Confidentiality and Conflicts of Interest: The Ethics of Being an Advisor

An advisor is trusted with things most outsiders never see: the real numbers, the plans that have not been announced, the problems the founders are still working out. That trust is the whole basis of the role. It is also easy to damage, usually not through bad intent but through a situation that was never thought through in advance.

This guide covers the four areas where advisors most often get into trouble: confidentiality, conflicts of interest, honest representation, and knowing when to step away.

Confidentiality: what you learn stays with the company

As an advisor you will hear things that would interest competitors, investors and your own network. The rule is simple: what you learn from a company stays with the company. You do not share it, and you do not use it for your own benefit or for the benefit of another client.

Three points are often misunderstood:

• The duty continues after the engagement ends. It lasts for as long as your agreement says and for as long as the information is not public. Ending the advisory role does not free you to talk about what you learned.
• Using is as bad as sharing. Trading shares based on non-public news, or steering another client because of what you know, breaks confidentiality even if you never tell anyone.
• "Among trusted people" is still sharing. Telling another advisor or a friend in confidence is still disclosure.

Conflicts of interest: disclose early, in writing

A conflict of interest exists when your other roles, investments or relationships could affect the advice you give, or could reasonably be seen to affect it. The second part matters. A conflict does not need to change your advice to be a problem. It is enough that the company would see it as a risk if it knew.

Typical examples:

• Advising a direct competitor of the company
• Holding shares in one of the company's customers, suppliers or acquisition targets
• Being paid by the other side of a deal you are advising on
• Recommending a service provider who pays you a referral fee

Having a conflict is not in itself wrong. Experienced advisors almost always have other roles. What matters is how it is handled. A good rule has three steps:

1. Disclose it early and in writing, before it becomes a problem. A short email is enough.
2. Let the company decide whether it can live with it. It is their risk to judge, not yours.
3. If it cannot be managed, decline the role or step away.

A conflict disclosed at the start is rarely a problem. The same conflict discovered by the company later almost always ends the relationship, and often the advisor's reputation with it.

Honest representation: say what you can actually do

The pressure to oversell is real, especially when you are competing for a role. Resist it. Founders talk to each other, and an advisor's reputation is built on a small number of relationships.

• Describe your experience accurately. "I was part of the team that entered Germany" is different from "I led the German launch".
• Do not promise what you cannot control. Introductions, funding and customer deals depend on other people. Promise the effort, not the outcome.
• Say when something is outside your expertise. Pointing the founder to a better person is a sign of a good advisor, not a weak one.

When to step away

Ending an advisory role is a normal part of the work. Sometimes it is the only right thing to do. Step away when:

• A conflict of interest cannot be managed
• The company asks you to do something illegal or clearly unethical
• The role has turned into unpaid employee work that was never agreed
• You can no longer give the time you promised

When you leave, do it cleanly: tell the company in writing, hand over what you have, and keep the confidentiality you agreed to. How you leave is remembered as long as how you worked.

A quick test for grey areas

When you are unsure, ask yourself one question: would I be comfortable if the founder, and the company's investors, knew exactly what I am doing and why? If the answer is no, disclose it or do not do it.

What a training title does and does not cover

Business advisory work is not a regulated profession in most countries. Titles such as Boardio Qualified Advisor relate to business advisory and advisory board work. They are not a financial, investment or legal advice qualification, and advisors should never present them as one. If a company needs regulated advice, the right answer is to say so and point them to a licensed professional.

Learning to work as an advisor? Advisor Essentials is Boardio's free training on what it takes to work as a business advisor, including ethics and conflicts of interest.

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