“An apparent conflict of interest is one which a reasonable person would think that the professional’s judgment is likely to be compromised.” – Michael McDonald.
Conflicts of interest (COI) can enter the workplace, undermining trust, fairness, and employee morale.
When decision-makers and employees understand the many forms of workplace conflict of interest, from nepotism to insider trading, we can better recognize and address them before they cause damage.
This article discusses common workplace conflicts of interest (COI) and offers guidance on how to identify them and establish practical policies to manage them.
What is a conflict of interest in the workplace?
A conflict of interest in the workplace occurs when an individual’s interests or relationships intersect with their professional obligations, potentially compromising their ability to make impartial decisions or act in the best interest of their employer or colleagues.
Why must managers and employees understand the concept?
Understanding conflict of interest helps individuals recognize situations where personal interests may coincide with professional duties, potentially leading to bias or unethical behavior.
There are four types of conflict of interest, they include, romantic or relational, financial, competitive, and confidential conflict of interests. Each type involves individuals engaging in activities that lead to personal gain at the expense of their employer.
When employees and managers understand the concept, they can participate in addressing conflicts, facilitating an organizational culture built on trust, honesty, and fairness.
Corporate Survey Studies on Workplace Conflict of Interest Have found:
- 38% of employees have witnessed a conflict of interest at work (Source: CIPD)
- 56% of employees say conflicts of interest are either not well-managed or not managed at all in their organization. (Source: EY News)
“It (may) take skill and good judgment to recognize that you are in a conflict of interest situation. This is because private and personal interests can cloud a person’s objectivity.” – Michael McDonald.
What Are the Most Common Examples of Conflict of Interest in the Workplace?
The most common examples of conflicts of interest in the workplace are:
Nepotism occurs when someone in authority favors friends or family members in hiring or promotion, even if they are not the most qualified.
Conflict of Interest: Nepotism compromises the fairness of employment decisions and can harm employee morale.
Company’s Interest: Addressing nepotism maintains an equitable work environment, reduces discrimination, and ensures that staffing decisions are awarded based on merit.
Employees accepting gifts or favors from clients, suppliers, or other external parties can lead to conflicts.
Conflict of Interest: Accepting gifts can influence an employee’s decisions, favoring those who provide gifts versus those who do not.
Company’s Interest: Addressing this issue prevents biased decision-making, maintains integrity, and ensures fair treatment of all parties.
This occurs when an employee uses confidential information for personal gain, such as trading stocks based on non-public company data.
Conflict of Interest: Insider trading is illegal and unethical, jeopardizing the integrity of the financial markets.
Company’s Interest: It is crucial to prevent insider trading from occurring to maintain legal compliance and trust in the market.
An employee engaging in a romantic relationship with a colleague or supervisor can affect objectivity and fairness.
Conflict of Interest: Romantic relationships may lead to preferential treatment and workplace tension.
Company’s Interest: Identifying and deterring romantic relationships ensures professional conduct, avoiding favoritism and potential conflicts.
Competition with Employer
An employee starting a business or working for a competing company while employed elsewhere is a conflict of interest.
Conflict of Interest: These actions can divert time, resources, or confidential information from the employer.
Company’s Interest: Addressing this issue protects the company’s finances, material resources, and trade secrets.
Creating a Conflict of Interest Policy: Core Principles
A organization’s conflict of interest policy should include these items:
Objective: The purpose or goal of the policy.
Mechanism of Disclose: A statement and definition of an employee’s obligation to provide information relevant to a conflict of interest.
Investigations: How the company will look into COI allegations and document any findings.
Addressing Allegations: A guide on how to formally communicate with an employee who may be involved in a conflict of interest.
Recommended Disciplinary Action: Define the consequences for being involved in a COI.
Conflict Of Interest Policy Principles
The following is a list of principles in which a for COI policy should be structured around:
Encourage everyone to promptly report potential conflicts. For instance, if an employee’s side job could affect their work, they should inform their supervisor.
Clearly outline repercussions for policy violations to ensure accountability. For instance, employees who fail to report conflicts may undergo counseling.
Emphasize that decisions should favor the organization’s interests. For example, an employee should avoid accepting gifts from a supplier that might influence their work.
Schedule regular policy reviews to adapt to evolving situations. Hold brief annual meetings to discuss new or emerging conflicts affecting teams.
Communication & Training
Provide guidance and training to help individuals recognize and manage conflicts. Conduct workshops where staff learn how to deal with potential workplace ethical violations.
Maintain records of conflicts and disclosures. Keeping records of employees’ reported conflicts, even if it’s as simple as a relationship with a client, is vital for transparency.
Ensure the policy is visible using the organization’s internal network or communication channels.
Ensure the policy aligns with applicable laws and regulations. For instance, ensure the policy adheres to labor laws and standards relevant to your organization’s industry.
Remember: A conflict of interest policy is only valid if it applies consistently across all levels of the organization. Addressing potential conflicts as they occur is vital as it ensures that employees and team members understand the policy and their roles in upholding it.
“Trust in the integrity of a person, company, or system is essential. Part of that trust comes from the belief that a company prioritizes public interest over personal interest, whether it’s their employees’ or clients’. It can take a long time to repair a reputation once credibility is questioned. That’s why perceived conflicts of interest are often just as serious as actual conflicts of interest.” – LawDepot.
Understanding and actively managing workplace conflicts of interest is crucial for maintaining a positive, fair, and trusting work environment.
When employees and managers recognize the various scenarios in which COIs can present themselves, organizations will be better equipped to address them.
The aim of this article is to shed light on common examples and provide insights into creating practical policies that uphold fairness, transparency, accountability, and compliance. Embracing these principles can bolster an organization’s integrity and reputation among stakeholders.
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