A conflict of interest arises when a person’s interests, vested authority, or favoritism towards close relations unduly influence or are likely to hinder the impartial execution of their responsibilities and obligations. Under what conditions can we identify such conflicts of interest? Furthermore, how does the interplay between conflicts of interest and corrupt practices come into play?

What is a conflict of interest?

A conflict of interest is a scenario in which the interests of an individual holding a position of authority, power, or their favored relatives have the potential to, or do, inappropriately influence the execution of their duties and responsibilities.

Types of conflicts of interest

Individuals in positions of authority and power may be deemed to have conflicts of interest if there are evident signs that they fall under any of the categories specified in Article 29 of Decree No. 59/2019/NĐ-CP, which are as follows:

• Receiving monetary benefits, assets, or other advantages from agencies, organizations, units, or related individuals associated with the tasks they handle or oversee.

• Involvement in establishing, managing, or directing private enterprises, limited liability companies, joint-stock companies, partnerships, or cooperatives, except in cases where different laws govern such matters.

• Providing advisory services to domestic or foreign enterprises, organizations, or individuals on matters linked to state secrets, work-related confidential information, or tasks within their jurisdiction.

• Exploiting information acquired through their official positions and authority for personal gain or to serve the interests of other entities or individuals.

• Appointing their close relatives, including spouses, parents, children, siblings, or other direct relatives, to hold managerial positions relating to personnel, accounting, treasury, overseeing transactions, purchasing and selling goods or services, or signing contracts for entities they lead or subordinate to.

• Contributing capital to businesses operating in sectors and fields they directly manage or allowing their close relatives, such as spouses, parents, or children, to engage in business within these areas.

• Entering contracts with enterprises owned by their close relatives or permitting these enterprises to participate in bidding processes for projects overseen by their respective agencies, organizations, or units.

• Having close relatives with direct rights and interests directly linked to the performance of their official duties.

• Unjustly intervening or influencing the activities of agencies, organizations, units, or individuals vested with authority for personal gain.

Common Examples of Conflicts of Interest

• Insider trading: The practice of using confidential or non-public information to make investment decisions that give an individual an unfair advantage in the stock market.

• Hiring a family member or friend: When a person in a position of authority favors and employs a family member or close friend, potentially compromising objectivity in the hiring process.

• Accepting gifts or favors: Receiving gifts, services, or special treatment from individuals or entities that could influence one’s decision-making or create a perception of bias.
• Serving on the board of a competing organization: Being a member of the board or having influential roles in both a company and its competitor, leads to divided loyalties and potential conflicts between the interests of both organizations.

Appointing unqualified but preferred personnel, or favoritism, are a form of conflicts of interest.

Consequences of Conflicts of Interest

• Legal liability: Engaging in conflicts of interest can lead to legal consequences if it violates laws, regulations, or ethical standards, potentially resulting in fines, penalties, or legal actions.

• Damage to reputation: Conflicts of interest can tarnish an individual’s or an organization’s reputation, causing public distrust and negatively impacting their standing within the community or industry.

• Loss of credibility and trust: When conflicts of interest are discovered, it erodes the trust and confidence others have in the person or entity involved, leading to a loss of credibility and reliability.

• Financial loss: Conflicts of interest may result in financial losses, as decisions made based on personal interests rather than the best interests of the organization or clients can lead to poor outcomes and decreased financial performance.

Conflicts of interest often stem from personal motives. Within an organization’s functioning, various positions may encounter individual interests that run counter to the organization’s collective welfare. The significance of a position amplifies the potential impact of such conflicting interests. As a result, individuals might make decisions driven not by the company’s advantage, ultimately harming the organization and its overarching goals.

Conflicts of interest directly impinge on the organization’s profitability and overall progress. Therefore, when these conflicts arise in a business, they undoubtedly disrupt its functioning. Such conflicts erode public and internal trust, tarnish the organization’s reputation, cause financial losses, and, in certain instances, lead to legal infringements.

Best Practices for Managing Conflicts of Interest

Identifying and Clearly Defining the Seeds of Conflict

Many say that ” prevention is better than finding a cure.” Therefore, the company should issue a document that specifies the behaviors that have the potential to create conflicts of interest, along with a practical example closely related to the company. This will discourage and prevent such negative actions and establish rules to prevent and impose sanctions if conflicts of interest occur.

Issuing and Updating Company Policies Regarding Conflicts of Interest

Once the conflict-of-interest policy has been understood by employees, it should be continuously updated to reflect changes in the company’s position. Leaders need to cover all potential scenarios that may arise. Consistently updating policies will demonstrate the company’s commitment to avoiding negativity and prioritizing the collective.

Establishing a Confidential Information Channel for Conflicts

A conflict of interest is a serious and sensitive issue that is often not publicly disclosed to protect the reputation of the involved parties. To avoid unwarranted losses, the company should have an anonymous channel to promptly address even the smallest cracks where conflicts of interest might arise. This approach will not only resolve the damages caused by conflicts but also safeguard the company’s reputation.

Training Employees on Conflicts of Interest in the Company

Employees should undergo a brief training session on this matter to raise awareness of conflicts of interest within the company and to be reminded of the consequences to themselves and the company when making erroneous decisions due to conflicts of interest.

Take conflict of interest seriously with experienced legal counsel

Recognizing the significance of conflict of interest, it is crucial to approach this matter diligently and with the guidance of seasoned legal advisors, such as Le&Tran Law Corporation.

With experienced legal counsel, businesses can proactively identify potential conflicts of interest and implement robust policies and procedures to mitigate their adverse effects. Le&Tran Law Corporation can provide valuable insights and expert guidance in drafting comprehensive conflict of interest policies tailored to the specific needs of the company.

Additionally, having trusted legal advisors by your side ensures that employees are adequately trained and educated on the implications of conflicts of interest. The legal team at Le&Tran Law Corporation can conduct training sessions that empower employees to recognize, report, and handle conflicts in an ethical and compliant manner.

Moreover, when conflicts of interest arise, having the support of knowledgeable legal counsel ensures that the situation is managed appropriately, adhering to the highest legal standards and safeguarding the company’s reputation and interests.

In conclusion, engaging the services of Le&Tran Law Corporation demonstrates a commitment to taking conflict of interest seriously and promoting a culture of integrity and transparency within the organization. Their expertise helps businesses navigate complex legal matters related to conflicts of interest, safeguarding the company’s long-term success.

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