CEA Conflict of Interest Management 3 — Questions and Answers
Question 1: A compliance officer discovers that a senior executive failed to disclose a significant financial interest in a company that received a major contract. What should the officer do FIRST?
- Immediately terminate the executive's employment
- Document the finding and report it through established escalation channels (Correct answer)
- Inform the press to ensure public accountability
- Ignore it if the contract was awarded at a fair price
Correct answer: Document the finding and report it through established escalation channels
Compliance officers must document findings and report through proper channels before any disciplinary or remedial action occurs.
Question 2: Which scenario BEST illustrates a 'revolving door' conflict of interest?
- A government regulator accepts a senior role at a company she previously regulated (Correct answer)
- A manager rotates between departments within the same organization
- An employee returns to a former employer after a brief absence
- A consultant works simultaneously for two competing firms
Correct answer: A government regulator accepts a senior role at a company she previously regulated
The 'revolving door' refers specifically to movement between regulatory/government roles and the private sector being regulated.
Question 3: An organization's conflict of interest policy requires annual disclosures. An employee's situation changes significantly mid-year. Under best practices, the employee should:
- Wait until the next annual disclosure cycle
- Disclose the change promptly when it occurs (Correct answer)
- Disclose only if the change results in an actual conflict
- Consult legal counsel before deciding whether to disclose
Correct answer: Disclose the change promptly when it occurs
Best practice requires ongoing or prompt disclosure whenever material changes occur, not just at scheduled intervals.
Question 4: A nonprofit board member uses inside knowledge of the organization's planned land purchase to personally buy adjacent property first. This is MOST accurately described as:
- A legitimate personal investment decision
- Self-dealing and a breach of fiduciary duty (Correct answer)
- An apparent conflict with no actual harm
- A legal matter only, not an ethics concern
Correct answer: Self-dealing and a breach of fiduciary duty
Using confidential organizational information for personal gain constitutes self-dealing and a serious breach of fiduciary duty.
Question 5: Which of the following MOST effectively reduces unconscious bias in conflict of interest situations?
- Relying on the conflicted individual's own judgment about their objectivity
- Implementing blind review processes and structured decision criteria (Correct answer)
- Requiring conflicted parties to document their reasoning
- Allowing conflicts if the outcome benefits the organization
Correct answer: Implementing blind review processes and structured decision criteria
Blind reviews and structured criteria reduce the influence of unconscious bias by removing identifying information and standardizing evaluation.
Question 6: A supervisor who is romantically involved with a subordinate refuses to recuse herself from the subordinate's performance review. The PRIMARY ethical problem is:
- Violation of workplace dating policies
- Compromise of objective evaluation due to personal interest (Correct answer)
- Failure to notify HR of the relationship
- Potential favoritism in salary negotiations only
Correct answer: Compromise of objective evaluation due to personal interest
The core ethical issue is that the personal relationship undermines the ability to conduct a fair, objective performance evaluation.
Question 7: When an organization 'manages' rather than eliminates a conflict of interest, which safeguard is MOST important?
- Ensuring the conflicted party earns no profit from the situation
- Establishing ongoing monitoring and documentation of the managed conflict (Correct answer)
- Having the conflicted party sign a waiver of liability
- Transferring the conflict to another department
Correct answer: Establishing ongoing monitoring and documentation of the managed conflict
Managed conflicts require continuous oversight and documentation to ensure the conflict does not actually compromise decisions over time.
CEA Conflict of Interest Management 3
A compliance officer discovers that a senior executive failed to disclose a significant financial interest in a company that received a major contract.
What should the officer do FIRST?