Why Corruption Always Requires a Conflict of Interest

Kelly J. Todd
Managing Member
October 28, 2016

When it comes to corruption, there is almost always a common denominator: a conflict of interest. A conflict of interest exists when an individual or corporation has the opportunity – real or perceived – to exploit their position for personal or corporate benefit. Corruption occurs when the individual or corporation takes advantage of that opportunity and indeed abuses their position for private gain. The good news is, if conflicts of interest can be controlled, the risk of corruption can be minimized.

Because of this, it is important for management teams within organizations – public or private – to be alerted to the connection between conflicts of interest and corruption. Understanding this relationship can lead to the prevention and detection of misconduct and fraudulent activity. While this relationship can be confusing, a simple way to remember the difference between conflicts of interest and corruption is could vs. does. While conflicts of interest do not always lead to corruption, corruption almost always requires a conflict of interest.

Conflicts of interest are often closely associated with procurement positions; however, it can be anyone in a position to influence the award of business, control payments or abuse supplier relationships. Examples include a purchasing employee who secretively gives business to another company under his control, an employee who gives business to a company in exchange for a gift or other kickback, or an employee who starts a company that provides similar services to the clients or potential clients of their employer.

To prevent conflicts of interest from morphing into corruption, there are preventive steps that can, and should, be taken. Offer training to all employees so they, too, can understand this relationship and the significance of conflicts of interest. Management should be intentional in creating an environment where the staff is comfortable declaring annually in writing any potential, perceived or actual conflicts.  Finally, management should be educated on the procedures for handling conflicts of interest.

If there is an actual conflict of interest, management has options. Sometimes, it’s as simple as removing the conflicted employee from the situation. Other times, it can be more complicated – steps that can be taken include: restricting job-relevant conflicting interests; removing the employee from the conflicted decision-making responsibility; or, if the employee has a business relationship with a third-party, the employee could resign from the position.

Management should remember that the mere act of having a present conflict of interest is not necessarily inappropriate – it’s the knowledge of and response to the conflict that is crucial, and reduces the risk of corruption.

If you are interested in learning more about how the relationship between conflicts of interest and corruption, or want to learn more about our services and our team, please contact us.