Conflict of Interest definition

A conflict of interest (COI) occurs when an individual or organisation has two or more interests where satisfying one interest may possibly inhibit the ability to satisfy the other interests. Conflict of interest does not mean that deviance has occurred; it simply refers to the potential.

In an organisational context, conflict of interest can occur in many different contexts. Arms manufacturers, for example, are accused of ‘promoting warfare’ because their profitability comes from the sale of arms, the demand of which is fuelled by conflict. Some conflicts of interest arise only in given situations e.g. a psychotherapist may find a conflict of interest arising if they have a personal relationship with a client.

Some commentators term conflict of interest competition of interest, reflecting a viewpoint that the state of nature is inherently competitive and that competition between interests arises naturally.

A related term is perverse incentives, whereby something intended to incentivise someone in a specific direction actually encourages them to do the opposite. For example, a golden parachute – which provides a significant severance package to executives if a company is taken over – may encourage executives to pursue a sale, even if it’s not in the financial interests of the company.