What is a ‘conflict of interest’?

The financial crisis is awash in so many specialised terms that their sheer number seems to rival the amount of bail-out money being doled out to shore up the faltering economy.

One word that is constantly being bounced around, from the Bundestag to the White House, from Wall Street to High Street, is ‘conflict of interest’. It has been used to describe everything from company boards setting their own salaries to a decision by the US Federal Reserve Bank to hire asset management companies to manage the government’s bailout funds.

But what is a ‘conflict of interest’? Is it something that only happens in companies or does it also occur in government? The components of the phrase can be easily broken down and defined, but when seen as a whole… that’s where the trouble begins. What does the term mean in practice?

For Transparency International (TI), ‘conflict of interest’ is defined as:

A “situation where an individual or the entity for which they work, whether a government, business, media outlet or civil society organisation, is confronted with choosing between the duties and demands of their position and their own private interests.”

For TI, this dilemma can occur both in the public and private sector. An example from the public sector is that of Bosnia Herzegovina. The country passed a conflict of interest law that restricts elected officials, executives, and advisors in government institutions from certain activities, including promising employment, granting privileges based on party affiliation, giving gifts, and providing privileged information on state activities.

‘The Anti-Corruption Plain Language Guide’

TI has tried to make this and other key terms easier for everyone to understand by producing ‘The Anti-Corruption Plain Language Guide‘. The guide is the result of discussions within the TI movement and consultations in six countries – Bangladesh, Kenya, Lebanon, Romania, South Korea and Zambia – that included stakeholders from government, business, civil society and the media. Drawing from these contributions, a list of 45 terms was compiled accompanied by definitions and practical examples. Each term has been chosen for its influential role in defining and shaping the work of TI, and is open to continued debate and revision.

So what does conflict of interest mean to you?

Do you agree with the TI definition? How should the definition be changed to capture the problems we have witnessed in the public and private sectors?

Every two weeks, TI will be posting another new term on the blog and you are invited to contribute your ideas to the discussion. Help us improve our understanding of the words used to describe what’s happening in our world.