4 Questions About Board Conflicts of Interest

One of the essential tools for preventing corruption in an organization is identifying and resolving conflicts of interest. Accordingly, organizations, especially those with state participation, are recommended to pay close attention to this tool in the course of building a system of anti-corruption measures; for private organizations, the regulation of conflicts of interest is also becoming relevant in combating corporate governance fraud.

How to prevent conflicts of interest?

A well-developed system of anti-corruption measures that make it difficult for an employee to get into a situation of conflict of interest (for example, establishing the specifics of receiving gifts from persons interested in the employee’s location in connection with his work duties).

Implementation of verification procedures in making personnel decisions and in the distribution of responsibilities for the possibility of a conflict of interest.

How to identify conflicts of interest in the board?

Declaring by the employee that he has specific (personal) interests; such declaration can be carried out upon employment and later regularly (for example, annually) and (or) situationally (directly in the event of certain situations).

Independent identification of situations of conflict of interest by the unit (employees) responsible for preventing corruption in the organization by comparing the information provided by the employee with information contained in various government and commercial databases.

How to manage conflicts of interest?

Conflict of interest resolution may include:

  • Strengthening control over the performance by the employee of labor duties, during the execution of which a conflict of interest may arise.
  • Removal of an employee from taking actions (making decisions) about a legal or natural person with whom his interest is connected.
  • Limiting an employee’s access to information, the possession of which may lead to a conflict of interest.
  • Transfer of an employee to another job within the structural unit and another branch of the organization.

Offers to the employee to refuse the benefit received or expected to be received, which is the cause of the conflict of interest.

At the same time, it should be taken into account that the effective resolution of a conflict of interest requires a detailed analysis of each specific situation to determine the most relevant measures to prevent the commission of an offense.

Is a conflict of interest always dangerous?

A conflict of interest does not always lead to negative consequences for the organization, but such a situation carries many risks for the organization. Even in the case of a decision that led to positive results for the organization, if there is a conflict of interest, such a situation can lead to doubts about the objectivity of the employees of the organization and undermine the corporate culture.

In this regard, organizations are encouraged to develop appropriate policies related to the procedure for preventing and resolving conflicts of interest. An organization wishing to take measures to prevent and resolve disputes of interest faces the difficult task of maintaining a balance between the interests of the organization as a whole and the personal interest of the employees of the organization.

On the one hand, employees of the organization have the right to engage in other labor, entrepreneurial and political activities and enter into property relations in their free time from their primary work.

On the other hand, such private activities of employees, as well as family and other personal relationships, may conflict with the organization’s interests.