Conflicts of Interest in the Boardroom (Part One)
Let's be clear. Conflict is not the problem.
Every decision a director makes emerges from some form of tension — competing priorities, different stakeholder interests, trade-offs between short-term performance and long-term sustainability. The boardroom wouldn't function without conflict. The question isn't whether conflict exists. It's whether it's identified, acknowledged, and managed properly.
What destroys boards isn't conflict. It's unmanaged conflict — the kind that sits in the room, unspoken and undisclosed, quietly shaping decisions in ways that no one is willing to name.
Think about it. Every significant board decision involves some form of competing interest: grow aggressively or conserve capital; acquire the company or stay independent; pay the dividend or reinvest in operations. Right or left. Yes or no. This stakeholder or that one.
Conflict, in that sense, is simply what decisions look like before a resolution is reached. The problem only starts when a director's personal interest enters that equation in a way that hasn't been acknowledged.
Not all Conflicts Are the Same
Financial conflicts are the most obvious. A director who holds shares in a competitor. A director whose family trust has a financial stake in a contract the company is about to award. A director receiving consulting fees from a major supplier. These are direct economic interests that create a pull on decision-making.
Relational conflicts are subtler and, arguably, more common. A director who is a close personal friend of the CEO may not have a cent riding on any decision — but their reluctance to challenge, to vote against, to say the uncomfortable thing, is just as real. Loyalty is a powerful force in boardrooms, and it frequently masquerades as good judgment.
Fiduciary conflicts arise when a director sits on multiple boards. If you're a director of Company A and Company B, and those companies are competing for the same contract, the same talent, or the same market, your duty to one board may directly conflict with your duty to the other. This is increasingly common in investment-backed businesses, where the same institutional investor has nominees on multiple portfolio company boards.
Positional conflicts occur when a director's role creates a structural tension. The CEO sitting as a director evaluating their own remuneration. The founding shareholder who is also a board member being involved in the vote on a dilutive capital raise. These situations aren't necessarily corrupt — but they carry inherent tension that must be surfaced.
Perceived conflicts deserve their own category. Sometimes a director has no actual financial or personal stake in a matter, but a reasonable observer looking in from outside would reasonably question their objectivity. Governance isn't just about what's actually happening — it's also about what it looks like, and the trust that perception either builds or erodes.
The Response to Conflict
There is a looser way in which the word “conflict” is sometimes used in boardrooms—and it deserves closer attention.
A director may say that they “feel conflicted,” not because they have an interest that conflicts with the company’s interests, but because a particular matter makes them uncomfortable and they find it difficult to articulate why.
Perhaps they have a relationship with someone involved in the matter. Perhaps they previously expressed a strong view on the issue. Or perhaps something about the discussion simply gives them pause.
That discomfort is valuable information, and it should not be ignored. But it is not necessarily a conflict of interest in the formal sense.
Conflating the two can produce poor governance outcomes. A director may recuse themselves when they should remain in the room—depriving the board of a perspective it needs. Conversely, a director may remain involved when a genuine conflict means that they should step away.
The discipline lies in naming the issue precisely and identifying the type of conflict, if any, that exists.
Is there an identifiable personal or financial interest? Would a reasonable, objective observer question the director’s ability to act independently because of their relationship with another organisation, their other professional role or some competing obligation?
If an actual, potential or perceived conflict can be identified, it requires an appropriate and proportionate response.
But where the elements of a formal conflict are absent—and the director is instead uncomfortable or conscious of having previously supported or criticised the matter—the better course is usually to address that discomfort directly.
The director should first acknowledge it to themselves and then consider whether transparency with the board would assist the discussion. Their fellow directors can then assess the context and decide what weight to give the contribution.
Mere discomfort does not always require formal disclosure. But candour can help the board understand the perspective from which a director is speaking.
A well-functioning board should not treat every uneasy feeling as a reason to leave the room. Sometimes discomfort is not evidence that a director cannot contribute independently. Sometimes it is evidence that the board has finally reached the issue that most needs to be examined.
The task of governance is not to eliminate discomfort. It is to understand what the discomfort is telling us—and to ensure that neither silence nor an unnecessary recusal deprives the board of the conversation it most needs to have.
