Legal Definitions - conflict of interest

A conflict of interest arises when an individual or organization has competing interests or loyalties that could potentially influence their decisions or actions in a way that is not impartial or objective. This situation occurs when a person's private interests—such as personal gain, financial benefit, or loyalty to another party—clash with their professional, public, or fiduciary duties to act solely in the best interest of another person or entity. The core problem is that the individual might be tempted to prioritize their own conflicting interest over the duty they owe, thereby compromising fairness, trust, and ethical conduct.

Here are some examples to illustrate this concept:

• Example 1: Corporate Board Member

  Imagine a board member of a large technology company who also holds a significant ownership stake in a smaller startup that is currently bidding for a major software development contract with the larger company. When the board member participates in discussions and votes on which company should receive the contract, they face a conflict of interest. Their duty as a board member is to act solely in the best interest of the large technology company, ensuring it gets the most advantageous deal. However, their personal financial interest as an owner of the startup could tempt them to favor the startup's bid, even if it is not the most beneficial option for the larger company. This creates a situation where their personal gain could improperly influence their professional decision.

• Example 2: Public Official and Zoning

  Consider a city council member who is responsible for voting on new zoning regulations that would allow for commercial development in a previously residential area. This council member personally owns several properties in that exact residential area, and the proposed zoning change would significantly increase the value of their land. This official has a clear conflict of interest. Their public duty is to vote on zoning changes impartially, considering only the overall benefit to the community and adherence to urban planning principles. However, their private financial interest in their property's increased value could lead them to vote in favor of the change, even if it might not be the best decision for the broader public good or if there are valid concerns from other residents. This compromises their ability to make objective decisions in their official capacity.

• Example 3: University Professor and Textbook Sales

  A university professor teaches a popular course and requires all students to purchase a specific textbook for the class. Unbeknownst to the students, the professor is the author of that textbook and receives royalties from every copy sold. This professor has a conflict of interest. Their professional duty is to select the most appropriate and effective learning materials for their students, prioritizing educational value and affordability. However, their personal financial interest in earning royalties from textbook sales could tempt them to continue using their own book, even if a newer, more comprehensive, or less expensive textbook might better serve the students' learning needs. This situation creates a tension between their duty to their students and their personal financial gain.