Q: I work in a growing technology company. Before this company, I worked at a larger technology company. After working here several months I have begun to realize that there are lots of personal and familial relationships which seem to interfere with how we run this business. I just discovered that the Chairman of the Board is a childhood friend and fraternity brother of a senior executive. They often share stories of the “good old days.” Also, two senior leaders are married to each other. Our CFO has a son that works in sales. I think favoritism and personal relationships are impacting how we run our business. This would have never been allowed at my last company. Is this normal for small companies? It is so odd. It seems incestuous. I feel like I am at a disadvantage because I don’t have any internal connections.
A: Personal and business relationships in the workplace sometimes don’t mix. Sometimes just the appearance of a conflict of interest can spark suspicions about favoritism or impartiality.
Often companies will institute a conflicts of interest policy and/or a hiring of friends and relatives policy. These policies specify what is acceptable, but also, more importantly, what is not acceptable. In some companies, these are very strictly interpreted while other companies are more lax. Some small companies don’t have such policies but the CEO or other senior-level person will put a stop to conflicts or personal relationships that can impair independent decision-making.
Sometimes even relationships outside of the company can interfere with how a company runs. Some companies avoid external vendors who might have internal personal relationships with decision-makers within a company. As an example, ABC, Inc. may not allow DEF, Inc. provide professional tax services to ABC because a senior partner of DEF is related to a board member of ABC.
Often times, many of my clients prohibit hiring relatives of employees, officer, Directors or Trustees for certain positions. The role and the reporting relationship(s) are evaluated as part of the decision to permit the employee to be hired. Even household members are sometimes considered family member, especially with respect to a supervisory/employee relationship. Some of the policies that I have reviewed even state that close personal friendships may also interfere with impartiality and should be avoided in some cases. Finally, many of my clients have such policies because personal relationships do interfere with company business.