Organizational conflict of interest abounds. On any given day, news media often report at least one story about a potential conflict of interest. And no industry or type of employer has a monopoly on conflicts. They arise in government and in private industry. We are all familiar with accusations that city officials “voted their pocketbook.” We have all also read about financial advisors recommending investments to clients that benefit the advisor. These kinds of conflicts take a toll. Protecting the workplace starts with defining conflicts, recognizing risks, determining origins, and creating effective strategies to handle conflict of interest challenges if and when they occur.
Conflict of Interest Defined
The term “conflict-of-interest" is of relatively recent origin. United States courts and legislatures did not begin tackling the subject until the 1950s. Black’s Law Dictionary did not include the term until almost 1980.1
Multiple definitions exist of the conduct, behavior, and circumstances that can create a conflict of interest. Most cover a situation that has the potential to undermine the impartiality of a person because of the possibility of a clash between the person’s self-interest and the professional or public interest.” 2
Conflict of Interest Impact
People have not always considered taking personal advantage of one’s official position problematic. Historically, business leaders and government officials often did so to advance their personal interests without public complaint. Over the last 50-75 years, however, the public began to take a dim view of conflicts of interest, seeing them as potential for damage and corruption.
Conflicts lead to questions about the impartiality, reliability, and confidence in the advice and service delivered to the client or customer, as well as create the potential for more egregious and potentially illegal behavior. For these reasons, most public and private employers require employees and agents to report potential conflicts.
Conflict of Interest Causes
Conflict of interest situations can arise in many different ways. Sometimes, individuals make a deliberate decision to engage in the behavior that constitutes a conflict of interest. Other times, however, the conflict arises without conscious choice. Some common causes of unintentional conduct include circumstances where individuals:
Lack understanding of governing rules
Think they can break some rules because they follow others (moral licensing)
Belong to an organization with ineffective conflict controls
Believe they are immune from influence
Participate in an organizational culture which endorses personal gain as a privilege of office or employment
Conflict of Interest Prevention
While the creation of a robust conflict prevention program takes time and understanding of ethics law, industry demands, and organizational culture, effective prevention almost always includes several sound management practices, including:
Clear and effective policies and internal controls
Regular training on and communication of policies
Access to timely counseling and advice
Modeling by leadership
Creative problem solving
Consistent, transparent enforcement of policies
These practices will result in an open, accessible process to discuss, vet, and resolve potential conflicts.
Almost every employer faces the possibility of having to address an employee—or company leader-whose workplace conduct gives rise to a real or perceived conflict of interest. Just as the break-room first aid kit acknowledges the inevitability of workplace injuries, companies need a conflict of interest toolkit that honestly addresses conflict of interest risk and prevention and a consistent policy of enforcement if and when violations occur.
See Conflict of Interest in Four Professions for a more complete etymology.