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Conflict of Interest - North Carolina State University

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Conflict of Interest
State Ethics Commission
Conflict of Interest
Person A has role X regarding issues Q
пЃ® X requires competent/objective judgment
regarding Q
 A’s having X thereby justifies others (B) to rely
on A regarding Q
пЃ® A (actually, latently, potentially) is subject to
influence, loyalties, or other interests tending to
make A’s competent objective judgment in X
regarding Q less likely to benefit B than A’s
occupying X justifies B in expecting.
(see Conflict of Interest in the Professions by Michael Davis,
portions here from Davis’ work)
Bottom Line
a = personal interest (usually financial
benefit/competition detriment)
пЃ® b = official duty/public interest
пЃ® c = objective, professional, or
independent judgment
Can a + b = c ?
If not, seek a remedy
Conflict of Interest
Any situation in which an individual or
corporation (either private or governmental) is in
a position to exploit a professional or official
capacity (role) in some way for their personal or
corporate benefit (role).
пЃ® Therefore, conflict of interest = conflict of roles
Conflict of Interest
Having a conflict of interest is not, in and of
itself, evidence of wrongdoing
пЃ® For many professionals, it is virtually
impossible to avoid conflicts of interest from
time to time
пЃ® It can, however, become a legal matter if
an individual tries influencing the outcome
of the decision for personal benefit (a
breach of the Duty of Loyalty) – see
N.C.G.S. 138A-12 and 138A-36.
Conflict of Interest
A conflict of interest may exist even if there are no
improper acts as a result (“Conflict of Roles” and
Conflict of Interest)
A person with two roles (e.g. a stockholder and
government official) may experience situations
where those two roles conflict
Having two roles is not illegal, but the differing roles
may provide an incentive for improper acts in some
The conflict can be mitigated- but it still exists
The Ethics Act and
Types of Conflicts of Interest
Self-dealing: in which public and private
interests compete, if not collide
пЃ® Outside employment: in which the
interests of one job contradicts or
competes with another
пЃ® Family interests: in which a spouse,
child, or other close relative is employed
or where goods or services are purchased
from said relative
Conflicts of Interest
Other improper acts that are sometimes
classified as conflicts of interest are
probably better classified otherwise
– Accepting bribes can be classified as
– Unauthorized disclosure of confidential
information, in itself, should not be considered
conflict of interest
– Use of government or corporate property or
assets for personal use is fraud
Ways to Mitigate Conflict of Interest
The best way to handle conflicts of
interest is to avoid them entirely
Short of avoiding conflicts of interest, the
best way to deal with them is one or more
of the following (mitigation) measures…
Ways to Mitigate Conflict of Interest
(see 138A-2; 15; especially 36 [Public Servants and Official Actions])
Disclosure or “remedies”:
– Severity of Conflict of Interest:
 Likelihood that professional judgment will be
influenced, or appear to be influenced, by the
secondary interest, and
 The seriousness of the harm or wrong likely to
result from such influence or its appearance
(see 138A-36 and Article 3 [138A-21-27:SEI])
Ways to Mitigate Conflict of Interest
– To minimize any conflict, the board member should
not participate in any way in the decision, including
Third-party evaluations
– The cure (rules/law) can create difficulties in
matching the rule to the great variety of conflicts of
– A response to the common claim that ethics cannot
be legislated: morality and law overlap/interact in
many mutually reinforcing ways, especially with
Conflict of Interest (appearance, potential, actual), as
discussed in N.C.G.S. 138A: “The State Ethics Act”
Failure to Recognize Conflict of Interest and
Act Upon It May Become Felonious
The courts have interpreted “honest services” to
include honest and impartial government, and a
general duty on the government official to act
out of loyalty, honesty, independence,
impartiality, and integrity.
Accordingly, the public has a right to have its
public officials perform their duties free from
improper influences, corruption, fraud, deceit,
self-enrichment, self-dealing, and conflicts of
Failure to Recognize Conflict of Interest and
Act Upon It May Become Felonious
The taxpayer, the media, and government leaders
are paying attention- so should we.
These federal statutes, which predate The Ethics
Act but whose potential applications are made
the more probable, are the ones under which a
former Council of State officer, a U.S.
Congressman from North Carolina, a former N.C.
legislator, and a former board member were
recently convicted.
The Congressman is serving a four-year prison
term, and the former Commissioner is facing a
maximum of 20 years pursuant to the federal
and state violations.
Conflict of interest consists of a set of
conditions by which professional judgment
concerning a primary interest (e.g.
patient’s welfare) tends to be unduly
influenced by a secondary interest (e.g.
financial gain); with a board, the primary
interest is the business, mandate, or
responsibility of the board, being
influenced by a board member’s
secondary (individual) interest.
Bottom Line (again)
a = personal interest (usually financial
benefit/competition detriment)
пЃ® b = official duty/public interest
пЃ® c = objective, professional, or
independent judgment
Can a + b = c ?
If not, seek a remedy
The Trust Test
Would stakeholders (“relevant others”) trust my
judgment if they knew of my conflict of
roles/conflict of interest?
It is easier to see Conflict of Interest in others
than yourself; so, discuss with others and
promote/act with transparency: This is the goal
of the Statement of Economic Interest
(Article 3, SGEA)
(from Michael McDonald, Chair, Department of Applied Ethics,
University of British Columbia)
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