Organizational Conflicts of Interest

Organizational Conflicts of Interest

University of the People

        Conflicts of interest (COIs) can occur in any organization, whether it be private or public, for-profit or not-for-profit. It is an area that is typically involves a favorable outcome that occurs as a result of a personal or profession tie that an individual has with a group of people or organization, which is ordinarily unlikely occur (Rowan, 2014). It typically presents itself as a harmless favor, that can oftentimes bring with it legal action or loss of employment (Rowan, 2014).

The company I have chosen to associate a particular type of conflict of interest with is WE Family Offices, a wealth management enterprise for high net worth families. The individual I will be focusing on for the purpose of this paper is the current chief executive officer and founder of WE Family Offices, Maria Elena Lagomasino. The particular type of conflict of interest is the conflict of interest by boards of directors (Murray, 2019). Maria currently serves on the board of directors of The Coca-Cola Company and is also a lead independent director at the company. She also serves on the board of directors for The Walt Disney Company. I’ve chosen this particular type of conflict of interest as it board of directors are well known for encountering circumstances in which their involvement as a director on the board of a company begins with good intentions, but results in exiting the board due to a conflict of interest. This type of exit occurred in 2009 when the CEO of Google, Eric Schmidt, resigned from Apple’s board of directors due to the two companies developing similar operating technologies and operating systems for their mobile market, which resulted in the two companies becoming direct competitors. In the case of WE Family Offices, Maria is subject to conflicts of interest that could arise due to sales based compensations, as well as investment advisory with a bias towards particular companies that she actively participates in as a director on the company’s board. This could also result in insider trading due to knowledge acquired regarding the potential rise or fall of stock prices of the companies she has direct access to or is affiliated with (Murray, 2019).

I currently reside in Indonesia, a country that is not without a history of corruption. Even still, I have identified two areas of corporate law that have some correlation to the potential conflicts of interests that Maria may face in Indonesia. Under Article 99 of the Company Law, Maria would not be able to represent the company on the board of directors if she had a conflict of interest with the company (“The Authority, Duty And Liability”, n.d.) Currently, neither her position as CEO or director position on various boards creates a conflict of interest. Should Maria become involved with insider trading related to the companies on which she serves as a director on the board, the prevailing law in Indonesia would deem her actions a crime based on Law No. 8/1985 on Capital Markets (Rako, 2017). I use the word based, because it is said that there has to be an insider trading case in Indonesia specific to the Indonesian Stock exchange that has been successfully brought to justice.

Due to the lack of organizational policies used to discourage insider trading and board of director conflicts of interest within Indonesia, I will focus my attention on WE Family Offices recent decision, which is also Maria’s decision to certify WE Family Offices as a Certified B Corporation (“WE Family Offices”, 2019). Under the guidance and policies of this certification, WE Family Offices is legally required to integrate the B Corp’s framework into its own organizational policy to ensure that it’s operations are transparent, decision makers are held accountable and aligning their corporate interests with the interests of their clientele (“WE Family Offices”, 2019). WE Family Office’s decision to become a Certified B Corporation will almost certainly both motivate employees of WE Family Offices to pursue the interests of the company over their own, as well as to minimize the costs of WE Family Offices complying with or enforcing the laws specific to conflicts of interest in the future.

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