What don’t people get about conflict of interest?

Conflict of interest is a pretty straightforward and clearly understood concept, right?

We look at any number of definitions of the term and they all have the central tenet of incompatibility.

Some tell us it’s “a situation that has the potential to undermine the impartiality of a person because of the possibility of a clash between the person’s self-interest and professional interest or public interest”.

Others talk of “a situation in which a person is in a position to derive personal benefit from actions or decisions made in their official capacity”.

So what is it that people don’t get about conflict of interest?

That’s a question that has been foremost in my mind throughout the ongoing saga at CPA Australia – and if you’re not aware of it, either you’ve just arrived from a far-off planet or you don’t consider yourself a newspaper reader…

The issues were raised by dissident members who were most unhappy with the CPA’s governance once the salary level of the CEO and board members were disclosed – and that only after persistent media probes.

Their complaints focused on three primary areas.

Firstly, the CEO’s salary of almost $1.8 million – well above what is deemed reasonable for such a not-for-profit body – and a similar amount in annual chairman’s and directors’ fees.

Secondly, the organisation’s financial support in marketing the CEO’s book, ‘The Naked CEO’, published in 2014.

And thirdly, the size of the board – there are 12 directors – and, more pertinently, its convoluted electoral structure and process that tends to favour incumbents. This structure, the dissident members argue, also played a part in keeping basic information such as the CEO’s salary and director fees from rank and file members.

By any definition and by any measure, I’m sure we will all agree that what’s been going on at CPA Australia is the perfect case study for those wishing to examine an organisation absolutely riddled with actual or potential conflict.

There’s the promotion of the CEO’s book – at the cost of the organisation.

There’s the establishment of a subsidiary company to provide financial advisory services in competition with some of the organisation’s own members.

But it goes even further, all the way to the organisation’s vital regulatory function. It’s supposed to regulate members but now with this subsidiary, it has effectively become a regulator of itself!

And if that’s not enough, there’s the icing on the cake…

CPA Australia has now established an independent review of the organisation’s governance but two of the three appointees to the independent review panel wrote testimonials for the CEOs book!

You’re kidding, right????

Sadly, no – but thankfully ASIC is also investigating CPA Australia. Let’s hope it does a good job.

Until next time,

Kate.

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