How to address a workplace conflict of interest

Jeffrey Fermin
July 25, 2022

Learning about a conflict of interest in the workplace can be stressful for everyone involved, whether you are an employer or an employee. It is important to understand what a conflict of interest is and how it can impact your workplace.

What is a conflict of interest?

A conflict of interest occurs when a person or organization is involved in two or more interests, financial or otherwise, one of which could possibly corrupt the motivation of the individual or organization.

Conflict of interest is generally discussed in company codes of conduct or employee handbooks, and it's up to many organizations to determine what a conflict might look like, along with discussing the penalties associated with it.

There are many ways that a conflict of interest can manifest itself in the workplace. It's important to note that a conflict of interest doesn't necessarily mean that someone has done something wrong. However, it can create situations where someone might be tempted to act in their own self-interest rather than in the best interest of their employer or clients.

How can a conflict of interest impact the workplace?

A conflict of interest can have a negative impact on the workplace in a number of ways.  

It can create an unfair competitive advantage for those involved in the conflict. It can also lead to decreased productivity as employees focus on their own interests rather than the work at hand. Additionally, a conflict of interest can erode trust between employees and employers.

If things get really bad, a conflict of interest can result in legal action being taken against an individual or organization. Basically, a severe conflict of interest can create a hostile work environment and cause morale, along with a company's bottom line, to suffer.

What are some steps that can be taken to prevent conflicts of interest

There are a number of steps that employers can take to prevent conflicts of interest in the workplace.

First, it is important to have clear policies and procedures in place regarding conflicts of interest. These policies should be communicated to all employees and enforced consistently. Additionally, employers should provide training on what constitutes a conflict of interest and how to avoid them.

Second, employers should encourage employees to disclose any potential conflicts of interest. This will help to ensure that conflicts are dealt with before they become a problem.

Finally, employers should monitor the situation closely and take disciplinary action if necessary. This may include anything from verbal and written warnings to termination of employment.

Learning about a conflict of interest in the workplace can be stressful for everyone involved, whether you are an employer or an employee. So do your best to have a protocol set for what to do when you find a circumstance of conflict.

Is a conflict of interest a legal issue?

Depending on the circumstance, a conflict of interest can turn into legal action. If you are ever unsure whether a situation constitutes a conflict of interest, it is best to seek legal counsel. An experienced attorney will be able to advise you on how to proceed. It is important to be aware of potential conflicts of interest in the workplace and take steps to prevent them.

To find out whether your employee's (or employer's) behavior is illegal, check your state's conflict of interest statute (if you have one), regulation or policy. If it doesn't exist, you'll have to explore options for other ways to remedy the situation.

However, more times than not, a conflict of interest is not a legal issue, but is more of an ethical or moral dilemma. If the potential for a conflict of interest exists, it's best to err on the side of caution and avoid the conflict altogether.

As a manager, how to handle an employee with a conflict of interest

If you are a manager and you have an employee with a conflict of interest, there are a few steps you can take to handle the situation.

First, talk to the employee about the conflict of interest and explain why it is a problem. It is important to be clear and concise in your explanation.

Next, give the employee an opportunity to correct the situation. If they are unable to do so, then you may need to take disciplinary action, up to and including termination of employment.

It is important to document everything throughout the process. This will help to protect you and your organization if the situation escalates.

As an employee, what do if you see another employee committing a conflict of interest

If you are an employee and you see another employee committing a conflict of interest, there are a few steps you can take.

First, try to talk to the employee about the conflict of interest and explain why it is a problem. It is important to be clear and concise in your explanation.

If the employee does not listen or refuses to correct the situation, then you can report the issue to your manager or HR department. They will investigate the situation and take appropriate disciplinary action, up to and including termination of employment.

It is important to document everything throughout the process. This will help to protect you and your organization if the situation escalates.

Examples of workplace conflicts of interests

There are many examples that could be explored, however, if you're looking to gain an understanding here are some common examples of workplace conflicts of interests:

  • An employee who owns stock in a company that does business with their own company in the same industry.
  • An employee who accepted a job offer from a competitor while still employed.
  • A manager dates an employee who reports to them.
  • An employee starts a company that provides similar services to similar clients as those of their full-time employer. This is not only a conflict of interest, but could also be a violation of a non-compete agreement.
  • An employee who uses their position to give preferential treatment to a friend or family member.
  • An employee who has a financial interest in a supplier or customer.
  • An employee who divulges confidential information to someone outside of the company.
  • Nepotism can be deemed a conflict of interest  — when it comes to employment, nepotism is when someone gives preferential treatment to a family member or close friend.
  • Insider trading is another common type of conflict of interest. This is when an employee uses non-public information to buy or sell stocks.

These are just a few examples of conflicts of interest. If you have any concerns that an employee may be involved in a conflict of interest, it's important to address the situation as soon as possible.

Proven strategies to prevent conflicts of interest at work

Want to make sure that you're organization has ideal business practices? Try implementing some of these strategies:

Develop business standards

One way to prevent conflicts of interest is to develop business standards and procedures. This can include things like requiring employees to disclose any financial interests they have in companies that do business with their own company.

Business ethics training

Properly defining conflict of interest in business ethics training can help employees understand what types of behavior are considered conflicts of interest. This can be an important first step in preventing such incidents from happening. With training, you can provide different scenarios to guide employees in making the right choice when a potential conflict of interest arises.

Formal reporting procedures

Using something like a whistleblower hotline or an ethics hotline can be one of the formal ways to report a conflict of interest.  Providing employees with a way to confidentially and anonymously report any concerns can help prevent major incidents from occurring.

Online code of conduct training

An online code of conduct training can help employees understand what is expected of them when it comes to conflicts of interest. This type of training can be easily accessible and provide employees with a refresher on company policy.

Enforcing  consequences

If an employee is found to be in violation of a conflict of interest policy, it's important to enforce consequences. This can help to discourage future incidents and send a clear message that such behavior is not tolerated.

Avoid any potential conflicts of interests

As organizations grow it's important  to avoid any potential conflicts of interest. This can be done by ensuring that employees understand what types of behavior are considered to be a conflict of interest. Additionally, having standards and procedures in place can help to prevent it from happening.

Conflicts of interest can happen in any organization — and if you're looking for a safe way to have it reported to leaders within your organization, use AllVoices to help collect and manage feedback.


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