Conflict of interest policy

A conflict of interest arises when someone’s personal interest could influence a decision they make on behalf of the company. A conflict of interest policy does not forbid every such situation. It requires people to disclose them, and it sets out what happens next: who decides, whether the person concerned steps out of the discussion, and how the decision is recorded.

In family companies, conflicts are ordinary rather than exceptional. Typical examples:

• A relative as a supplier. A cousin’s firm bids for a contract.
• Family employment. A director votes on the pay or promotion of their own child.
• Property and assets. The company rents premises owned by a family member.
• Side ventures. A family executive invests in a business that competes or trades with the company.

A policy makes these situations routine to handle, rather than awkward to raise. It usually applies to the board of directors, senior managers and family members in governance roles, and it supports the fiduciary duties directors already hold.

Conflict of interest policy or family employment policy?

They overlap but are not the same. A family employment policy sets the rules for which family members can work in the business and on what terms. A conflict of interest policy covers every situation where personal and company interests meet, of which family employment is one.

Why it matters for the successor

A successor is the person whose position is most likely to be questioned on grounds of family favour. A clear policy, applied consistently, protects them: decisions about their role, pay and authority are made openly and on the record. It also gives them a neutral way to raise an uncomfortable conflict involving a parent or sibling. The article on boundaries between family and business looks at the wider question.

The family should involve its lawyer when drafting a conflict of interest policy, so that it fits the company’s governing documents.