Page images
PDF
EPUB

Recommendation 7

The Commission recommends that senior federal employees in all three
branches of government be prohibited from serving on the boards of directors
of for-profit commercial enterprises (whether or not compensated) and that
requests by such employees to serve on the boards of directors of nonprofit
organizations be subject to review on a case-by-case basis.

A. Present Law

No statute currently prohibits federal employees as a group in any branch from serving on the board of directors, or in equivalent positions, of nongovernment organizations. Executive branch employees who serve in such positions, however, may not, under 18 U.S.C. § 208(a), participate in decisions or policy-making that affects the financial interests of the entities in which they hold office. Nonstatutory rules applicable to each branch of government impose additional limitations on this kind of service.

In the executive branch, regulatory standards of conduct generally prohibit any outside activity, including service on the boards of directors of outside organizations, if the activity would interfere with an employee's performance of his duties, whether because of conflicting time demands or because an organization's financial interests necessitate frequent recusals from important official actions. Employee standards of conduct also typically prohibit use of official resources (including time, equipment, personnel and facilities) for non-official purposes and prohibit use of an official government title in connection with an officership.

In the legislative branch, there is a specific Senate rule limiting Members, officers and employees paid over $25,000 per year (and employed more than 90 days in a calendar year) from serving as an officer or member of the board of any publicly regulated corporation, financial institution, or business entity. See Senate Rule XXXVII (Conflict of Interest). Specific exceptions in the rule allow uncompensated membership on the boards of organizations that qualify under Internal Revenue Code § 501(c) (nonprofit organizations) and organizations principally available to Senate officials and their families. An additional exemption allows memberships on boards of organization on which the Senate official had served continuously for at least two years prior to election or appointment, provided that the service is minimal and the Senate official does not work for a committee that regulates the activities of the organization. There is no comparable rule in the House of Representatives.

As to the judiciary, as previously noted, Canon 5 of the Code of Conduct for United States Judges prohibits a judge from serving as an officer, director, active partner, manager, advisor, or employee of any business. There is an express exemption for businesses wholly owned by members of the judge's family.

B. Considerations

In the Commission's view, service by a senior federal employee on the board of directors of a profit-making organization (and comparable positions), while consistent with present law, should hereafter be barred as inconsistent with the government's need for the entire loyalty of its employees and officials. Such board memberships not only can take time and distract an employee's attention away from his official duties, but can risk the abuse of public office for private gain, by creating an appearance that there has been an official endorsement of private profit-making activities. Moreover, an employee's board membership may require recusals that interfere with his ability to carry out official duties. Compensated board memberships also create the potential for evasion of the limitation we are recommending on the payment of honoraria to public officials. Companies that previously would have paid an official for a public speech might instead pay substantial directors' fees.

The Commission therefore recommends the enactment of legislation that would bar such service by senior federal employees in all three branches. We anticipate that the legislation might define "Senior Employee" by reference to the current Senior Employee classification for public disclosure report purposes.

In contrast, the Commission does not recommend a blanket prohibition on service on the board of directors or as a trustee of a non-profit organization. It is in the public interest to encourage service in charitable and other nonprofit organizations, particularly in view of the Nation's current budgetary situation and the consequent limitations on the social services provided by the government itself. The Administration is encouraging a range of private organizations to step in where government efforts cannot reach. Public employees should be free, within the constraints of conflict of interest determinations, to assist in this valuable effort.

Rather, the Commission believes that such service by a Senior Employee should be reviewed on a case-by-case basis by the Designated Agency Ethics Official (or equivalent authorities outside of the executive branch) to ensure that the proposed service is not likely to distract from official responsibilities or to create a conflict of interest, or appearance of such conflict for the employee. In addition, in accord with the existing bar in executive branch standards of conduct against using public office for private gain, no mention of a federal employee's name (whether the employee is senior or not) should be permitted to appear on any materials circulated by an organization for fund-raising purposes and employees should be barred from using their official titles in connection with such service. Although case-by-case review does create some burden on government reviewing officials and although there may still be a periodic need for Senior Employees to recuse themselves from activities affecting an organization with which they are affiliated, the Commission believes that these disadvantages are outweighed by the desirability of encouraging public service activities by federal employees.

The Commission recognizes that the above limitations on organizational affiliations

cannot be applied to special government employees who serve the government for only short periods of time. These individuals, whether members of advisory committees, temporary employees, or others, do not make a career out of serving the government and should not be expected to reorder substantially their private lives to accommodate government service. Prominent citizens would not serve on advisory committees, for example, if in doing so they were required to abandon their service on corporate boards of directors and subject their participation in charitable organizations to an agency approval process. Thus, the Commission recommends that the limitations described above not apply to these individuals. Rather, organizational affiliations should continue to be disclosed when individuals are considered for government appointments, so that the appointing authority can determine whether the appointment is appropriate in light of the candidate's other activities. The general conflicts of interests standard in 18 U.S.C. § 208 will still bar special government employees (other than advisory committee members, see Recommendation 5) from participating in decision-making on matters that can affect the entities with which they are affiliated.

C. Alternatives Considered

The Commission discussed whether the proposed restrictions on outside board memberships should apply to all federal employees or only to Senior Employees. We had several reasons for deciding to apply the bar only to Senior Employees. First, in our view, the greater responsibilities of Senior Employees require a greater commitment of time and energy by them to government work than is uniformly the case throughout the ranks of federal employees. Second, we did not want to adopt a rigid rule applicable to all federal employees without the opportunity to learn more about the variations in agency rules and procedures in this area. Since time prevented us from doing such an inquiry, we have chosen to refrain from a recommendation applicable to all federal employees that may have unforeseen consequences. We do not mean in any regard to take issue with those agencies that already apply the recommendations we aimed at Senior Employees to all of their employees.

The Commission also considered whether the bar on serving on the board of directors of profit-making organizations should include an exception for family held businesses. We recognize that some employees may have strong family reasons for serving on the board of a family corporation, and that, in the judiciary, at least, there has been a special exception for such activities. Nevertheless, although acknowledging the special status of family owned organizations, the Commission believes that the problem of divided loyalty of a public official who sits on the board of directors of a family held business is no less, and may be more, than the problem of divided loyalty as to other profit-making businesses. We therefore decided not to propose any special treatment of such businesses.

The Commission also considered recommending an absolute prohibition on the service on organizational boards of directors, regardless whether the organization was forprofit or non-profit. We rejected this limitation on board service for non-profit organizations as a needless restriction on the public service activities of federal employees.

So long as the Designated Agency Ethics Official (or equivalent authority) reviews a given outside activity request to ensure that the proposed activity does not detract from official duties or create a conflict or appearance of conflict with those duties, the Commission saw no overriding reason why such participation should be prohibited. And, although the ethics official might more often have cause not to approve requests by more prominent or higherlevel officials to serve on the boards of directors of non-profit enterprises, the Commission saw no justification for an across-the-board prohibition on such service by high-level officials.

Recommendation 8

The Commission recommends the following changes in the laws and
regulations governing acceptance of gifts: (1) enactment of uniform gift
acceptance authority government-wide; (2) enactment of a uniform maximum
value for gifts to individuals; and (3) enactment of revisions to the current
statutory bar on gifts to supervisors.

A. Present Law

This summary focuses on the major statutes and rules dealing with receipt of gifts, including: gifts to agencies in the form of reimbursement for official travel; gifts to individuals, including gifts of meals and entertainment; special provisions governing gifts to supervisors; and gifts from foreign governments.

Reimbursement to Agencies for Official Travel. An agency that has statutory "gift acceptance authority," which many agencies do not have, can, under specified circumstances, accept gifts, including payments reimbursing the agency for employee travel expenses. See, e.g., 15 U.S.C. § 78d(c) (Securities and Exchange Commission gift acceptance authority).

Individual employees may generally not accept reimbursement for travel made in connection with official duties. Under some circumstances, acceptance by the employee could violate 18 U.S.C. § 209, which prohibits supplementation of salary for the performance of the employee's official duty. In addition, § 201 of Executive Order 11222 prohibits executive branch employees and officers from accepting "any gift, gratuity, favor, entertainment, loan, or any other thing of monetary value" from a donor having interests that may be affected by the employee's agency. The implementing regulations at 5 C.F.R Part 735 prohibit an individual from accepting anything of monetary value -- including reimbursement for travel and gifts of meals and entertainment -- from prohibited sources, unless the individual's agency has a written exception approved by the Office of Government Ethics. A prohibited source is one with business or financial relations with the employee's agency or regulated by the agency, or with interests that may be substantially affected by the performance or nonperformance of the employee's official duties.

Alternatively, if the travel meets the requirements of 5 U.S.C. § 4111 (which authorizes receipt of reimbursement for the expenses of employees attending training, meetings or conferences), reimbursement may generally be accepted by individual employees, with agency approval, from organizations that are exempt from taxation under § 501(c)(3) of the Internal Revenue Code, unless a conflict of interest analysis dictates otherwise.

Absent agency authority to accept gifts or another special authorization, neither an employee nor the employing agency may accept reimbursement for the employee's official

« PreviousContinue »