Conflict of Interest

We often hear the phrase "conflict of interest" . What does that phrase mean and when do conflicts of interest arise? Conflicts of interest arise when decision makers, be they school directors, councilmen, university or college trustees, or others in similar positions have personal, family, business or others interest that could effect their independent judgement and their faithful performance of duties to the institution they serve. Of course, most potential conflicts do not have such effect, they nevertheless must be addressed because even a perceived conflict of interest can be harmful to the institution. Usually, accomplished, active individuals like those who serve on such institutions inevitably are in engaged in activities and affairs of other institutions and organizations.
In most situations, conflicts of interest involve direct or indirect business relationships between the institution and the individual, they also arise in a variety of other circumstances. To illustrate, conflicts of interest occur when an individual or family member:

• conduct business with the institution,
• use institutional resources to promote his or her individual or family’s financial or other interest,
• uses confidential information about the institution to promote his or her individual or family interest,
• has a relationship with a competing institution,
  gains financially from an institutional transaction,
• assists an outside entity to benefit financially or otherwise from the institution in ways not available to that entity’s competitors,
• lends or borrows money or property from an entity or person who conducts business with the institution,
• receives gifts from an individual or entity who conducts business with the institution,
• accepts gifts or perquisites (perks) from the institution not readily available to other members of the institutional community,
• participates in or permits the approval of policies not in the institutions best interest,
• participates in or permits the rejection of policies that are in the institutions best interest,
• and promotes or participates in social or political agendas or campaigns that could have a detrimental effect on the institution.

Conflicts of interest by decision makers or even the appearance of such conflicts of interest, must be avoided. The only way a decision maker can avoid a conflict of interest is to be familiar with what constitutes them and to promptly identify a potential conflict. Of course, the decision maker should promptly disclose personal, family, business or other circumstances that could raise conflict questions. If a conflict is in fact identified, the decision maker affected, should of course, refrain from any action by the institution that involves the conflict and in no event, should the decision maker have a right to vote on the matter or even to be present when the issue is discussed by other institutional decision makers.

Submitted by:

Samuel J. Davis, Esquire

sdavis@davisanddavislaw.com