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Conflicts of interest.

Conflicts of interest are part and parcel of business affairs. LOCSU's executive chairman, Alan Tinger (pictured) propounds the need for transparency, and highlights a range of case studies that explore potential conflicts and ways to handle them

OVER THE years in the optical sector there have been many examples of potential conflicts of interest. Think, for example, of optometric advisers in the days of former PCTs being responsible for decisions made in respect of practices that were also competitors of their own private practice.

Today, remaining transparent is an established requirement in the business world at large, and optics is no exception. Managing conflicts of interest is a fundamental part of good governance, and LOCs in particular have become far more focused in this area. Conflicts of interest can often be perceptions, but perceptions are reality in the eye of the beholder.

Handling hints

For the uninitiated, a conflict of interest is a situation in which an individual or an organisation has competing interests or loyalties--and, in the case of optics, the potential for conflicts of interest is high. Individuals within optical organisations are often involved with more than one organisation and, at the same time, also own or work for an optical practice. These individuals may believe that they can separate competing interests and dismiss the issue of practical conflict, but, in truth, the perception of a conflict of interest is of equal importance as the reality of conflict.

As with many aspects of business, conflicts of interest need to be managed. To achieve this in a transparent way, optical organisations should put in place:

* A conflict of interest policy

* Annual declarations of actual or potential conflicts by all directors/ trustees/committee members

* Declarations of conflicts of interest by all attendees as a standing agenda point for all meetings

* A process for the chair of each meeting to rule on how a particular conflict can be managed.

At a meeting, when a declaration of interest has been made which is pertinent to an agenda item, the chair must decide, dependent upon the level of potential conflict, if:

* The individual can take part in the discussion of the item but cannot vote if a vote is required

* The individual can remain in the meeting while the item is discussed but cannot take part in the discussion and cannot vote

* The individual must leave the meeting while the item is discussed and, if necessary, voted upon.

LOCSU has provided guidance on a variety of conflicts of interest, and the three case studies below highlight the need for different responses. LOCSU is sometimes requested by LOCs to advise on how to deal with conflicts of interest which they face, and this may be requested at an early stage in the process or, on occasions, after the event.

LOCSU also has to manage conflicts of interests which arise at its own board meetings.

Time to withdraw

When discussing the LOCSU bid for the DVLA vision testing contract, a LOCSU director declared that the business he worked for was also considering making its own bid. Given the seriousness of the conflict of interest, the director agreed that he would withdraw from the meeting while the matter was discussed and similarly from subsequent meetings and that he would not receive any minutes, papers, emails, and so on which referred to the bid.

In this way, the conflict of interest was managed and the director involved has been able to continue his involvement with the Board and participate in all other discussions and communications.

Conflict at the start

In one example when an LOC had to deal with a conflict of interest, an LOC was bidding via an LOC company for a community service in their area and the LOC chair decided to bid separately for the same contract via his family business. The LOC chair informed LOCSU that his company was bidding for the service, but felt this should not affect his role as LOC chair, believing that he could continue to be impartial. Meanwhile the directors of the LOC company contacted LOCSU for advice regarding the LOC chair's conflict of interest.

In this instance, LOCSU advised that the chair of the LOC must not be present on any occasions when the LOC Company's bid was discussed, must not have sight of any minutes or papers which referred to it, and above all, must not have sight of the bid document.

In this example the conflict of interest can be said to go further than simply exempting from participation, as the chair's family business was, in theory, competing with the LOC, and the chair could therefore not be acting in the best interests of both the LOC and his own business. However, in this case the Commissioners chose the LOC company as the 'preferred bidder' and so the matter ended as the chair could no longer be seen as being in competition with the LOC.

It is also worth noting that this is a different situation from the LOCSU DVLA case: the LOCSU board member worked for a large company, but did not own it.

Late stage conflict

In another example, an LOC had, in theory, contracted with a company to provide services to the LOC. In LOC terms, considerable sums of money were being paid to the company for services to the LOC. Some members of the LOC committee were concerned that officers of the LOC were also directors of the company providing the services. Representatives of LOCSU attended a meeting of the LOC and were formally requested to investigate the situation and advise accordingly.

LOCSU conducted a detailed investigation, with the assistance of both the LOC and the company involved. On examination of the agreement setting out details of the services to be provided by the company and the remuneration for these services, it was clear immediately that the signatories for the company were also officers of the LOC--an absolute conflict of interest. In other words, directors (and part owners) of the company were also officers of the LOC. The LOC officers concerned did not understand that they had conflicts of interest and believed, as they said, that they "could wear different hats" and act in the best interests of the particular organization they were wearing "the hat" for.

Setting aside the concept of whether or not an LOC can legitimately enter into a contract (as it is an unincorporated association without trustees), it was clear that this situation could not continue, and following LOCSU's report to the LOC in general meeting, it was agreed that the arrangement would be unwound and that the company would no longer provide the services to the LOC. For further information or advice, contact LOCSU: or 020 7549 2051

Alan Tinger is a chartered accountant and companion of the Chartered Management Institute. In optics, he is part-time executive chairman of LOCSU, a director and consultant to FODO, and a member of the Optical Confederation leaders group. He is also a trustee, treasurer and chair of the audit committee of Action For Blind People and a member of the audit committee and of the Programmes Board of RNIB.
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Title Annotation:BUSINESS
Author:Tinger, Alan
Publication:Optometry Today
Geographic Code:4EUUK
Date:Nov 15, 2013
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