Question

Explain in details what conflict of interest is and how it's useful in Business Ethics

in 400 words

Answer 1

A conflict of interest arises when a decision that is in the best interest of an individual may not be in the best interest of a business or an organization to which the individual owes his loyalty. Such a conflict may occur when an individual becomes unreliable due to a clash between his personal interests and professional duties. For example, an employee may help himself but at the same time hurt his employer by accepting a bribe to purchase poor quality goods for his company to use. Every board member in a corporate has fiduciary duties and a duty of loyalty towards their corporation. If one of the directors chooses to take action that benefits him at the expense of the firm, then he is harming the firm with a conflict of interest. Hence, if people wish to be ethical, then they must consciously avoid situations where they benefit from being disloyal to their organization. Apart from being unethical, a conflict of interest might have legal ramifications and it might also result in job loss.

Self-dealing is the most common type of conflict of interest in the business realm. It occurs when a professional organizational member at the management-level accepts a transaction from another organization that benefits the manager but harms the firm or the clients of the firm.

Gift issuance is another common form of conflict of interest. It occurs when a corporate manager accepts a gift from a client to further his or her cause. In response to this scenario, an organization might prohibit the exchange of gifts between customers and employees.

A similar scenario may arise when, in the course of professional duties, an individual may get hold of certain confidential information. Any information of this nature that can be used by an employee for personal gains is a huge conflict of interest. The financial industry constantly comes across such a conflict of interest in the form of insider trading. Moreover, favouritism or nepotism can also result in a potential conflict of interest.

Therefore, every employee has an ethical responsibility to avoid a conflict of interest. In most cases, when a conflict of interest arises, the party is usually asked to remove themselves, and this is a legal requirement in most cases. Employees need to fully disclose any activity or transaction that might result in a potential conflict of interest. If an employee is unsure about whether an activity might constitute a potential conflict of interest, then the employee should get in touch with the ethics and compliance department for assistance.