not informing
your superiors of the problem. This is an example of
a. conflict of commitment
b. conflict of duties
c. conflict of ethics
d. conflict of interest
The answer is D, because a conflict of interest is simply a situation in which you
have competing interests that can interfere with your obligations to various people
and organizations
3. Agung is a bad guy. His obligations fade into the background when he have a
chance to enrich himself. People in positions of trust can abuse or betray that trust by
giving into the …. and accepting bribes or kickbacks, engaging in accounting tricker.
(Hint: most common type of conflict of interest)
a. bad motive
b. ethical motive
c. money motive
d. profit motive
The answer is D, because most common type of conflict of interest — or at least
the one that grabs the most headlines — involves money and is called the profit
motive.

4. Team leader Gary is scheduled to prepare a performance of Lisa, a team member who
also happens to be his wife's closest friend. The ethical temptation Gary faces is
a. sexual harassment
b. misuse of corporate resources
c. dealing with confidential information
d. conflict of interest
The answer is D, because Gary is feeling unsure about his role as a team leader or
as a husband of Lisa’s closest friend.

5. Which of the following is not an example of why ethical problems occur in business?
a. Personal gain and selfish interest
b. Conflict of interest
c. Cross-cultural stability
d. Competitive pressures on profits
The answer is C. because the rest of the answer is the causes of ethical problems
occur in business.
6. What is the difference between quid pro quo with unsavory ones?
a. People who do it
b. The risk
c. The contract
d. Openness
The answer is D. because quid pro quo is generally fair trades that benefit both
parties without harming other individuals.

7. What will happen if a company doesn’t implement an internal disclosure policy?

a. Get blacklisted
b. Get more money
c. Get more fames
d. Closed down
The answer is A. because it is an ethic of business and already arranged in the
regulation to improve transparency

8. Which of the following is an example of transparency in business?

a. Company asks job applicants whether they have wife/husband
b. Company wants job applicants to work hard
c. Company asks job applicants whether they’re related to anyone working for the
company
d. Company raises the acceptance of job applicants
The answer is C. because company wants to know whether a job applicant has any
potential of interest

9. What is correct about arm’s length transaction?

a. Transaction involved friends and company.
b. Transaction between family member.
c. The buyer must be unrelated and unaffiliated with the seller.
 d. The buyer must has a good relationship with the seller.
The answer is C, because arm’s length transaction is a transaction in which the
buyers and sellers of a product act independently and have no relationship to each
other.

10. What is the purpose of doing resucal?

a. Efficiency
b. To reduce the risk of misbehavior.
c. To make a good relationship.
d. Effectiveness
The answer is B, because leave the decision making to someone who doesn’t have
conflicting interests is to reduce the risk of misbehavior.