Business - What Is a Conflict of Interest?

In business, particularly in a small town or city, a conflict of interest will often come about due mainly to lack of choice. Unfortunately, this isn't always the case where multinational companies are concerned along with their well-paid executives. A conflict of interest is one where a person or a business owes allegiance of one kind or another, to two masters.

When the law was first introduced in England back in the 15th century, it was recognized then that a man could not serve two masters equally well. So what does a conflict of interest look like today?


What constitutes today's conflict of interest?

Business - What Is a Conflict of Interest?

In today's business world, the governing boards of many companies and corporations, is comprised of a group of people known as company directors. Many of these company directors are also on the boards of other corporations or companies and for each board of directors that they sit on, they are paid a fee. These fees vary from board to board and many of them are substantial.

Some bigger corporations only have well-known people on their board of directors because they are the most likely to add credibility and bankability to the business. Many ex-politicians accept board of director appointments to supplement their income or for any number of other likely reasons.

The value these people bring to the board of directors appointment is in their reputations and the network of other business contacts they have accumulated over the years. The reputation of a board director is virtually what they are trading on along with their network of contacts.

If they are on the board of one business and that business wants to amalgamate, take-over or buy-out another business whose board of directors they are also sitting on; and there is financial gain to be had by the outcome, then any director who finds themselves in this position where he or she will gain financially from the outcome, is known to have a conflict of interest.

The outcome will be financial gain either way for them but how can a person in that position get the best deal possible for either company? In business negotiations, there is always someone who gets a bit (or a lot) less than the other. So anyone who has to accept, approve or refuse a business offer and will gain a benefit from the outcome either way can't be impartial about an outcome. They have conflicting interests.

Conflict of Interest and the Legal Profession:

The legal profession in a small town especially where there are very few lawyers, will often be charged with having a conflict of interest simply because they could well be the only lawyers in the town. However, in these circumstances, the law takes a very dim view of any lawyer who does not immediately declare he or she is conflicted. Then the Judge must Judge that case before a case can be heard.

How can this Conundrum be Resolved?

The only resolution today in the case of a Company director is for them to resign their position, declare it and/or stand aside for the duration of the negotiations. Either way, it is illegal and against corporation law in most countries for any person to disregard this clause of corporation law.

A less-legal conflict of interest:

A more obvious conflict of business interests can often be found in sports sponsorships. Any alcohol rehabilitation programme sponsored by a beer brewing company to wean players off extreme 'alcohol' abuse is obviously conflicted. Or years ago perhaps when Tobacco Companies sponsored sporting events was another prime example of a business conflict.

The sad thing for the average citizen in most countries today is that too many of these business conflicts exist and go unpunished. Even the ones that do get reported often are never investigated fully due to lack of legal funding to pursue the issue. That is no excuse for the practice because it is immoral as well as illegal under corporation law in many countries.

Business - What Is a Conflict of Interest?

A Business conflict of interest is illegal under most countries corporation laws.