How Board Members with Conflicting Interests Can Remain Neutral?

Business means money. Nothing else. Businesses are run for money and there is usually no other obligation that comes into their way as far as transactions are legal or at least if they can be covered legally.

According to Companies Ordinance 1984, under which the companies of all sorts are run in Pakistan, a director of a company – usually a shareholder or otherwise – can be part of any other company simultaneously. If such simultaneous associations (with more than one companies) are conflicting in terms of interest then all a director needs to do is to disclose such conflicts of interests and that’s it.

Section 187 through 196 of Companies Ordinance deals with the appointment, ineligibility, powers, roles and other rules concerning the directors.

Ordinance says that directors can’t vote for a decision concerning conflicts of interests. He/she is kept out of such process where conflict of interests arises. That’s how the book defines and that’s how companies are run.

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But a question arises, is it really possible for a business-owner (a director) to remain neutral especially when his/her company is procuring something from vendors and he himself is part of one potential vendor?

To explain this scenario from real life situation, let’s take this example of Bank of Punjab which recently advertised an opportunity requesting for quotes and proposals for implementation of mobile financial services solutions.

Interestingly, one of the directors at Bank of Punjab is also an advisor at Abacus Consulting, a technology provider which is bidding for the Bank of Punjab tender for offering mobile financial services.

As said above, there is a protocol available when such conflicts arises, i.e. director will be kept out of the process by both Bank of Punjab and Abacus Consulting and this is how pure business ethics will be achieved.

But a million dollar question: Are businesses this noble? Is it really possible for someone with conflicting interest to not to influence the procuring decisions, or sharing of background information or a role of any kind will not be played? (We are specifically talking about Pakistan)

I leave this to you to decide.

Tech reporter with over 10 years of experience, founder of ProPakistani.PK