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Conflicts of Interests

 

Rather than a definition, let’s look at some simple examples:
I am 15 years old. My best friend tells me a secret. Another friend finds out there is a secret and wants me to tell = I have a conflict of interests.


I am a real estate agent, engaged to help a client sell their house. Then I find out a friend wants to buy that house = I have a conflict of interests.


I am a Judge. I have to decide a case which could go either way. There are two sides, each represented by lawyers. I have business interests with one of the lawyers = I have a conflict of interests.


So these are all about finding myself in a situation where I clearly have a responsibility; and I cannot fulfil that responsibility properly / fully / purely because I also have another, competing responsibility to someone else.
So the test for this sort of conflict is very simple: do I have a responsibility to more than one person?


A bit more complicated is the question for anyone who is entrusted to perform a professional duty: is your own self interest interfering with your duty?
For example:
I am a pre-purchase inspector. I have a contract with a prospective buyer to produce a report on the condition of the property. While undertaking the inspection I see how I could make more money by offering to fix some of the problems I identify.
My self interest in making more money is in conflict with my duty to report impartially.


We expect Professionals to be able to put aside self interest and perform their duties impartially. The more respected the profession is, the more strict our expectations and the more harshly society will judge those who are perceived to be sacrificing their duty for selfish ends.


At this moment, I detect the development of a movement towards judging Remediation Specialists as a group who are “sailing very close to the wind” . This is about the distinction between, on the one hand identifying what is wrong with a building and what needs to be done to fix it, and on the other hand, being involved in the actual remediation. The reasons why the same firm would do both are well understood within the profession – but some members of the public clearly see it as consultants generating work / feathering their own nests. The fees generated by running a remediation project can be a great deal larger than what is earned in the investigation and reporting stages.


To explain a little bit why firms do both: you cannot be an expert without experience. The more experience you have testing your scope by being involved in the supervision of remediation, the better equipped you will be to develop a more realistic scope of works after the next investigation. Conversely, if all you have done is investigate and report and you have no first hand experience to draw upon when developing the scope of works, the chances of that scope striking the right balance diminish and you may lack credibility in the eyes of a Judge. It is easy to imagine a Judge asking an expert to: “Tell me what you do, rather than what you think.” To be an expert you need practical experience, not just theory.


Most of the larger firms do however create a separation, or pause between on the one hand the investigation and reporting stage (which includes the scope of remedial works) and on the other hand the involvement in the remedial process. That pause provides space for the client to think, and the opportunity to go and get a second opinion, or “change horses” For this reason I suggest any client should be wary of an offer of service from a consultant which encourages signing up for the whole package right at the start. There should be no problem with a staged approach which does not over commit the client.