The Office of Government Ethics has issued a reminder on the implications for stock ownership of a conflict of interest law, telling agency ethics officials that “employees who own stock in a company should be counseled that they may not participate in a particular matter affecting the company even if there is there is not a probable effect on the company’s stock price.”
The law at issue bars executive branch employees from participating personally and substantially in any particular matter that they know would have a direct and predictable effect on their own financial interest or financial interests imputed to them.
“Stock constitutes ownership rights in a company; as such, OGE has consistently treated financial interests of the company and the financial interests of the shareholders as one and the same . . . therefore, an employee may not participate in any particular matter that would have a direct and predictable effect on the financial interests of a company in which the employee (or any imputed person) owns stock, not merely those particular matters that would affect the stock price.”
That’s because stock ownership is an ownership interest in the entity itself and government “matters” that affect the financial interest of the entity have an effect on the financial interest of a person who owns stock in the entity, an effect that “need not be reflected” in the stock’s price.
Instead, the test for whether a conflict of interest exists is “whether the particular matter would have a direct and predictable effect on the financial interest of the company whose stock the employee owns,” it said.