handling of potential conflicts of interest: it’s all about disclosure to the community
Update: please see my apology for having posted this.
The Zcash community is involved in a complex discussion about whether to release our third-generation Shielded Money protocol implementation under the permissive MIT licence or the Bootstrap Open Source Licence.
The main argument for using the Bootstrap Open Source Licence is that if we use the MIT licence then others can benefit from our work (performed by Electric Coin Co and funded by the ZEC holders through the Dev Fund) without giving anything back to the ZEC holders.
In that debate, there were four prominent leaders of the Zcash community who vigorously argued that it would be better for the ZEC holders if we used the MIT licence. (Three of them are Board Members of the Zcash Foundation, and one of them is the business partner of one of those Board Members, which fact was not disclosed to the Zcash community.)
They engaged in this debate without disclosing to the Zcash community that some of them had personal business interests which actually in the past (with our current, second-generation Shielded Money protocol implementation), or could potentially with their current business provide financial gain for them from the MIT-ing of the third-generation protocol.
Having private business interests is not wrong. Having a potential conflict of interest is not wrong. I am not claiming that the specific businesses of the people in question are wrong or harmful. But they do constitute a potential conflict of interest, and potential conflicts of interest require specific handling.
It is fine for you to argue that your private business interests are either unrelated to the issue in question, or are complementary to the interests of the other party rather than conflicting with their interests.
But only if you disclose to them.
If you have relevant private business interests, and in your role as a leader, you engage with the other stakeholders without disclosing this fact to them, and attempt to persuade them of something that could potentially personally profit you from their decision, then you are doing something wrong.
This is true even if it would turn out that the stakeholders—when given the opportunity to scrutinize your business—would conclude that your private business interests are either sufficiently unrelated or sufficiently complementary to their interests. But if you withhold that information from them, and you do not give them the opportunity to consider that and to make up their minds for themselves, then you are doing something wrong.
In business, the rules for handling potential conflicts of interest are simple:
- You must disclose to the potentially affected stakeholders about the situation which potentially causes a conflict of interest.
- You must recuse yourself from exercising power — such as engaging in Board of Directors discussions or casting a vote—which could potentially benefit you at others expense due to this potential conflict of interest.
It appears that the Zcash Foundation has seriously erred by not practicing these principles in order to protect the Zcash community’s interests, in this discussion about whether to MIT or to Bootstrap Open Source Licence our third-generation codebase. Instead, the Zcash Foundation has strongly insisted that we must MIT our codebase, without disclosing the fact that two of their Board Members and a business partner (co-founder) of one of their Board Members, who were actively engaged in the public discussions, had potential conflicts of interest which could potentially gain them private benefit from that decision.
Matt Green, Jack Gavigan, and Eran Tromer have repeatedly publicly characterized my statements about this as being “accusations”, and used loaded words such as “crazy”, “ridiculous”, “unwarranted”, etc. etc., but everything that I have written here and in my previous post are simply facts.
(My previous post contains more detail, but it also features an urgent and critical issue regarding the Zcash Foundation’s ownership over the trademarked name “Zcash”, which is now resolved by The Zcash Foundation signing off that Zcash NU5 can use the trademark “Zcash”.)