Conflict of Interest

Definition

The term conflict of interest is used to describe any situation in which the interest of an individual or company interferes with their ability to objectively or impartially participate in a process.  Generally, conflicts of interest can fall into one of two categories:  actual and perceived.

Explanation

A conflict of interest can exist whenever one party's interests interfere with their ability to objectively or impartially perform their duties.  There does not have to be loss or harm to another party for a conflict of interest to exist.  They can be either actual or perceived:

  • Actual Conflict of Interest:  includes scenarios where one party's personal interest interferes with their ability to remain impartial or objective.
  • Perceived Conflicts of Interest:  includes scenarios where one party's personal interests could lead others to doubt their ability to remain impartial or objective.

Ethical standards require individuals or companies to promptly disclose conflicts of interest.  In addition, ethical conduct prohibits companies and individuals from:

  • Engaging in activities that interfere or appear to interfere with their ability to objectively and impartially perform their duties.
  • Taking advantage of their position in a company for their personal benefit or the benefit of family members or acquaintances.
  • Accessing resources, including confidential information, for their personal benefit or the benefit of family members or acquaintances.

Judicial disqualification, also known as recusal, is an ethical standard within the judicial system.  A judge that presides over a matter in a court of law is required to abstain from that proceeding if a conflict of interest exists, or they are unable to participate in a fair and objective manner.

Related Terms

anti-competitive practice, confidentiality agreement, dividing markets, price fixingbid rigging, group boycott, disparagement, dumping, exclusive dealing, tying arrangements