How to Handle Conflict of Interest in Corporate Settings

What is Conflict of Interest and how does it arise?

In recent months, we have seen a spate of scandals involving top corporate houses and sportspersons about how they have been implicated in conflict of interest issues. These scandals have dented the reputations of many corporate houses, media houses, and sports management companies. At heart of the issue is whether employees in corporates, mediapersons, and sportspersons can continue be employed in their current occupations and at the same time be involved with a competing venture that presents conflicts of interest to both parties.

The point here is that conflict of interest arises when an individual in a particular employment has links with another venture that is in the same line of business or has interests that intersect and overlap with the interests of the former. For instance, if you are employed in a technology company and at the same time spend your spare time developing technological applications that you intend to sell in the market, then your current employment and the spare time venture are conflicting with each other as both of them are targeting the same audience.

Further, if you are a corporate honcho and your spouse or your children are employed in sectors that have the same line of business as your company, you must either declare this upfront so that there are no controversies or ensure that your vocation and your spouses’ vocation do not overlap.

Ways and Means to Handle Conflict of Interest

Organizations and individuals must handle conflict of interest in a professional manner. Often, the practice in corporates is to ask employees to declare any potential conflicts their or their family members’ employment and business interests’ conflict with each other.

Further, most multinationals ask their employees to abide by the guidelines on what ought to be done in cases of conflict of interest. This usually takes the form of issuing strict rules about what constitutes conflict of interest and what constitutes appropriate behavior in such cases.

Further, conflicts of interest also arise when employees in a particular company invest in stocks and equities of competitors as well as their own companies. In this aspect, conflict of interest also overlaps with insider trading guidelines that are issued by all companies. The key aspect here is that conflict of interests must be dealt with severely if the employees are found to be violating them as they have legal and reputational ramifications. For instance, the law prohibits individuals from having interests in competing entities while being employed with a particular company. Apart from this, there are strict injunctions on governmental employees having private employment as well as politicians holding offices of profit. These laws have been passed to ensure that probity and uprightness in public life is maintained and the rules adhered to.

Risks arising from Conflict of Interest

The reputational aspect is another facet of the conflict of interest issue. For instance, if an employee is found to be violating the conflict of interest guidelines, the ensuing scandals do a lot of damage to the companies hurting their brand image and reputation.

Further, companies lose out to their competitors when it is found that employees have interests that are not strictly in line with the interests of their own. Hence, many companies in recent years have been acting swiftly and strictly against conflict of interest issues. The issue becomes serious when employees use their knowledge of the company’s operations to further their private interests, which means that in effect, they are resorting to violation of the ethical and value based aspects of the professional employment.

Concluding Thoughts

Finally, conflicts of interest are unavoidable many times because of the rather complex and interconnected nature of modern business and society. Hence, corporates ought to take expert legal opinion in drafting rules and regulations in determining what constitutes conflict of interest and what can be acceptable behavior.