Global Anti-Bribery Guidance

Best practice for companies in the UK and overseas

11. Conflicts of Interest


11.1 Defining Conflict of Interest

Conflicts of interest arise when the various interests, duties or commitments that a person may have; family, friends, work, voluntary work or political interests, come into conflict (or are very likely to).  They are common given the number of interests people inevitably have, and they do not necessarily involve improper or corrupt behaviour, although they can lead to such behaviour. 

11.2 Risks from Conflicts of Interest

A conflict of interest creates corruption risk when an employee or contracted third party breaches the duty due to the company by acting in regard to another interest and does not advise the company of this. This improper behaviour, if serious enough, could expose the person to extortion demands or be the first step to criminal behaviour including bribery. Even where there is no improper behaviour from a conflict of interest, the public perception might be otherwise.  It is best practice for the company to be transparent about its policies and operations to avoid risk of public suspicion of conflicts of interest.  Generally, weak identification and management of conflicts of interest will undermine the company’s reputation for integrity.

Examples of conflicts of interest and corruption risks

  • An employee awarding a contract to a company in which he or she has a financial interest or a connection such as a relative or friend.
  • An employee being a director, shareholder or consultant of another organisation that could compromise his or her duty to the company.
  • Employees running their own companies or involved in external activities such as political or community organisations.
  • Secondary employment: Part-time employment with or consultancy to another company.  Even if this is contractually allowed it can be a significant source of conflict.
  • An employee recruiting a relative or friend or recruiting individuals in order to secure a business advantage.  See the JPMorgan case study as an example of where such practices have led to issues.
  • Insider trading - corporate ‘insiders’ buy or sell their company’s stock on the basis of information that is not available publicly.
  • An employee planning to take up a position with another organisation and acting in its favour in breach of duty to his existing employer.

11.3 Mitigating Risks

The company should identify where risks for conflicts of interest could lie and implement a policy and procedure to manage potential and actual conflicts of interest. This will include a process for maintaining an up-to-date register and adopting preventive measures related to recruitment and procurement. Employees and relevant third parties should be required to disclose any conflicts of interest before recruitment or appointment and then following appointment to advise the company of any changes. Staff should receive training on understanding and identifying conflicts of interest, and knowing what to do when they arise. Employees should also be encouraged to discuss potential conflicts of interest with their management.

11.4 Case Studies

11.4.1 JPMorgan - Jobs for Princelings were Bribes

JPMorgan agreed in November 2016 to pay U.S. $264 million to settle a U.S. probe into its practice of hiring well-connected Chinese ‘princelings’ to win business. ‘Princelings’ are the children of high-ranking Communist party officials, but the term is often applied more generally to the sons and daughters of China’s elite.

Andrew Ceresney, director of the SEC’s enforcement division said: ‘JPMorgan engaged in a systematic bribery scheme by hiring children of government officials and other favoured referrals who were typically unqualified for the positions. JPMorgan employees knew the firm was potentially violating the FCPA yet persisted with the improper hiring programme because the business rewards and new deals were deemed too lucrative.’

‘The so-called Sons and Daughters Program was nothing more than bribery by another name,’ said assistant attorney-general Leslie Caldwell. ‘Awarding prestigious employment opportunities to unqualified individuals in order to influence government officials is corruption, plain and simple.’

Beginning in 2006, the bank’s princelings initiative defied an internal prohibition on such hiring, according to the DoJ agreement. JPMorgan bankers created spreadsheets to track the hiring of Chinese officials’ relatives, ‘which has an almost linear relationship’ with new business in China, according to a 2009 email cited in the agreement.