Obligations to the Firm

When you accept employment, you generally agree to perform certain tasks, usually
during certain specified hours, in exchange for financial remuneration. Whether oral or
written, implicit or explicit, a contract governs your employment relationship and provides
the basic framework for understanding the reciprocal obligations between you and your
employer. Your employment contract determines what you are supposed to do or
accomplish for your employer, and it may cover other matters ranging from parking
privileges to your dress and deportment while carrying out your responsibilities. The terms
of your employment contract may be specific and detailed or vague and open-ended.

Loyalty to the Company

Because you are hired to work for your employer, you have an obligation, when acting on
behalf of the organization, to promote your employer’s interests. Insofar as you are acting
as an agent of your employer, the traditional law of agency places you under a legal
obligation to act loyally and in good faith and to carry out all lawful instructions. But it
would be morally benighted to view employees simply as agents of their employers or to
expect them to subordinate entirely their autonomy and private lives to the organization.
Morality requires neither blind loyalty nor total submission to the organization.

Conflicts of Interest

Even the most loyal employees can find that their interests collide with those of the
organization. You want to dress one way, but the organization requires you to dress
another way; you’d prefer to show up for work at noon, but the company expects you to
be present at 8 A.M.; you’d like to receive $75,000 for your services, but the organization
pays you a fraction of that figure. The reward, autonomy, and self fulfillment that workers
seek aren’t always compatible with the demands of the organization. Whatever the matter
in question, the perspectives of employee and employer can differ.

Sometimes this clash of goals and desires can take the serious form of a conflict of
interest. In an organization, a conflict of interest arises when employees at any level have
special or private interests that are substantial enough to interfere with their job duties—
that is, when their personal interests lead them, or might reasonably be expected to lead
them, to make decisions or to act in ways that are detrimental to their employer’s interests.
 In general, if the contents of the work agreement are legal and if the employee freely
consents to them, then he or she is under an obligation to fulfill the terms of the
agreement. Implicit in any work contract is the assumption that employees will not
sacrifice the interests of the organization for personal advantage. Of course, individuals
may seek to benefit from being employed with a certain business or organization, but in
discharging their contractual duties, employees should not subordinate the welfare of the
organization to their own gain.

When in a certain situation an employee’s private interests run counter to the interests of
his or her employer in some significant way—or, to put the point differently, when those
interests are likely to interfere with the employee’s ability to exercise proper judgment on
behalf of the organization— a conflict of interest exists. The danger, then, is that those
interests will lead the employee to sacrifice the interests of his or her employer.

Financial Investments
Conflicts of interest may exist when employees have financial investments in
suppliers, customers, or distributors with whom their organizations do business.

For example, Monica Peykova, purchasing agent for Trans-Con Trucking, owns a
substantial amount of stock with Timberline Office Works. When ordering office supplies,
Peykova buys exclusively from Timberline, even though she could get equivalent supplies
cheaper from another supplier. In this case, Peykova has acted against Trans-Con’s
interests. But even if Peykova never advantages herself this way, a conflict of interest still
exists. During the dot-com boom, executives at high-tech firms often owned stock in other
young companies in the same or closely related fields. Those tangled financial
relationships sometimes produced conflicts of interest. For example, eight executives at
EMC were heavily invested in the start-up StorageNetworks. They recommended it to
their clients, and those referrals quickly grew to 40 percent of the younger company’s
business. But as StorageNetworks got larger and as EMC expanded its own services
division, the two companies found themselves competing, leading some at EMC to
complain that the other firm was poaching its employees and interfering with its customer
relationships. Today EMC says the impact on business was negligible. But a former board
member maintains that the eight executives were recommending StorageNetworks when
they should have been pushing EMC equipment: “No question, it had an impact on their
day-to-day decisions. It
was a tremendous financial incentive.”