Board Committees — Conflicts of Interest Policy

What is a conflict of interest?

'Conflict of interest' will depend largely on the scenario or situation. However a broad definition of a 'conflict of interest' might be:

"A situation where an individual or organisation could exploit a professional or official capacity for a personal or corporate benefit".

Some of the most common forms of conflict of interests are:

  • Self-dealing – An official who controls an organisation causes it to enter into transactions with the official or with another organisation which benefits the official.
  • Outside employment – In which the interest of one job contradicts another.
  • Family interests – In which an official causes an organisation to enter into transaction with another organisation owned by a close relative or which a close relative benefits from.
  • Gifts – From friends who also do business with the person receiving the gifts (further information on this can be found under the section on the Bribery Act).

What to do about a conflict of interest?

The important point to note regarding conflict of interest is that it is natural for conflicts of interest to occur.  In tackling conflicts of interest you are trying to 'manage' them rather than 'prevent' them from happening at all.

The fact that a conflict of interest exists, may not in itself, be evidence of any wrongdoing. For many professionals it would be impossible to avoid having conflicts of interest from time to time.

Where it become a legal matter is when an individual tries (successful or not) to influence the outcome of a decision for his/hers personal benefit.

Listed below are some possible actions that could be used to manage conflicts of interest:

  • Removal – One of the best ways to handle conflicts of interest is to remove it all together. This is for example when employees are banned from having interest in partner companies or working for companies where a conflict of interest could occur. 
  • Disclosure – Ensuring that all involved in decision making have disclosed all information and interests which could present a conflict of interest during a meeting or in a role they hold e.g. financial information. 
  • Refusal – Where people with a conflict of interest abstain from participating in the decision, this could be board members not voting on agenda points in which they have a conflict of interest..
  • Code of ethics/conduct – This may draw on all other options by signing an individual up to a process where they abstain from discussion where they have indicated that a conflict may exist.  More can be found on this in the Board Code of Conduct section.

A 'conflict of interest' policy needs to limit the possibility and/or opportunity for an individual to exploit their position.  Below you can find examples of 'conflict of interest' policies.

What is a conflict of interest?
A short explanation of what conflict of interest consitute in the work of board of directors.

Better practice
A better practice guide to conflict of interest.

Conflict of interest
Explanation of the conflict of interest that could appear within the members of a board or trustees.