Conflict of Interest Policy

Most companies have related-party transaction controls, far fewer have a conflict-of-interest policy broad enough to cover the situations that actually come up day to day. Here are the questions we're asked most.

How is a conflict-of-interest policy different from related-party transaction controls?

Related-party transaction controls govern deals between the company and specific related parties; a conflict-of-interest policy is broader — it covers any situation where a director's or employee's personal interest could influence, or appear to influence, a decision they are involved in, including outside employment, gifts, personal relationships, and competing business interests.

What counts as a conflict of interest?

Any situation where someone's personal interest — financial or otherwise — could reasonably be seen to compete with their duty to act in the company's best interest: a hiring manager interviewing a relative, a procurement lead with a personal stake in a supplier, a director sitting on the board of a competitor, or an employee accepting gifts from a vendor they oversee.

Does having a conflict automatically disqualify someone from a decision?

No — having a conflict is common and not itself wrong; failing to disclose it is the problem. Once disclosed, the standard response is recusal from the specific decision, not removal from the role altogether, unless the conflict is pervasive enough to compromise the position generally.

How should conflicts be disclosed?

Through a standing annual declaration covering outside interests, directorships, and significant relationships, supplemented by an in-the-moment disclosure requirement whenever a specific matter arises that the annual declaration didn't anticipate — both logged in a conflicts register that is reviewed, not just filed.

What is the recusal process, in practice?

The conflicted individual declares the interest, leaves the room (or the meeting, if virtual) for that agenda item's discussion and vote, and the decision is made and minuted by the remaining disinterested parties. Recusal without leaving the room — staying present while "not voting" — does not remove the influence a conflict creates.

Who reviews the conflicts register, and how often?

For directors, the board or a designated committee (often the audit or governance committee) reviews it at least annually and whenever a new conflict is declared; for employees, line management or compliance reviews it as part of the standard onboarding and annual-declaration cycle.

Does the policy apply to gifts and entertainment too?

Yes — most conflict-of-interest policies set specific thresholds above which a gift or hospitality item must be declared or is prohibited outright, because accepting gifts from a party a person can influence is one of the most common and hardest-to-see conflicts.

What happens if someone fails to disclose a conflict?

This should be treated as a distinct breach from the underlying conflict itself — often more serious, since it signals concealment rather than an unavoidable overlap of interests — and the policy should specify consequences ranging from a formal warning to termination or removal from the board, depending on severity and intent.

A conflict of interest is not a failure — pretending one doesn't exist is. The organizations that handle this well make disclosure the easy, normal thing to do, so the harder cases get caught before they become a problem instead of after.