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Chinese Walls for Freelancers and Businesses

Large businesses have to tackle some potentially serious conflicts of interest. Insurance firms maintain strict divisions between the claims and underwriting departments. Newspapers distinguish between the editorial and advertising sections. Law firms in jurisdictions that allow the same company to serve both sides of a law suit make sure that the different teams aren’t sharing confidential information. Even when a firm takes on a case against a former client, the “Chinese Wall” —  the information barriers set up inside the company — prevents lawyers from accessing facts the firm might have gathered on the previous case. It’s not just an ethical requirement. It can also be a legal demand. The Sarbanes-Oxley Act strengthened the Chinese Walls in financial firms to make sure that the firm’s brokers don’t affect the recommendations supplied by its corporate advisory divisions — and prevent employees from trading on inside information.  But these are big companies serving lots of different clients in areas with clear ethical issues. What about small companies and freelance workers? When do they have to worry about building Chinese Walls?

One dramatic example turned up recently in entertainment. Towards the end of Mad Men’s fourth season, advertising company Sterling Cooper Draper Pryce was in trouble. Its biggest client was about to leave and, wondering whether the firm will still be around in a few months, small accounts were heading for the door too. Creative Director, Don Draper, the egotistical focus of the show, made a move that was high in opportunism and low in ethics. He asked his girlfriend, a freelance consultant, whether any brands served by her other clients were looking for a new agency. It was a request that breached the Chinese Wall the consultant had mentioned in an earlier episode: the boundary that she had set up to prevent sensitive information picked up on the job from being shared between the people who hired her.

A Barrier is Good for Business

That Chinese Wall wasn’t a legal requirement, but it was good business sense. Talking to her advertising agency clients about the feelings of their clients would have made the freelancer harder to hire. An agency that felt that she was talking to others about their business wouldn’t have been quick to bring her back.

It’s not too difficult to see how other freelancers can find themselves in similar positions. As Web designers put together sites, they come to learn about the processes, pricing strategies and clients of the companies they’re working for. As they look for more work, the nature of the jobs that gather in their portfolios make it more likely that they’ll be working for their previous client’s competitors. While sharing knowledge of their time with their old client may help to deepen a new relationship, it won’t do much for the degree of trust that new client puts in them.

Other small businesses can face similar temptations. Photographers who take executive portraits can pick up all sorts of small talk during the shoot. Even freelance QA experts and copywriters can be privy to the kind of inside information that other clients would find very valuable.

Clients, of course, are aware of the risk and effectively bring their own Chinese Walls to a freelance relationship in the form of an non-disclosure agreement. But not all clients bother, either because they don’t place a high enough value on the sort of information they’ll be sharing or because they trust to the freelancer’s discretion. So what can a freelancer do to ensure that they don’t give in to the temptation to release information previous clients might not want to set free?

For a one-person company, it’s not easy. The Close Asset Group, a financial services company, explains how a Chinese Wall

“may involve a range of practices including the segregation of data and computer systems, as well as physical separation of certain businesses so they are unable to access the same part of the office. The use of a Chinese Wall will be established and enforced by the Compliance Department.”

The company maintains a Chinese Wall between the Asset Management Division and other divisions of the Group, and only uses the services of other companies within the group when commissions and other charges are “generally comparable” with competitors.

Freelancers though tend not to have different businesses to physically separate or hire, and there’s little point in segregating data and computer systems if the same person has access to all areas.

A Wall Between Work and Home

It may be something to consider for the future though. A freelance business that grows quickly enough to add assistants might want to consider restricting client files to reduce the risk of leaks. Freelancers that outsource parts of their work should be implementing a type of Chinese Wall by only providing information necessary to complete the job. That might not prevent a conflict of interest but it could stop the hired help from cutting out the middle man and heading straight for the client. For the most part, freelancers are going to be relying on discretion, common sense and a well-bitten tongue in place of solid barriers.

There are a couple of other kinds of Chinese Walls that freelancers might want to consider though. In 1999 Sony lost a lawsuit against Connectix, a software developer that had reverse-engineered its game system to produce a Virtual Game Station emulator. Connectix had tried to construct a Chinese Wall between one team that had analyzed and created documentation for Sony’s product and a second team that used that documentation to re-create the system. Sony eventually bought and killed the Virtual Game State but the ruling laid down a legal precedent regarding reverse engineering. Small companies and freelancers looking to copy the work of larger firms will need two teams and a clear division between the two.

But perhaps the most important Chinese Wall that a freelancer or small business owner needs to construct is also the hardest to maintain — and one most frequently breached in episodes of Mad Men: the barrier between work and home. But how dramatic would life be if that wall was in place?

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