Inherent Conflict of Interest
A conflict of interest is a situation in which a group or individual person has responsibilities or loyalties to multiple interests that could conceivably interfere with one another, possibly tempting the party entrusted with the interests to deal unfairly or corruptly. An inherent conflict of interest is a special case of this situation in which one such set of competing interests is directly related to the party itself, or, in other words, where an entity or person has to choose between doing what is best for it or doing what's best for its constituency, client or other entity it is responsible for representing.
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Conflict of Interest in Legal Practice
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In the practice of law, a conflict of interest is present when a lawyer represents two clients whose interests are adverse to one another. Since lawyers owe the duty of loyalty to a client, attorneys are prohibited from entering into agreements that place them in such a situation, except for when the law allows for both clients to knowingly consent to wave this right in writing.
Self-Dealing
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Self-dealing is an example of an inherent conflict of interest that arises when someone who operates one organization enters into an agreement or transaction with the organization itself or otherwise enters the organization into an agreement with a third party that directly benefits the operator. The conflict of interest arises because the operator has something to gain from both sides of the transaction and thus cannot be considered impartial.
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Outside Employment
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This occurs when someone holds two jobs whose interests are adverse. This can occur when someone agrees to serve in an official capacity for two businesses that directly compete against each other in the same industry. Generally, such a situation is only of consequence when the official holds a place of influence or is allowed to make important decisions on the behalf of such companies.
Nepotism
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Most generally, nepotism is the practice of favoring relatives regardless of merit. In business, nepotism can lead to a situation in which loyalties between personal and business relations conflict. For example, if a manager decides to grant a contract to a family member, he could be doing so even though there is a more competitive bid that would better benefit the interests of his company.
Mitigating Conflicts of Interest
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An inherent conflict of interest can be best avoided by practicing transparency, abstaining from decisions if there is any question of conflicting loyalties or simply by refusing to enter into them altogether. All parties involved in an agreement, transaction, disagreement, arbitration or other dealing should fully disclose all pertinent information to each other. People with possible connections to both parties should not take part in influencing a decision. And finally, people and entities should do their best to do business fairly and ethically with others.
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