Apparent and potential conflicts of interest: what’s the difference and why it matters

In addition to addressing actual conflicts, nearly all organizations’ COI standards speak to the need to avoid or disclose apparent conflicts.  Less often covered are expectations regarding potential COIs.

This may be because the two types of conflicts are often considered to be the same.  However, they are two different animals.

Apparent conflicts are, of course, existing situations or relationships that reasonably could appear to other parties to involve a conflict of interest.  They are discussed at some length (with examples given) in this earlier post.

Potential conflicts refer, as a general matter, to situations that do not necessarily constitute or appear to constitute a COI but where there is a reasonable possibility of an actual or apparent COI coming into play.  (I should stress that, given the thousands of laws, regulations and rules regarding COIs, this is not the only definition of a potential COI. But it is reasonably common and, in my view, reasonably logical.)

For instance, where A works at company X, which has as a supplier company Y, and A’s daughter B is considering applying for a job at Y, this is not yet an actual  or apparent conflict because B has not yet moved her job plans forward.  But (depending on a variety of facts not provided in this example)  the potential for a conflict is there.

As noted in this publication from the North Carolina Board of Ethics: “Potential conflicts of interest … are the most misunderstood concept in public service ethics. Many Public Officials give ‘potential conflict’ a negative connotation, when in fact it is neutral. ‘Potential’ [merely] means ‘capable of being but not yet in existence’ – possible.”  The same analysis holds true, I believe, in the private sector context.

Given this widespread misunderstanding, I think it is important to discuss potential (as well as actual and apparent) COIs in codes of conduct, other policies, training and other C&E communications – particularly because, as a practical matter, waiting until a potential COI has ripened into an actual  or apparent one might be too late to achieve a satisfactory resolution of the issue.  Indeed, the need for focusing on potential COIs assumes particular importance in light of certain findings of the emerging field of “moral intuitionism” which is discussed in this recent post.

As noted there, one of the strong moral intuitions humans have is loyalty, and this suggests that when a COI that triggers loyalty instincts  does appear – e.g., a conflict involving a family member, close friend or other individual to whom “in-group” loyalty is felt –  our intuitions might not lead us to deal with it an ethical way. To revert to our hypothetical, it is probably easier and certainly more effective  for A to get guidance from the C&E office about what to say to or ask his daughter B beforehand  about the conflict of interest that could arise from her applying for a job at Y than dealing with the situation after she has already done so  (when, due to is loyalty instincts,  he might well lapse into a defensive mode).

For this reason, preparing in advance to address a conflict may be particularly important.  And focusing on potential COIs in one’s C&E program – again, through the code, other policies, training and other communications – can help make that happen.

One Comment
  1. Hugh Weinberg 9 years ago

    I think your comments demonstrate why ethics (or conflicts of interest, as I prefer to refer to it as), is so essential, in both the public and private sectors. If someone knows in advance that it is impermissible to hire or even arrange an interview for a close relative, then he / she will hopefully avoid making preliminary inquiries which, while not actual conflicts of interests, could easily create the appearance thereof. There are so many ways to avoid even the appearance of impropriety, such as disclosure and recusal, that a sound training program helps employees avoid potential conflicts.

    There will be cynics, and uninformed media who misunderstand and misreport conflicts of interest issues, particularly with respect to the public sector, so perhaps “training” could be extended to the general public through the efforts of an organization’s public relations or community outreach programs.

    Some organizations’ ethics codes have “catch-all” provisions which are intended to prevent even the appearance of impropriety (such as the NYC Conflicts of Law, which basically says that no public servant shall engage in conduct that conflicts with his / her official duties), but I find those to be too vague and therefore ineffective (unless elaborated upon through supplemental rules an opinions, as the NYC Conflicts of Interest Board has done).

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