Former Minister Bridget McKenzie’s much-publicised involvement in the Community Sports Infrastructure Grants Program highlights how conflicts of interest can happen in all organisations, and why it is imperative that correct processes and procedures are in place to declare and manage them.

A conflict of interest refers to a situation where an individual has two competing interests in a matter which can impact their ability to make fair and impartial decisions. Under sections 182 and 183 of the Corporations Act 2001 (Cth), company directors, officers and employees must not improperly use their position or information obtained by them to gain an advantage for themselves or another person, or cause detriment to that company. There are also implied terms in an employment contract to the effect that employees will not promote their personal interests at the expense of their employer.

Conflicts of interest can lead to difficulties in the workplace between employees and their employers, or financially disadvantage or harm the employer’s organisation.

Conflicts of interests that may occur in a workplace include:

  1. The passing on of information, including disclosure of confidential or sensitive information relating to finance, customers or clients, marketing or other trade sensitive material to gain a personal benefit.
  2. Internal conflicts between employees leading to unfair or improper decision making, for example, an employee not being promoted because their manager dislikes them. The effect of these conflicts can be that recruitment and promotions may not be made on merit, creating disputes and procedural fairness issues within the workplace.
  3. Personal relationships. Personal relationships within the workplace raise issues relating to decision making in recruitment, promotions and disciplinary action, as well as financial decisions, for example appointment of suppliers, contractors or providers.
  4. Financial conflicts created by shareholding or third party ventures. These conflicts can occur when an employee, director or officer uses the entity’s resources for a personal profit, accepts undeclared gifts from clients, or has a vested interest in a company that the employer does business with. For example, employees, directors or officers who participate in an external venture which places them directly in competition with their employer.

While statutory and common law protections allow an employer to take action against employees who allow their actions to be affected by conflicts of interest, prevention is better than a cure.  With that in mind, employers should try to manage the risk of conflicts of interest through policies and employment contracts.