Everything You Need to Know about a Conflict of Interest Policy (With Templates)

3 min readJul 18, 2022

First published: https://docpro.com/blog88/everything-you-need-to-know-about-a-conflict-of-interest-policy-with-templates

For protection and avoidance of any adverse contravention of business interests, companies and organisations should create and implement a conflict-of-interest policy. A conflict-of-interest policy governs circumstances in which employees or those working on behalf of the organisation act in a way that offends the organisation’s interests. With a well-written conflict of interest policy, any adverse action can be dealt with efficiently across the board.

Here is your complete guide to the creation of a conflict-of-interest policy. We have also created documents suitable for employment and the creation of a trust.

What is a Conflict of Interest Policy?

A conflict-of-interest policy is used to outline procedures in which a possible conflict might exist between the interests of individuals and the interests of the organization. This policy is commonly issue used in the workplace, business transactions, or the creation of a trust. Ideally, it should describe what constitutes a conflict of interest in that organisation. The policy should also include specific examples to help employees better understand the policy.

Conflict of Interest in the Employment context

Conflict of interest is a very broad concept. Assessment of the conflict of interest at hand is highly dependent on the facts of the case. However, the general idea is that the employee’s interest should be measured against the interest of the organization. This means that different companies inevitably have very different policies. What is considered a conflict of interest in the public sector might be different from a private company; in the same vein, a non-profit organization is likely to have completely different policies from a partnership.

Assessing the employee’s conduct will also vary as they hold different responsibilities. The position and role of the employee will determine the limits of conflicts of interest. If the employee is in a highly regulated industry like banking, the threshold imposed upon an employee might be higher. Many industries also provide specific guidelines on professional ethics.

Types of conflict of interest

Generally, there are three types of conflict of interest. Different consequences may follow depending on the type of conflict of interest that arises. However, companies may choose to impose a more severe punishment notwithstanding the specific type of conflict of interest. It is important that employees are aware of the nuances and read over the policy carefully. Here are the three broad types of conflict of interest:

An actual conflict of interest

This occurs when there is a direct clash between one’s duties and responsibilities and personal interests. This clash, therefore, affects one’s performance of those duties. For example, if a company director enters a transaction with another company, that will constitute a conflict of interest, as he is also the director of the company.

Perceived conflict of interest

This occurs when an individual has two competing interest that is likely to interfere with one’s ability to fulfil the responsibilities of their job.

Potential conflict of interest

This exists where is no actual conflict of interest, but there could be one, due to their affiliation or membership elsewhere. This is when an action has not taken place, but it is nevertheless foreseeable that there will be a conflict of interest if the action is executed.