CONFLICT OF INTEREST

RELATIVE OR FRIENDS EMPLOYED BY SUPPLIERS OR CUSTOMERS

Case Facts

Ramlee is responsible for identifying and approving a vendor for carpet cleaning services for
their company’s worldwide headquarters. Ramlee has narrowed the potential vendor list to
two carpet cleaning companies: Salman’s Carpet Cleaning and Amir’s Carpet Cleaning.

Evaluation of Salman’s Carpet Cleaning Company revealed that they recently acquired
expensive, state of the art equipment enabling Salman to provide high quality, industrial
carpet cleaning. In addition, Salman’s Carpet Cleaning is both price and time competitive with
alternative cleaning operations available. Ramlee was excited about Salman’s Carpet Cleaning
and knew the company well because his wife, Saloma, is employed as the supervisor of
Salman’s Carpet Cleaning.

Salman’s Carpet Cleaning has a bonus incentive plan that (1) pays a finder’s bonus to
employee who find new customers, and (2) pays a bonus to employees based on profit
sharing. Saloma intends to put in for a finder’s bonus should her husband decide to select
Salman’s Carpet Cleaning as his company’s carpet cleaning vendor. Saloma is also excited
about the possibility of a larger profit sharing bonus that would likely result from the
increased business.
Amir’s Carpet Cleaning, which has been used in the past, uses outdated, older equipment.
Regardless, Amir’s Carpet Cleaning is both price and time competitive. Despite of the
equipments, Amir’s Carpet Cleaning still enable to provide a high quality in their cleaning
services.

Ramlee decided to hire Salman’s Carpet Cleaning Company as the sole carpet cleaning vendor
for his company because of the anticipated higher quality of work associated with the newer
equipment that would be used. Ramlee has not disclosed any information regarding his wife’s
employment to his company.

Question:

1. Is there a conflict of interest?

- yes
- A conflict of interest is a situation in which an individual has competing interests or
loyalties. Conflicts of interest involve a person who has two relationships that might
compete with each other for the person's loyalties. For example, Ramlee choose
Salman’s Carpet Cleaning and knew the company well because his wife, Saloma, is
employed as the supervisor of Salman’s Carpet Cleaning. the person might have a
loyalty to an employer and also loyalty to a family business. Each of these businesses
expects the person to have its best interest first.

2. Why is the relationship between Ramlee and Saloma, and their employment positions,
a cause for concern for both companies?

- If Ramlee did not formally disclose his wife’s high-level employment with Salman’s
Carpet Cleaning Company, he has likely violated his employer’s standards on conflict
of interest and disclosure.
- Most employers have a policy that employees avoid any activity that shows favoritism
towards family members or the perception of such favoritism. Such behavior is
considered disloyal or at odds with the best interests of the employer. Employees
 should always inform their managers when confronted with any situation that may be
perceived as a conflict of interest, even if the employee doesn’t believe the situation
would actually result in a conflict of interest.

3. What action(s) should Ramlee take to reduce or eliminate the conflict of interest? Is
disclosure sufficient?

- To prevent the perception that Ramlee recommendation was influenced by the

possibility that he or his wife might somehow benefit from the vendor decision,Ramlee
should have formally declared the relationship whether or not he believed a conflict
existed. To prevent an actual or perceived conflict of interest, Ramlee employer
probably should have removed Ramlee from a decision-making role for the carpet
cleaning decision.

4. How could the conflict of interest problem have been prevented?

- Require all your subordinates to periodically review your firm’s policies, guidelines,
and resolution procedures related to conflicts of interest involving relatives or friends
- Direct your human resources department to resolve any such conflict of interest
issues which might be unresolved in a timely manner.
- Direct your employees who have a conflict of interest concern to describe the
situation to a Human Resources Department contact and ask for guidance. Employees
should always inform their employers when confronted with any situation that may be
perceived as a conflict of interest, even if the employee doesn't believe the situation
would violate employer guidelines

5. As a high level manager within the organization, how would you address and resolve
the conflict of interest problem?

- Investigate, address, and resolve any conflict of interest concerns (either real or
apparent) immediately upon identification to lessen their repercussions.
- Do not allow gossip to flourish and fuel unwarranted perceptions of favoritism that
could, if uncontrolled, negatively impact your organization.
15 MARKS