Confidentiality in Economic Development

Back in January, I posted an article reviewing the code of ethics followed by economic development professionals (EDPros). The code speaks directly to the issue of client confidentiality: “Professional economic developers shall maintain in confidence the affairs of any client, colleague or organization and shall not disclose confidential information obtained in the course of professional activities.”  Like most rules or guidelines, the true test lies in its application in practice.

As I look back on my 35-year economic development career, I recall two specific occasions very early in my career when I inadvertently breached client confidentiality. In the first case, I mentioned the name of a confidential business prospect to a state legislator at a state economic development meeting. I was pressed to disclose the company’s name because the elected official insisted Ohio might lose the deal without the Legislature’s assistance. A story appeared in the newspaper the next day mentioning the company’s name and how the Legislature was doing all it could to seal the deal. Fortunately, the story had no impact on the project outcome since another state was chosen for technical and financial reasons.  I was pulled aside by my boss at the time and coached on the basics of business confidentiality.

In the second case, I received a call from a business reporter who had done his research on a prospective business investment project. He had all the facts, but nobody to attribute them to. The reporter asked if he could could “confirm” some information about a soon to be announced business deal. He essentially read the story to me and asked me one question: “Based upon what I have shared, do you see any reason why Cleveland might lose the deal?” My simple answer was “No. It sounds like a solid deal.” Guess what? The whole story was attributed to me. I was read the riot act by my boss and the business prospect. The deal still happened, but I had lots of egg on my face over the news story.

I learned from these two situations, but I have had several other close calls over the past 35 years, mostly because other parties, including elected officials, labor representatives, news reporters, economic development partners, and in some cases business managers and owners, pressure EDPros for insider information. Everybody says they want to help, but often self interest is the motivation. Political capital is often the motivation of elected officials. Unionization opportunities is the motive for labor officials. News reporters want the story before their competition gets it. Economic development partners, on all geographic levels, want to be included in the deal. A piece of the financial deal and reducing competition for labor and other scarce resources is the motivation of business managers and owners.

Economic developers must be very careful in how they handle sensitive information related to businesses and other concerned parties. A number of my economic development colleagues have bit the dust and lost deals because they mismanaged information in their work.

So what is a breach of confidentiality? In its most basic sense, it is a mismanagement of information; that is information is used in a way that it shouldn’t.  Confidentiality can be breached  in two basic ways: 1) unintentionally, which explains most of the breaches; and 2) intentionally, where people use protected and privileged in inappropriate and at times harmful ways.  The old wartime expression comes to mind: “Loose lips sink ships.”  The misuse of information can botch a development project and cause harm to the business trying to do the deal. When this happens, it causes business prospects to distrust economic developers. And it can even lead to a lawsuit being filed by the business against the EDO.

So how can an EDPro guard against breaching confidentiality?

First, clarify what information is confidential and respect its confidentiality.

Second, ask the business prospect who should and should not have access to information they provide, and honor these guidelines in working with the information.

Third, define how business information will be used in making decisions. If incentives are involved in the deal, certain confidential information must be shared with public officials and it can become public to anyone requesting it.

Fourth, use good judgment about how and when to use privileged information. As in any profession, good judgment comes from experience in economic development. You learn what is appropriate to share with other parties.

Finally, adopt a confidentiality policy that the EDO observes on a regular basis.

Also, it is not uncommon for a business to ask that EDPros to sign a nondisclosure statement to protect the information the business provides.

Trained EDPros are less likely to mismanage information than those without training. This is where many of the unintentional confidentiality breaches occur.

Stay tuned for more on this subject.

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