Conflicts of Interest

Managing conflicts of interest is fundamental to good corporate governance, ensuring that board members and executives act in the best interests of the company and its shareholders rather than pursuing personal advantage.

Conflicts of interest arise when a director's personal interests, relationships, or other duties could interfere with their ability to act objectively in the company's interest. The G20/OECD Principles require that board members disclose any material interests in transactions or matters affecting the company and abstain from voting on such matters. Effective conflict management protects shareholder value, maintains stakeholder trust, and reduces legal and reputational risk.

Types of Conflicts

Direct financial conflicts arise when a director has a personal financial interest in a transaction involving the company. Related party transactions involve dealings between the company and entities in which directors or their associates have interests. Competing duties arise when directors serve on multiple boards or have obligations to other organisations that may conflict with their duties to the company. Information conflicts arise when directors possess confidential information that could be used for personal advantage.

Management Framework

Best practice for managing conflicts includes maintaining a register of directors' interests and related party transactions, requiring prompt disclosure of actual or potential conflicts, establishing clear procedures for recusal from conflicted decisions, implementing policies on outside directorships and business interests, and conducting regular reviews of conflict management effectiveness.

Regulatory Requirements

Most corporate governance codes and listing rules require disclosure of conflicts of interest and related party transactions. GRI 2-15 (Conflicts of Interest) requires disclosure of the processes used to prevent and mitigate conflicts. ESRS 2 GOV-1 covers governance structures including conflict management. Stock exchange listing rules typically require shareholder approval for significant related party transactions.

Further Reading

• G20/OECD Principles — Conflict of interest provisions
• Related Party Transactions — Detailed RPT guidance

Key Resources

• OECD Guidelines on Managing Conflict of Interest
• International Corporate Governance Network (ICGN)

Related Topics

• Related Party Transactions
• Board Committees
• Anti-Corruption