BOARDS

Conflict of Interest

Conflict of Interest

If you serve on a board, committee or governance council, you will encounter conflict of interest. It is inevitable. The question to ask is not how to avoid, but how to manage, conflicts of interest.

A direct conflict of interest puts you in a position to benefit, personally or in business, from a decision you take part in as a member of that board or committee. It’s also a conflict if the benefit would be to someone close to you, such as family, friends or business associates.

The settled law on this goes back 160 years and is grounded in your duty to represent the interests of others, such as shareholders or members. The legal rule explicitly disallows a distinction between potential and actual conflict. A potential conflict is a conflict, end of story.

More often, what we get is a “conflict of duty”. You have a duty as a member or employee of another organisation that will undermine your ability to decide impartially. Even if the conflict is perceived but not real, it can damage both organisations if not properly managed.

While conflicts will always arise, it’s poor handling of them that does the damage. Declare your interest immediately, withdraw from discussion and voting on the issue, and ask your colleagues what other steps they would like to take.

Conflict of Interest 3

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