Interest conflict

A conflict of interest is a situation generated by the collision between the decision-making powers that an individual has and their private interests. This collision, on many occasions, affects the objectivity of the decision taken.

Interest conflict

A conflict of interest, therefore, is a situation in which an individual must make a decision. For decision-making, the individual has private interests, as well as decision-making powers. The conflict of interest is the collision, the confrontation, of private interests with those decision-making powers. Thus, the objectivity of the decision taken, when confronting interests, can be called into question.

In finance, this refers to the situation in which a shareholder, in turn, exercises a control or responsibility function within the same company of which he is a shareholder. As your capital depends on the share price, the decisions could be more focused on preserving your capital, than, on the other hand, on more responsible and objective decisions. Or on the contrary, they could be aimed at increasing the value of their shares, instead of thinking about the future of the company.

Types of conflicts of interest

Despite the simplicity of the concept, conflict of interest is a concept that, in its meaning, offers a great variety of understanding. That is why the concept can be classified into three primary groups.

These groups among which the conflict of interest could be classified are:

  • Potential conflict of interest: This occurs when the person has a particular interest that could lead to influence in decision-making, given their professional competence. However, your position frees you from making decisions, so there is no need to be involved in it.
  • Real conflict of interest: Unlike the potential, this occurs when the person has that same particular interest, which could end the objectivity of the decision. However, given the decision-making competence of the individual, he is obliged to adopt decisions that could be influenced by those particular interests.
  • Apparent conflict of interest: It is when a person, without having any conflict of interest, is accused by another of the existence of conflicts of interest in decision-making. Once all the information has been offered to corroborate the inexistence of decisions that may have been influenced by individual interests, then we are talking about what is apparent.

Example of conflict of interest

A conflict of interest is a situation that, most likely, we have experienced throughout our lives. They are situations in which our private interests influence decision-making for another matter in which we have decision-making competence.

Therefore, among the scenarios in which it could occur, we offer some examples of what the concept typifies:

  • When a public official of the Tax Agency is in charge of carrying out the corresponding inspection of a family member’s business.
  • In a situation in which a soccer referee is in charge of refereeing a match in which a relative of his plays, as well as his favorite team.
  • When a bank employee must offer resolution to the request for a loan requested by a friend or relative.
  • In a scenario in which a teacher must correct an exam from a relative of his.

These, although there are endless examples, are samples of possible scenarios in which this conflict could occur. However, it should be added that despite the fact that there may be a conflict of interest, the aforementioned examples do not attempt to question the professionalism of the trades represented for the