What Is a Conflict of Interest?
A conflict of interest occurs when personal or financial interests have the potential to influence decisions at work. This may lead to a situation where an individual's interests conflict with those of the organisation.
Common examples of conflicts of interest include:
- external roles or activities outside employment
- ownership interests or involvement in other companies
- personal relationships with customers, suppliers or business partners
- financial interests that may influence decision-making
- situations where an employee may benefit themselves or someone close to them
In some sectors, such as financial services, healthcare and the public sector, particularly high standards of transparency and objectivity are required.
Consequences of Conflicts of Interest
A conflict of interest does not necessarily mean that someone has acted improperly. However, it can influence how decisions are perceived and raise concerns about a person's objectivity.
If conflicts of interest are not identified and managed in time, they may lead to:
- reduced trust among customers, employees and business partners
- biased or questioned decision-making
- reputational damage to the organisation
- internal conflicts and a poorer working environment
- financial or legal consequences
In organisations where transparency and integrity are particularly important, even perceived conflicts of interest can have a significant impact on trust.
Legislation on Conflicts of Interest in Sweden
There is no single law in Sweden that governs all types of conflicts of interest. Instead, the issue is addressed through various legal frameworks depending on the role, sector and circumstances. If you have questions about how these rules may apply to your organisation, please contact us.
For employees in the public sector, there are rules relating to both conflicts of interest and secondary employment. Under the Swedish Administrative Procedure Act (2017:900), an individual who has a conflict of interest must not participate in the handling of a matter. Secondary employment is regulated by the Public Employment Act (1994:260).
For example, an employee may not hold a position, own a business or engage in other activities that could undermine public confidence in the impartiality of a public authority or damage its reputation.
Example: A public official may need to step down from a board position or consultancy role if there is a risk that the public could perceive the engagement as influencing their official duties.
For board members and managing directors, conflict-of-interest provisions are set out in the Swedish Companies Act (2005:551). These rules are intended to ensure that decisions are made in the best interests of the company and are not influenced by personal or financial interests.
For example, a board member or managing director must not participate in decisions relating to agreements between the company and themselves, or in matters where their personal interests may conflict with those of the company.
Example: A board member who owns a consultancy business may need to refrain from participating in decisions regarding the appointment of their own company as a supplier.
There is no general legislation in Sweden that specifically regulates conflicts of interest for private sector employees. However, employees are subject to a duty of loyalty towards their employer, established through employment law and case law from the Swedish Labour Court.
This means that employees are expected to act in the employer's interests and avoid situations where personal financial interests, external business activities or secondary employment could influence their work. Many employers therefore maintain their own policies relating to secondary employment and conflicts of interest.
Example: A procurement manager who also operates a business offering similar services may find that their personal business interests conflict with those of their employer.
Certain industries are subject to particularly stringent requirements when it comes to identifying, documenting and managing conflicts of interest. Financial services firms are subject to the Swedish Securities Market Act (2007:528) and the EU regulatory framework MiFID II, while auditors must comply with independence requirements under the Swedish Auditors Act (2001:883).
A common feature of these sectors is that even perceived conflicts of interest can undermine confidence in the organisation. As a result, organisations often have extensive procedures in place to identify, document and manage potential conflicts.
Example: An investment adviser must not allow personal financial interests to influence advice given to clients. Similarly, an auditor must remain independent from the organisations they audit in order to maintain objectivity and trust.
Preventing conflicts of interest
Identifying a conflict of interest is not always straightforward. Organisations should therefore have clear processes in place to identify, assess and manage potential risks before they affect the organisation.
- Identify potential conflicts of interest
The first step is to identify situations where personal, financial or professional interests may influence decision-making or create conflicts of interest.
- Encourage open discussion
Employees and managers should regularly discuss secondary employment, external appointments and other engagements that may give rise to conflicts of interest. Open discussion makes it easier to identify risks at an early stage.
- Assess the risks
Not every conflict of interest means that someone has acted improperly. It is therefore important to assess whether the situation could affect objectivity or undermine confidence in the organisation.
- Document and monitor
When a potential conflict of interest is identified, organisations should document the assessment and any actions taken. Clear documentation promotes transparency and supports future review.
- Establish clear policies and controls
Codes of conduct, conflict of interest declarations, secondary employment policies and background screening can help organisations identify and manage potential conflicts before they become significant issues.
Do you need a clear screening policy?
Many organisations lack clear guidelines on when and how background screening should be conducted. A well-designed screening policy helps ensure consistency, fairness and compliance with applicable regulations.
Background screening checks that can help identify conflicts of interest
Conflicts of interest are not always visible during recruitment or before entering into a business relationship. The right background screening checks can provide organisations with greater insight into company interests, external appointments and other circumstances that may be relevant to a role.
Company directorship and business interest checks
A company directorship and business interest check can provide insight into an individual's board appointments, ownership interests and other business connections. This information can help employers identify potential conflicts of interest, for example where a candidate is involved in organisations that are customers, suppliers, business partners or competitors of their own organisation.
The check can also reveal external appointments and secondary business activities, giving organisations a stronger basis for making informed decisions and managing potential risks before they affect the business.
Suitability and integrity declaration
A suitability and integrity declaration gives candidates the opportunity to disclose secondary employment, external appointments and other circumstances that may be relevant to the role. This information can promote transparency and help employers identify potential conflicts of interest at an early stage.
By asking structured questions about matters such as secondary business activities, board appointments and other engagements, organisations gain a stronger basis for assessing potential risks and ensuring that candidates meet the organisation's standards for integrity and trustworthiness.
Do you need help with background screening?
Not sure which background screening checks are most relevant for your organisation? Complete the form and our team will help you find the right solution.