What is a Conflict of Interest | Definition | GAN Integrity

A conflict of interest happens when an individual involved in multiple interests finds themselves in a decision-making situation where serving one of those ... ComplianceGlossary PreviousReturntoGlossary Next ConflictofInterest WhatisaConflictofInterest? Aconflictofinteresthappenswhenanindividualinvolvedinmultipleinterestsfindsthemselvesinadecision-makingsituationwhereservingoneofthoseinterestswouldharmanother.Interestsincludemanydifferenttypesofcommitments,duties,obligations,andvalues,suchas: Contractualorlegalobligations(tobusinesspartners,vendors,employees,employer,etc.) Loyaltytofamilyandfriends Fiduciaryduties Professionalduties Businessinterests Anindividual’spotentialinterestscanbegroupedbroadlyinto4types: DirectInterests–Anindividual’sownpersonalself-interest,family-interestandpersonalbusinessinterests. IndirectInterests–Personal,family,andbusinessinterestsofpeopleorgroupswithwhomtheindividualassociates. FinancialInterests–Involveagainorlossofmoneyorvalue. Non-financialInterests–Involvepersonalorfamilialrelationshipsandotherpotentialsourcesofbias. Conflictsofinterestcreateariskthattheindividualwillactinawaythatbetraystheirdutiesorobligations,usuallytotheirprimaryemployer.  ThreeCommonTypesofConflictsofInterest Manydifferenttypesofcorruptionstemfromconflictsofinterestthatarisebetweenanindividual’sprofessionaldutiesanddirectorindirectinterests. Nepotism Nepotismhappenswhenanindividualinchargeofahiringprocesschoosestoawardajoboffertosomeoneintheirownfamilyorwithwhomtheyhaveapersonalrelationship.Inthiscase,theindividual’sdutytotheiremployer(choosingthemostqualifiedorbestcandidatefortherole)mayconflictwiththeirloyaltytoafamilymember(choosingafamilymembertoreceivethebenefitsofthejobinsteadofanunknownperson).  Self-Dealing Acorporatefiduciaryislegallyobligatedtoactinthebestinterestsofthecorporationanditsshareholders.Whenafiduciaryactsintheirownbestinterestsinsteadofinthebestinterestsoftheirclient,thisisknownasself-dealing.Self-dealinginvolvesaconflictofinterestsbetweenanindividual’sfiduciaryduties(legalobligationtotheclient)andfinancialinterests(desireforpersonalfinancialgain).  BusinessRelationships Manyconflictsofintereststemfrompersonalbusinessinterests.Anindividualwhoworksfortwobusinessesinthesameindustry,orwhoworksforthepublicsectorwhilemaintaininginterestsincompaniesthatbidongovernmentcontractsmayexperienceaconflictofinterestwhentheirjobdutiesandbusinessinterestscomeintocompetition.Inaddition,aconflictofinterestcouldbesittingontheboardofanothercompany,owningstockinanothercompany,anddecidingwhichvendorgetsacontract.   WhatisanExampleofaConflictofInterest? Conflictsofinterestcanappearinanydecision-makingprocesswheretheindividualmakingthedecisionhasmultipleinterestsatstake.Somecommonsituationscouldinclude: Hiringanunqualifiedfriendorrelativetofillapositioninsteadofthemostqualifiedcandidate. Preferentiallyawardingagovernmentcontracttoanorganizationinwhichyouorsomeoneyouknowownsstock. Performingpart-timeorcontract-basedworkforacompetitororganization Afamousconflictofinteresttookplacein1967whenagroupofHarvardscientistswerepaidbytheSugarAssociationtopublishapaperthatminimizedtherelationshipbetweenhearthealthandsugarconsumption.Thesescientistsviolatedtheirobligationtopublishtruthfulandreputableresearchinordertosupporttheirpersonalfinancialinterests.  HowtoHandleanEmployeeConflictofInterest OrganizationsshouldestablishaclearConflictofInterestpolicythatdescribeshowsuchconflictswillbehandled.Employeesshouldbeencouragedtotalktotheirmanagersandvoluntarilydiscloseanyperceivedconflictsofinterest. Whenapublicorprivatesectoremployeeexperiencesaconflictofinterest,theymayresolvethesituationbychoosingtoeither:  abandononeoftheconflictingroles,or  recusethemselvesfromtherelevantdecision-makingprocess RelatedResources TheEUWhistleblowingDirective:FindingtheRightSolution ImprovingYourCompany’sRiskAssessmentProcess KeepLearning ComplianceTech UnderstandingYourConflictsofInterestAnalytics Someareasofcomplianceprogramsaremoreclear-cutthanothers.Whileitmightberelativelystraightforwardtorunaninternalcomplianceinvestigationbasedontangibleevidence,otherareasofcompliance,suchasconflictsofinterest(COI),canbenotablytrickytomanageforcomplianceteams.ThekeytoCOIsuccess?Understandingyourconflictsofinterest…ReadMore eBook ABlueprintforanAutomatedComplianceProgram:ThirdEdition eBook TheUltimateGuidetoInternalReporting&Investigations MoreResources