Topic Guide: Conflicts of Interest

Measures to address conflicts of interest can take different forms, from legislation explicitly designed to deal with conflicts of interest, to more general codes of conduct and management guidelines. Indeed, alongside general civil service legislation, individual public bodies should draft their own specific behavioural standards. Conflict of interest provisions should also be included in officials' employment contracts to facilitate disciplinary proceedings where necessary. Whatever form they take, regulating conflicts of interest is essential to the development of accountable and scrupulous procedures in decision making.  

Three major areas should be covered by conflict of interest regulation. Taken together, regulation of these areas, combined with effective oversight and enforcement minimises opportunities for impropriety in public office.

Activities and positions deemed to be incompatible with the proper performance of public duties should be clearly stipulated and prohibited. Officials may be prohibited from:[1] 

• holding another post in a different branch of government
• private sector employment (including consulting)
• any ownership stake in a private legal entity conducting business with government
• accepting certain kinds of employment within a specified time period after leaving office 

The kinds of functions proscribed will need to be tailored to the specific role as the nature of interests likely to lead to improper behaviour differ for customs officials, parliamentarians, procurement officers, and so on.

Certain officials and members of government should be obliged to regularly declare their past and present interests. As described in the following section on income and asset disclosure, a good disclosure regime will include both financial assets and other interests. These are quite distinct. Financial assets and income entail concrete financial benefit. Interests, on the other hand, encompass a range of benefits which, at the time of declaration, may not bestow any particular advantage to the official (for example, membership of business associations or boards), but which could exert influence on an individual's decision making.[2]  

Currently, less than 30 per cent of countries oblige officials to declare private business activities such as board memberships, consultancies or government contracts.[3] Requirements for legislators to declare interests need to be carefully designed to reflect the fact that legislators are expected to represent constituents' specific interests, which may overlap considerably with their own interests.[4]  

Finally, it is increasingly recognised that disclosure of interests must also include the interests, holdings and liabilities of officials' spouses and children, in addition to the officials' own interests. Particularly if immediate family members have ownership stakes in private legal entities conducting business with government, it is an essential requirement that this be disclosed.

Clear procedures for the resolution of conflicts of interest and disciplinary measures for dishonest activity should be laid out.[5] As outlined by the OECD, appropriate procedures to mitigate conflicts of interest could involve:[6]  

• recusal: the voluntary or enforced abstinence of officials from decision making or participation in discussions in which they have a personal stake
• divestment or liquidation of a particular interest by the public official
• restriction of official's access to sensitive information
• transfer of public official to an alternative duty
• resignation of public official from the conflicting private-capacity function 

Failure to manage conflicting interests appropriately should be dealt with by a competent agency and result in disciplinary action, up to and including dismissal. Criminal prosecution leading to fines and imprisonment should be a credible sanction for those contravening conflict of interest rules.[7] Any decisions or contracts subsequently found to have been affected by an undeclared conflict of interest should be retroactively cancelled, and the beneficiaries excluded from working with the public administration for a period of time.[8]

Bearing these three strands in mind, national legal frameworks on conflicts of interests should seek to regulate the following areas:

• Secondary employment. This is one of the most obvious conflicts of interest in public office, and undermines the independence and autonomy of administrative and regulative decision making.[9]

• Procurement. Conflicts of interest during procurement procedures can arise at various stages and threaten the integrity of the outcome because the most suitable service provider may not be selected. As well as the risk of outright bribery, officials responsible for making decisions- may have economic interests in a bidding company, or the prospect of future employment with them.[10] The greatest opportunities for corruption are during the evaluation of bids and awarding of contracts as the requisite technical expertise narrows the field of public officials able to make decisions.[11] Particular attention should be paid to the constitution of bid evaluation committees and the external audit of public contracts. 

• The revolving door. The promise of future employment, consultancies and board memberships in the private sector has the potential to skew public officials' decision making when dealing with a host of issues. Movement into government to regulate the same issues that former private sector employees have been working on is also deeply problematic and can lead to conflicts of interest. Although restrictions on the "revolving door" are not yet common practice, the transition of public sector employees into the private sector and vice-versa is a real challenge to the integrity of public institutions. Senior officials from all branches of government and administration should be subject to regulations establishing the minimum amount of time they have to wait after leaving office before taking up private sector employment related to their former duties. These cooling off periods are best differentiated according to seniority,[12] but a recent Transparency International working paper suggested a two year minimum.[13]

• Sharing confidential information and insider trading. Secondments to and from the private sector should also be tightly regulated and monitored to ensure certain companies do not gain insider information or influence on decision making, which would give them an unfair advantage over competitors.[14] While not perfect, this increases the costs for businesses seeking to buy access to government decision makers. The Canadian conflict of interest code stipulates that Canadian ministers are not permitted to disclose information that is not accessible to the general public to any non-governmental or corporate interests for five years after leaving office. Breaching the code can result in a fine, as well as termination of the government pension.

• Nepotism and cronyism. Instances in which an official influences the hiring of relatives and business associates or the provision of favours to them are clear conflicts of interest. While it is unreasonable to prohibit a public department from employing multiple members of the same family, circumstances in which an official is a direct subordinate of a relative should be avoided. This nepotism can be relatively straightforward to detect if both members are within the state apparatus. However, situations where a public official is conducting government business with a private entity which is owned by or employs a relative or friend are more difficult to prevent.

• Private financial interests. Measures should be taken to ensure that officials' private financial interests (and those of their spouses and immediate family) do not interfere with their performance of public duty. As outlined above, where private financial interests come into conflict with public policy, officials should either exclude themselves from decisions, divest from the relevant private asset or resign their public post.

• Fraud and bribery. Circumstances in which a public official deliberately seeks to augment their own financial wealth illicitly usually go beyond the remit of conflict of interest provisions. Accepting bribes is the crassest form of conflict of interest, but it is also best governed by the appropriate criminal code. Likewise, the dishonest use of government property or assets for personal gain is fraudulent activity and should be dealt with as such.