Have you ever found yourself stuck in a situation where your professional duties clashed with your personal interests?

For example, have you ever been asked by a client to work a side job paid directly to you rather than your company? Or have you ever had to make a promotion decision between a friend and another qualified employee?

At work, we face conflicts of interest all the time. Choosing the wrong path can sometimes lead to drastic consequences, such as lawsuits, fines, job loss–or, in the worst case–jail time.

As an attorney, law professor, and talent agent, I’m passionate about business ethics. I advise clients and companies on why it’s essential to understand conflict of interest and how to handle a situation when you or an employee encounter one.

What is a conflict of interest?

A conflict of interest is when your personal interests or obligations clash with your professional duties–and likely, you need to choose between doing the right thing for someone else or if you are only looking after yourself.

Many times, licensed professionals actually owe a duty of care and a duty of loyalty to their stakeholders–and they are forbidden from taking actions that are a conflict of interest.

There are three main types of situations with conflicts of interest:

• Financial (e.g., when an employee recommends a product they own stock in).

• Personal (e.g., when a lawyer represents more than one party in a deal).

• Pre-determination (e.g., when a boss promotes a friend before another co-worker).

How to identify conflicts of interest.

In general, if a situation feels wrong to you, it probably is wrong.

When you’re in a situation with competing needs or agendas, you’re probably having a conflict of interest. Or when you feel like you cannot be transparent with a colleague, employee, or client, you might be doing something where there is a conflict.

If you feel something is off, ask yourself these questions.

• What’s the context? Are there any conflicts with your financial holdings, personal relationships, and professional commitments that could affect a decision?

• Are you being transparent? Have you been upfront with colleagues, clients, or employers about any potential conflicts?

If you are unsure about a situation, consult your supervisor or a relevant professional association. There might be established protocols to follow.

Dangers of conflicts of interest.

Don’t ignore possible conflicts of interest.

Conflicts of interest can land you in legal hot water, resulting in lawsuits, fines, professional suspensions–even jail time.

They are also destructive to work culture because they erode trust among stakeholders. Clients, leaders, and employees expect loyalty and unbiased advice.

When you withhold information that could affect someone’s decision-making, you are lying to them.

How to manage conflicts of interest.

If you find yourself encountering a conflict of interest, here are a few strategies I advise to my clients.

• Decline. Often, the cleanest solution is to walk away from the situation.

• Refer. If you have the expertise and network, refer the client or project to someone who can handle it without conflict.

• Mitigate. With certain conflicts, you could mitigate the risk. For example, a board member with a financial interest in a supplier could recuse themselves from voting on contracts with that supplier.

Remember, conflicts of interest are common and can be properly managed. The key is to be proactive, transparent, and prioritize doing the right thing over the easy thing.

By doing so, you can protect yourself, your clients, and–most of all–your reputation.

This article was originally published by Inc Oct 4, 2024.