One consequence of the corporate governance failures of recent years is an increased focus by government, the press and the plaintiffs' bar on conflicts of interest. Accounting firms, in particular, have been criticized for conflicts arising when they do substantial amounts of non-audit work for public company clients for whom they also perform audits. One reaction from accounting firms -- and others -- is to seek broad, advance waivers from clients concerning any claims of conflict of interest. Companies should be wary of agreeing to such waivers.
It may be instructive to use, as our example, an accounting firm which has done or is doing work for one company, but then also plans to do work for a second party that is adverse to the first company in a transaction or dispute. A proposed waiver might cover any and all claims the first company might later have relating to any actual or perceived conflicts of interest. Apparently, some companies have already granted such waivers with little or no negotiation or revision -- and, probably, with little thought. There are several good reasons to think twice about the scope of the waiver a company grants. And there are reasons to think more than twice about the propriety of granting any waiver, no matter how limited.
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