Dealing With Conflicts of Interest

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Are conflicts of interest affecting your employees' trust in you?

Konrad's boss has asked him to manage the bidding process for an upcoming IT infrastructure upgrade. His partner works for an IT vendor, so he asks her to submit a bid for the contract.

This is a clear example of a conflict of interest. After all, how can Konrad now make an objective recommendation when it comes to choosing the supplier?

Conflicts of interest can be as obvious as this one, but they can also be quite subtle; and if you fail to recognize a conflict of interest, you could easily find yourself in a situation that damages your credibility, integrity, or reputation.

You also need to recognize the close connection between conflicts of interest and breaches of confidentiality. Often it is the use or disclosure of confidential information that gives rise to a conflict of interest.

In this article, we'll look at why it's so important to identify conflicts of interest, and we'll explore what you should do when you find yourself in a situation that involves one.

What Is a Conflict of Interest?

In this 2009 report, editors Bernard Lo and Marilyn Field defined a conflict of interest as, "a set of circumstances that creates a risk that professional judgment or actions regarding a primary interest will be unduly influenced by a secondary interest."*

Put simply, conflicts of interest occur when competing loyalties affect your judgment or objectivity, and they are particularly important when you are making decisions on behalf of other people. These are examples of situations where a conflict of interest has occurred:

• Guy, a medical doctor, receives a research grant from a pharmaceutical company. He then feels obliged to prescribe drugs from that organization, even though there are better alternatives available.
• Gillian coaches her nephew to help him get a role in the company she works for. She talks positively to the hiring manager about his abilities and character, without disclosing her family relationship.
• Sita's boss has asked her to select a supplier for their department. She chooses an organization in which she has a stock holding.
• Juan awards record bonuses to himself and his executive team in the same year that he cancels the company's dividend to shareholders.

In many cases, conflicts of interest aren't illegal, unless you work with, or are involved with, a city, state, or federal government; you work in a regulated profession such as law or accountancy; or you contravene bribery laws.

However, they can cause people to question your honesty, credibility   , integrity   , and reputation   , which is why it's important to know how to recognize and handle these situations effectively.

How to Recognize and Declare a Conflict of Interest

It can sometimes be difficult to identify situations where your professional interests, obligations, or responsibilities might conflict with your personal interests. Whenever you are involved in a business or financial decision – and particularly when you are representing other people's interests – think carefully about the situation.

Step 1: Evaluate the Situation

Consider these questions:...