Conflict-of-Interest-Handbook Ebook 240326 215641

Conflict
of Interest
Handbook
Kris Dobie
Author: Kris Dobie
Cover design and layout: Elsie Weich
Principal reviewer: Prof Deon Rossouw
Ethics Handbook Series Editor: Prof Deon Rossouw
Conflict of Interest Handbook

© The Ethics Institute (TEI) 2023
ISBN: 978-0-7961-1426-6
Published by: The Ethics Institute

Pretoria, South Africa
Website: www.tei.org.za
Contact: [email protected]
© This publication is licensed under a Creative Commons Attribution

| Non-commercial | No Derivatives 4.0 International License.
This handbook does not constitute legal advice. For legal advice on compliance with the
Companies Act and Regulations or any other legal or regulatory requirements, please
consult an appropriately qualified legal advisor.
Publications in The Ethics Institute’s handbook series
available at www.tei.org.za
Ethics Risk Handbook (2016) [also available in Portuguese]
Ethics & Compliance Handbook (2017)
The Ethics Office Handbook (2018)
The Social and Ethics Committee Handbook [Second Edition] (2018)
Codes of Ethics Handbook (2020) [also available in Portuguese]
Whistleblowing Management Handbook (2020)
Ethics Ambassador Handbook (2021)
Institutionalising Ethics Handbook (2021) [also available in Portuguese]
Ethics Reporting and Auditing Handbook [Second Edition] (2022)
Ethical Culture Handbook (2022) [also available in Portuguese]
Ethical Leadership Handbook (2023) [also available in Portuguese]
Conflict
of Interest
Handbook
Kris Dobie
Published by The Ethics Institute 2023

THE
Table of Contents ETHICS
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Preface 1
1. Introduction 3
2. Understanding conflicts of interest 5
2.1. Principal-agent relationship 5
2.2. Defining conflicts of interest 6
2.3. Types of conflicts of interest 8
2.4. Examples of conflicts of interest 9
2.5. Conflicts of interest and corruption 10
2.6. Regulatory environment 11
a) Private sector – Directors 13
b) Private sector – Employees 19
c) Public sector – Politicians 19
d) Public sector – Officials 22
3. Managing conflicts of interest 25
3.1. People 28
3.2. Policy 29
3.3. Procedures 33
a) General disclosures of interest 33
b) Specific disclosures of interest 36
c) Gifts and hospitality 39
d) Due diligence 39
e) Approvals and management 40
3.4. Training and awareness 43
4. Making conflicts of interest decisions 44
4.1. Regulatory and policy considerations 44
4.2. Principle-based considerations 45
Conclusion 47
References 49
About the Author 51
About The Ethics Institute 52

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Preface ETHICS
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The Conflict of Interest Handbook is the 12th publication in the Ethics Handbook Series
of The Ethics Institute.
The Ethics Handbook Series was first introduced in 2012. THE ETHICS
The purpose of this series of publications is to provide per- INSTITUTE
sons involved in the governance or management of organ- Handbook Series
isational ethics with practical hands-on resources to deal

with various aspects of organisational ethics. All the publica-
tions in this series are made available for free on the website
of The Ethics Institute (www.tei.org.za). We are delighted to
see that these publications are used in organisations in the
private and public sectors as well as in tertiary education
in many different countries. Some of these publications are SCAN QR CODE
FREE DOWNLOAD
now also available in Portuguese.
The practical guidance provided in the Conflict of Interest Handbook addresses an is-
sue of cardinal importance for organisations. A large portion of unethical conduct in
organisations like corruption, nepotism, and fraud, are manifestations of conflicts of
interest. Conflicts of interest also appear on all levels of organisations as well as in the
governance structures of organisations.
This book introduces various forms of conflicts of interest, which are richly demonstrat-
ed with practical examples. More importantly, the book focuses on what should be done
once conflicts of interest have been identified. An outstanding feature of the book is
that it does not only follow a compliance approach to the management of conflicts of
interest, but embeds it in the context of ethical organisational culture.
I would like to thank my colleague, Kris Dobie, for his meticulous research into the prac-
tical realities of dealing with conflicts of interest in various organisational settings. In the
process of preparing the material for this handbook, he consulted widely with ethics
practitioners who are dealing with conflicts of interest on a regular basis. We would
like to extend a special word of appreciation to Natasha Pharo (Sasol), Phindi Twala
(Vodacom), Johanna van Wyngaard (MTN), Farzana Lorgat and Nokwazi Mabuza
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(AngloGold Ashanti), who each contributed in their own unique way to the insights
displayed in this book.
I wish all our readers a good reading experience and trust that you will find in the Conflict of
Interest Handbook a handy and trusted companion in dealing with conflicts of interest.
Prof Deon Rossouw

CEO: The Ethics Institute
Conflict of Interest Handbook PAGE 2

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1. Introduction ETHICS
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Although a small sub-field of organisational ethics management, conflicts of interest have

had an outsized role to play in the shaping of South Africa’s state capture years. Behind
almost every corruption incident there was some conflict of interest. Generally, these in-
cidents involved people who were wilfully abusing their positions for private interests. Of
course, not all conflicts of interest situations entail the wilful abuse of position. Sometimes
people just have conflicting interests that need to be managed.
When choosing a strategy for managing conflicts of interest in an organisation one needs
to keep in mind that most of the interests that you want to manage are those of well-inten-
tioned people who need guidance and a system. A small (but critical) minority of incidents
involves people dealing in bad faith who want to abuse the system. A strategy,
therefore, has to address both of these groups.
Conflicts of interest occur in both the public and private sectors, and consequently the
handbook has been developed as a resource for both sectors. It is predominantly a
resource to those who are responsible for managing conflicts of interest in their organisa-
tions. It draws on the rich experience of practitioners who have gone through the growth
pains of setting up conflict of interest management policies and systems, and who have
managed these systems over many years.
The handbook considers conflicts of interest predominantly from an ethical perspective

rather than a purely legal one. Nonetheless the South African regulatory environment
forms the basis of legal considerations.
While the principles that are set out in the handbook apply to all employees and directors
of an organisation, the main focus is on managing conflicts of interest for employees.
Directors’ conflicts of interest are thoroughly regulated in South Africa, and there already
exists substantial guidance in this regard.
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The handbook is divided into three sections:
1. Understanding conflicts of interest

This section defines conflicts of interest and provides a vocabulary for
discussing different types of conflicts of interest. It also sets out the
South African regulatory and common law environment dealing with
conflicts of interest. It should be of interest to all readers.
2. Managing conflicts of interest

This section provides guidance on considerations and approaches to
managing conflicts of interest in organisations. It covers policies,
procedures, and systems for managing conflicts of interest, and is
aimed at ethics practitioners.
3. Making conflict of interest decisions

Whereas the previous section is defined at a systems level, this
section considers the thinking process of evaluating individual
conflict of interest situations. It might be of interest to any organisational
employee, but predominantly for managers and ethics practitioners.

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2. Understanding conflicts of interest ETHICS

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2.1. Principal-agent relationship
Underlying all conflicts of interest is the principal-agent relationship. This is where one
person or organisation (the agent), acts on behalf of, and in the interest of, another per-
son or organisation (the principal). A typical example of a principal-agent relationship is
where I appoint a lawyer to act on my behalf. I am the principal, and the lawyer is my
agent, with a responsibility to act in my best interest.
Another example of a principal-agent relationship is where I am employed by an organ-

isation, or I am part of the governing body of an organisation. Because I have been
vested with the powers to act on behalf of the organisation, I have the corresponding
responsibility to act in its best interest.
PERSONAL ORGANISATION
INTERES
When I am employed by an organisation I act in its interest, not my own.
It is therefore clear that I cannot, when acting on behalf of the principal, put my own
interests before theirs. I have a duty to act in their interest with care, loyalty and in good
faith. These duties are related to the concept of a fiduciary duty.
Fiduciary relationships are often of the financial variety, but the word fiduciary does
not, in and of itself, suggest pecuniary (“money-related”) matters. Rather, fiduciary
applies to any situation in which one person justifiably places confidence and trust
in someone else, and seeks that person’s help or advice in some matter. The
attorney-client relationship is a fiduciary one, for example, because the client trusts
the attorney to act in the best interest of the client at all times. Fiduciary can also be
used as a noun referring to the person who acts in a fiduciary capacity, and fiduciarily
or fiducially can be called upon if you are in need of an adverb. The words are all
faithful to their origin: Latin fidere, which means “to trust.”
https://www.merriam-webster.com/dictionary/fiduciary
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2.2. Defining conflicts of interest
While definitions of conflicts of interest abound, the following definition from the Global
Reporting Initiative (2014) is brief and to the point:
“Conflict of Interest: A situation where an individual is confronted with choosing

between the requirements of his/her official function and his/her own private
interests.”
There are three distinct elements to a conflict of interest:
1. Official function. This is generally one’s responsibility to the employer.

2. Private interest. This can be one’s own interest, or the interests of others
that may cause bias.
3. Action, decision-making or influence. One is in a position where you
have to act, make a decision, or exert influence that might bring private
interests in conflict with one’s official function.
I would therefore have a conflict of interest if, while applying my mind to a matter that
involves my employer, I also have a personal interest that would make it difficult to act
objectively in the best interest of my employer.
It should be emphasised that it is not only a conflict with my own private interests that
come into play, but also other people’s interests that may cause me bias.
For example:
- I am the major shareholder in Company ABC that bids for an IT contract with
the organisation where I serve as IT manager. I am very clearly confronted with
choosing between my own company and the one where I am employed.
- I may, however, also find it difficult to apply myself objectively if I have no
personal interest in Company ABC, but it is owned by my spouse (which will
indirectly be in my financial interest), or even by my best friend (where I may
have no financial interest).

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The above examples indicate some important distinctions when it comes to interests
that might cause a conflict.
Direct vs indirect interests
- A direct interest is where I hold the interest directly in my own name. From
the above examples, it is where I directly own Company ABC.
- An indirect interest could be one of two things. The one option is that I do
not hold the interest myself – it is held by my spouse, another related person,
or a business associate. The second option is that there are intermediary
structures that hold the interests. Here the example would be that I hold an
interest in Company X, which in turn holds an interest in Company ABC.
Although my name is not listed as an owner of Company ABC, I am still a
beneficial owner.
Beneficial owner is a term used to indicate who, once the intermediary

structures have been unravelled, derives financial benefit from a company
or asset. Due to complex holding structures and laws that do not promote
transparency, it is not always easy to determine beneficial ownership in all
jurisdictions.
Financial vs non-financial interests
- A financial interest is the most common in conflicts of interest. I, or some-

one with whom I am financially entwined, might gain financially from a
transaction where I have a decision-making role.
- Non-financial interests could refer to relational interests, such as me ben-
efitting my friend, even though there is no financial benefit to me. Any bias
that I might have, for or against someone, that impacts on my ability to
apply my mind in the best interest of my organisation, could be seen as a
conflict of interest. Another example of a non-financial conflict is where a
judge makes a ruling in a case where their child is the accused, thereby
saving them from a prison sentence.
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2.3. Types of conflicts of interest
Another typology for conflicts of interest (World Bank, OECD, UNODC, 2020) breaks it
down into actual, perceived and potential conflicts of interest.
• Actual conflicts of interest are where my personal interests are in real conflict with
my official responsibilities. An example of this is where I am on an interview panel
and my child has applied for the position.
• Perceived, or apparent conflicts of interest are where it may reasonably seem to

an independent third party that a conflict of interest exists, whether or not this is
actually the case. An example of a perceived conflict of interest would be where
a government minister’s son is awarded a contract in the minister’s department,
even though due process was followed.
• One can see that for outside stakeholders, it is difficult not to suspect that, due to
internal power relations, some pressure may have been wielded to influence the
process. The more senior the related official is, the greater their perceived and ac-
tual influence in the organisation, and the more likely that there will be a perception
of abuse of power. The same principle would apply to the private sector.
It is important to not only be ethical, but also to be perceived

as ethical.
For purposes of building and maintaining a trust relationship with stakeholders it

is important to not only be ethical, but also to be perceived as ethical. An organ-
isation should therefore manage not only actual conflicts of interest, but also per-
ceived conflicts of interest.
• Potential conflicts of interest are where there is not currently a conflict of interest,
but if something changes there is the likelihood that one may arise. An example
of this would be to have the possibility to be promoted into a position where you
will be the relationship manager with your cousin’s company. There is currently no
conflict, but it may come into play if circumstances change.

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We can also make a distinction between personal and professional conflicts of interest.
Most of what we have been describing up to this point falls in the category of personal
conflicts of interest in that there is a personal interest that conflicts with official duties.
Another possibility is that there might be conflicts between two professional interests.
An example would be where a law firm is faced with the prospect of representing
two separate clients who have competing interests in a matter. The lawyer might have no
personal benefit one way or the other, but will struggle to objectively represent the inter-
ests of both clients simultaneously. We will call this a professional conflict of interest.
In this handbook we will deal predominantly with personal conflicts rather than professional
ones.
2.4. Examples of conflicts of interest
While it is impossible to list all conflict of interest examples, the following examples
should assist with building an understanding of what a conflict of interest can look like:
• Having a financial interest or directorship in a company that competes with your

employer.
• Having a financial interest or directorship in a company that does business with
your employer.
- The above two examples would also apply to related parties (i.e., close family,
close friends, or business associates) who compete or do business with your
employer.
• Being involved in a decision for awarding a contract, or appointing a staff member
where a member of your family, a close friend, or business associate is applying.
• Being involved in a regulatory or oversight decision where you, or a related party is
the subject or applicant.
• Being in a direct reporting line with someone you are closely related to, or roman-
tically involved with.
• Doing external work in the time that you are supposed to be doing work for your
employer.
• Using your employer’s resources for doing external work.
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• Abusing your position with your employer to obtain benefits for yourself or family
members in your relationships with customers, suppliers, contractors, and other
business partners.
• Receiving expensive gifts, meals, or entertainment (that can cloud your judgement)
from those you are making a decision about.
Conflicts of interest are related to the concepts of nepotism and cronyism,

where you benefit those close to you in family or other relationships.
The word nepotism has an interesting etymology. It is from the Italian nepotismo,
from nipote ‘nephew’. It derives from the special “privileges bestowed on the ‘nephews’
of popes, who were in many cases their illegitimate sons.” These ‘privileges’ included
them being appointed as cardinals.
- Oxford Languages (https://en.wiktionary.org/wiki/nepotism)
2.5. Conflicts of interest and corruption
The relationship between conflicts of interest and corruption becomes apparent when
their definitions are compared:
- Conflict of interest: “A situation where an individual is confronted with

choosing between the requirements of his/her official function and his/
her own private interests.” (GRI)
- Corruption: “The abuse of entrusted power for private gain.” (Transparency
International)
In the above definitions the underlined concepts have very similar definitions. Compar-
ing these definitions shows why the two concepts are so closely intertwined. A conflict
of interest exists where an official could abuse their position for private gain, whereas
corruption exists where an official does abuse their position for private gain. Thus, while a
conflict of interest does not always lead to corruption, corruption always involves a conflict
of interest.

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It is because of the implicit link between conflicts of interest and corruption, and the
severe reputational and regulatory fall-out that might flow from an actual or perceived
conflict of interest, that it is necessary for organisations to manage conflicts of interest.
Those responsible for the governance of an organisation should ensure that

employees and governing body members keep the possibility of conflicts of
interest at top of mind and know how to manage them should they occur –
thereby preventing corruption from occurring.
2.6. Regulatory environment
Many organisations also manage conflicts of interest in an attempt to comply with local
and international anti-corruption legislation. For the purpose of this publication, we will
focus on legislation and regulation that relates to conflicts of interest specifically, and
not anti-corruption legislation in general. The focus will also be limited to the South
African regulatory environment specifically.
When it comes to conflicts of interest, it seems that the legislators are more concerned
with protecting public than private interests. Conflicts of interest are, as a consequence,
far more regulated in the public than in the private sector. However, as is set out below,
any organisation would be protected by the common law duty of good faith that
employees owe to their organisations.
Case law
The duty to act in good faith towards an employer is quite firmly entrenched in South
African case law. In our legal system this means that it has become ‘common law’,
and that the principles can be deemed to apply to all cases.
This duty has been increasingly deemed to include the requirements to avoid con-
flicts of interest and to fully disclose external interests. Coetzer and Wingfield (2022)
sets out the following principles derived from case law.
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1. “It is an implied term of every contract of employment that an employee

will act in good faith towards their employer and will serve their employer
honestly and faithfully.”
• Labour Appeal Court - Sappi Novoboard (Pty) Ltd v Bolleurs (1998)
2. “In the absence of an agreement to the contrary, the employee owes a duty
of good faith to their employer. This entails among others, a duty:
- not to work against their employer’s interests;
- not to place themselves in a position where their interests conflict with
those of their employer;
- not to make a secret profit at the expense of their employer; and
- not to receive a bribe, secret profit or commission in the course of or by
means of their employment with the employer.”
• Supreme Court of Appeal – Ganes & Another v Telecom Namibia Ltd (2004)
3. It is not only actual conflicts of interest that need to be avoided, but also the
“real sensible possibility of a conflict of interest”.
• Supreme Court of Appeal – Phillips v Fieldstone Africa (Pty) Ltd (2004)
4. “Calculated silence in the face of a duty to inform an employer of material

facts amounts to a fraudulent non-disclosure” and “The dishonest non-dis-
closure of a material fact justifies a dismissal.”
- For example, if an employer has a policy that requires disclosure of all
external interests, and the employee then fails to make a disclosure in line
with the policy.
• Labour Appeal Court – Schwartz v Sasol Polymers and Others (2017)
5. “Where employees are involved with the service providers of their employer,
they have a duty to disclose this”.
• Labour Appeal Court – De Beers Consolidated Mines Ltd (Venetia Mine) v
National Union of Mineworkers & Others (2020)
6. “An employee who runs a side-line business (or ‘side-hustle’) and fails to
disclose this to their employer acts in violation of the duty of good faith owed
to their employer.”
• Labour Appeal Court – Bakenrug Meat (Pty) Ltd t/a Joostenburg
Meat v CCMA and Others (2020)

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7. “No real competition between the employer and the employee need exist
for dismissal of the employee to be considered the appropriate sanction.”
- The example used is if someone has a side-hustle, this business does not
need to compete with the employer to be considered a conflict, as it can
still impact negatively on the employee’s ability to do their job.
• Labour Appeal Court Bakenrug Meat (Pty) Ltd t/a Joostenburg Meat v CCMA
and Others (2020)
Adapted from Cowan Harper Madiki:

https://www.chmlegal.co.za/conflicts-interest-explained
a) Private sector – Directors
The private sector does have legislation that regulates conflicts of interest, and this is
specifically applicable at the governance level of the organisation.
The two most important regulatory documents related to conflicts of interest

of company directors are the King IV Report on Corporate Governance in
South Africa, 2016 (King IV) and the Companies Act, 2008. Since King IV was
published (in 2016) after the Companies Act, it has chosen to largely align
with the Companies Act on this. We will consequently deal with the Companies
Act first.
Companies Act, 71 of 2008
In the Companies Act, it is specifically Section 75 on ‘Director’s

personal financial interests’ that is applicable. This section ap-
plies to directors and any other people serving on board committees.
It also includes ‘prescribed officers’ which could include the CEO
or Managing Director.
Companies Act,
71 of 2008
Scan QR Code
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Consequence of non-disclosure
The most far-reaching aspect of the act is that where a director failed to disclose a per-
sonal financial interest, or failed to manage it appropriately, the resolution taken on that
matter by the board will be invalid. The decision can later be validated by shareholders
or made valid through a court application by an interested party. Nonetheless, the po-
tential impact is sufficiently substantial to warrant serious attention by governing bodies.
The Act specifies that, in order for a decision to be valid, the following must happen:
- The interest must be disclosed;

- The director must leave the meeting after the disclosure; and
- The director may not take part in considering or executing on the matter.
Personal financial interests (What needs to be disclosed?)
Since the above applies to ‘personal financial interests’ it is important to better under-
stand what this means in law. Section 75 of the Companies Act sets out that personal
financial interests are interests which are:
- Held by directors and related parties – Despite the word ‘personal’, the
requirement for disclosure includes interests held by the director as well as
their related parties;
- Financial – i.e., monetary or economic, or to which a monetary value can be
attributed; and
- Material – meaning significant enough to be of consequence in the matter, or if
it might reasonably influence a person’s judgement in the matter.
Related parties
Section 2(1) of the Companies Act defines a related party as follows:

(a) “An individual is related to another individual if they –
(i) Are married or live together in a relationship similar to marriage; or

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(ii) Are separated by no more than two degrees of natural or adopted con-
sanguinity or affinity;
(b) An individual is related to a juristic person if the individual directly or indirectly
controls the juristic person”.
It goes on to give significantly more detail about being related to a juristic person, but
the issue of control remains key.
To understand degrees of ‘natural or adopted consanguinity’, the diagram below is

useful:
Grandparent
Consanguinity
2nd DEGREE Brother / Sister

Grandchild
Parent
1st DEGREE
Child
YOU
Spouse
1st DEGREE
Domestic Partner
Affinity
Parent-in-Law
2nd DEGREE
Daughter/Son-in-Law
Adapted from: http://www.jsu.edu/hr/nepotism/index.html
Accordingly, the Companies Act requires members of the governing body to disclose
(over and above their own interests) also the interests of their spouses, their children
(and children-in-law), their parents (and parents-in-law), their siblings, their grandpar-
ents, and their grandchildren, that could be relevant to the organisation in question.
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2
There seems to be different interpretations of degrees
Grandparents
of consanguinity, and the King IV Practice Note on
1 3
Declarations of Interest defines second degree rela-
Uncles
Parents
tives as including “the member’s natural or adopted Aunts
consanguinity or affinity grandparents, grandchildren, 2 4

Brothers First
aunts, uncles, nephews, nieces or half-siblings.” This Person
Sisters Cousins
seems to misinterpret the definition of second-degree 5

1 3
relatives too broadly. The table on the right sets out an Nephews First Cousins
Children
Nieces Once Removed
understandable logic of degrees of natural consan-
2 4 6
guinity, which is in line with various sources dealing Grand
Grand First Cousins
Nephews
with ethics and nepotism. The shaded relatives would Children
Nieces
Twice Removed
be included in the definition.

Source: Wikipedia
The Act furthermore places a strong obligation on board members to pro-actively

ascertain whether their related parties have such interests. So simply saying that you
do not know does not seem to be an excuse.
One can only assume that it is an attempt to counter the extent of corruption and abuse
of power that has become manifest in South Africa, that has driven the legislator to
include such a wide-ranging definition of ‘knowing’.
‘‘knowing’’, ‘‘knowingly’’ or ‘‘knows’’, when used with respect to a person, and in

relation to a particular matter, means that the person either—
(a) had actual knowledge of that matter;
(b) was in a position in which the person reasonably ought to have—
(i) had actual knowledge;
(ii) investigated the matter to an extent that would have provided the person
with actual knowledge; or
(iii) taken other measures which, if taken, would reasonably be expected to
have provided the person with actual knowledge of the matter;
- Definitions section of the Companies Act, 2008.

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(We elaborate on the practicalities of managing the disclosures on related parties under
section 3.3 which deals with Procedures.)
King IV Report on Corporate Governance in South Africa,

2016 (King IV)
Under its first principle, which deals with ethical leadership, King IV has a section on
the characteristics that leaders should cultivate and exhibit. The first of these charac-
teristics is integrity, and it is here that the report gives its principled position on conflicts
of interest:
“Members of the governing body should avoid conflicts of interest. In cases

where a conflict cannot be avoided, it should be disclosed to the governing
body in full at the earliest opportunity, and then proactively managed as deter-
mined by the governing body and subject to legal provisions” (IoDSA, 2016:
p43).
It furthermore defines a conflict of interest as follows:
“A conflict of interest, used in circumstances relating to members of a govern-

ing body and its committees, occurs when there is a direct or indirect conflict,
in fact or in appearance, between the interests of such member and that of the
organisation. It applies to financial, economic and other interests in any oppor-
tunity from which the organisation may benefit, as well as use of the property of
the organisation, including information. It also applies to the member’s related
parties holding such interests” (IoDSA, 2016: p15).
The definition therefore goes wider than the Companies Act in that it refers to:
- Conflicts ‘in fact or in appearance’ – in other words not just actual, but also
perceived conflicts; and
- ‘Financial, economic and other interests’ – in other words it extends beyond
pure financial interests as set out in the Companies Act.
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The King Committee also published a Practice Note on ‘Declaration of Interests’ in

2018. This practice note provides guidance on how to implement the recommenda-
tions of the King Report as it relates to conflicts of interest.
It specifies two types of disclosure – general disclosures and specific disclosures. This
handbook has utilised the same typology in describing the management of conflicts of
interest in section 3.3. As a consequence, just the description of each type of disclosure
given by King IV will be mentioned here.
General disclosures
“Subject to legal provisions, each member of the governing body should sub-
mit to the governing body a declaration of all financial, economic and other
interests held by the member and related parties at least annually or whenever
there are significant changes.”
- King IV, Principle 7, Practice 25
Specific disclosures
“At the beginning of each meeting of the governing body or its committees, all
members should be required to declare whether any of them has any conflict
of interest in respect of a matter on the agenda. Any such conflicts should be
proactively managed as determined by the governing body and subject to legal
provisions.”
- King IV, Principle 7, Practice 26
The following are the key take-outs from the Companies Act and King IV regarding
conflicts of interest:
- Provisions apply to members of the governing body and its committees.

- Actual and perceived conflicts should be disclosed.
- Own and related parties’ interests should be disclosed.
- Once disclosed, conflict of interest situations should be proactively managed.

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b) Private sector – Employees
Conflicts of interest of employees are quite unregulated by formal legislation, and it

seems that each organisation has a responsibility to put their own policies in place.
Nonetheless, case law would protect organisations inasmuch as it prescribes a duty of
good faith to the employer. (See the ‘Case law’ text box on page 11.) Some of the case
law would seemingly only apply should the employer have their own policies in place.
c) Public sector – Politicians
Legislation and regulations abound for politicians at different levels of government. This
is contained in the following documents:
• Parliament
- Code of Ethical Conduct and Disclosure of Members’ Interests for
Assembly and Permanent Council Members
• Executive (Members of the Cabinet, Deputy Ministers and Members of Provincial
Executive Councils)
- Executive Members’ Ethics Act (Act No. 82 of 1998)
- Executive Ethics Code (Notice No. 41 of 2000)
• Local Government Councillors
- Code of Conduct for Councillors (Schedule 7 of the Municipal Systems
Act - added by s. 36 of Act 3 of 2021)
- Code of Conduct for Councillors Regulations (Notice No. 1322 of 2022)
Each of these pieces of legislation or regulations contain numerous prescripts related to

conflicts of interest which are quite self-explanatory, and will not be unpacked in detail.
Some principles are however relatively common across the mentioned codes:
1. Politicians have a duty to act in good faith and in the public interest.
2. They may not use their position (or information obtained in their position) to
improperly benefit themselves, direct family or business partners.
3. They are not allowed to receive any benefit for voting or not voting in a specific
manner.
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4. They may not receive any benefit for lobbying.

5. They are not allowed to vote on a matter in which they (or their direct family
or business partners) have an interest.
6. They must disclose any interest in any matter that is being discussed or voted on.
7. They must disclose gifts above a certain amount (lower limits differ from
R1000 to R1500).
8. They may not do business with an organ of state.
9. They may not have external remunerative work without permission.
10. They must submit an annual (general) disclosure of interest. Part must be publicly
available to inspect, and part (usually financial values) can be confidential.
They must also submit disclosures of their family members where they are
aware of these.
0rganisation has a responsibility to put their own disclosure

policies in place. Case law would protect organisations inasmuch
as it prescribes a duty of good faith to the employer.
The definition of family and related parties is set out below for different standards:
Executive Code for

Parliament
Ethics Code Councillors
Family definitions ’Immediate family’ ‘Family member’, ‘Partner’ means
means a member’s in relation to a a person who
spouse, permanent member, means the permanently lives
companion or member’s parent, with another person
dependents; spouse, companion in a manner as if
or dependent child; married.

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Executive Code for

Parliament
Ethics Code Councillors
Which ‘related Details of all 5.1 Every member (a) disclose to the
parties’ interests financial interests must disclose to the municipal council,
must be of a member’s Secretary particulars or to any committee
disclosed? spouse, dependent of all the financial of which that
child or permanent interests, as set out councillor is a
companion to the in paragraph 6, of- member, any direct
extent that a (a) the member; and or indirect personal
member is (b) the member’s or private business
reasonably spouse, perma- interest that that
aware of; nent companion or councillor, or any
dependent children, spouse, partner or
to the extent that the business associate
member is aware of of that councillor
those interests. may have in any
matter before the
council or the
committee;
Who is included 3.5. the personal or (2) A councillor
under ‘personal’ private financial or who, or whose
interests? business interest of spouse, partner,
a member includes business associate
any financial or or close family
business inter- member, acquired
est which, to the or stands to acquire
member’s knowl- any direct benefit
edge, the member’s from a contract
spouse, permanent concluded with the
companion or family municipality, must
member has disclose full particu-
lars of the benefit of
which the councillor
is aware at the first
meeting of the
municipal council.
It is notable that the extent of a ‘related party’ extends further for directors in the private
sector than it does for politicians. For politicians it goes to the first degree of consan-
guinity or affinity, whereas the Companies Act specifies the second degree for directors.
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d) Public sector – Officials
i. Public Service
The Public Service encompasses all those government employees who fall under
the Public Service Act and the Public Service Regulations. It includes employees in
national and provincial departments, but excludes those in local government.
Most of the standards on conflicts of interest relevant to this sphere are contained in
the Public Service Regulations (2016).
While there is a separate section on financial disclosures, one should first look at
Chapter 2, Part 1 of the regulations which contains the Code of Conduct for Public
Servants. The following is an extract of some of the most applicable broad principles
that indicate the duty of good faith and objectivity:
11. An employee shall:

(a) be faithful to the Republic and honour and abide by the Constitution
and all other law in the execution of his or her official duties;
(b) put the public interest first in the execution of his or her official duties;
12. (b) serve the public in an unbiased and impartial manner in order to
create confidence in the public service;
13. (b) not engage in any transaction or action that is in conflict with or
infringes on the execution of his or her official duties.
Furthermore, the Code contains rules on:
- Receiving ‘gratification’;
- Conducting business with an organ of state (which is prohibited);
- Declaration of conflicts and recusal from such decisions;
- Favouring friends and relatives;

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- Gifts (where everything above R350 requires permission); and

- External remunerative work (which requires permission and may not be done
in work time).
When managers decide whether something constitutes a conflict of interest, they

should first use the principles, and then consider the rules. In other words, the rules
cannot trump the principles.
Private sector companies should note that politicians and public servants
are not allowed to be directors of companies who do business with an
organ of state, so they should not be appointed to these positions if the
company wants to do business with government or state-owned entities.
Chapter 2, Part 1 of the Regulations deal specifically with financial disclosures. It sets
out predominantly who needs to disclose, what needs to be disclosed, as well as other
procedural issues.
Importantly it also sets out that the Public Service Commission will verify the interests
of all senior managers in the Public Service. Potential conflicts of interest will be direct-
ed back to departments who need to manage any conflicts and disciplinary matters
arising from these.
A different process is followed for ‘designated employees’ who have to disclose but
who are not senior managers. Here the department has to do the verification itself, to
identify possible conflicts of interest, and manage them appropriately.
According to the Regulations it is the responsibility of ethics officers in the

department to manage the disclosure system and also any processes related
to external remunerative work.
Interestingly there is a specific section on ‘Decision-making in cases of conflict of interest’

which triggers when a ‘functionary’ has to take a decision but has a conflict. While not
clearly stated it seems that this relates to specific senior functions, such as heads of
department, who are assigned responsibilities, but may be conflicted.
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ii. Municipalities
The majority of the principles and rules for municipal staff members related to conflicts
of interest can be found in the Code of Conduct for Municipal Staff Members, which is
contained in the Municipal Systems Act.
The relevant principles are contained in section 2 on General Conduct:
A staff member of a municipality must at all times-
a. perform the functions of office in good faith, diligently, honestly and in a trans-
parent manner;
b. act in such a way that the spirit, purport and objects of section 50 (of the Mu-
nicipal Systems Act dealing with basic values and principles governing local
public administration) are promoted;
c. act in the best interest of the municipality and in such a way that the credibility
and integrity of the municipality are not compromised; and
d. act impartially and treat all people, including other staff members, equally with-
out favour or prejudice.
Furthermore, there are more specific rules related to conflicts of interest. Among other
things municipal staff members may not:
- Abuse their position for personal gain (for themselves or someone else);
- Do business with the municipality;
- Unduly influence other functionaries to their own benefit or the benefit of
others; and
- Accept or request gifts or favours for abusing their powers.
There is no requirement for general annual disclosures of interest, but staff members
must disclose if they, or their “spouse, partner, business associate or close family mem-
ber, acquired or stands to acquire any direct benefit from a contract concluded with the
municipality”.

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There seems to be broad convergence in methods of managing conflicts of interest in

organisations. The framework that we present here is the outcome of discussions with
a number of listed entities about their conflict of interest management practices, as well
as reviewing legislation and literature on the topic.
Framework for managing conflicts of interest
People (to own and manage the processes)
Policy
Procedures
General disclosures
Specific disclosures
Approvals /
Management
Gifts and entertainment
Due diligence
Training and Awareness
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1. Firstly there should be people (i.e. staff members) to own and manage the policy.
2. A suitable policy should be developed.
3. Procedures should be put in place to give effect to the policy. The procedures
should include means for making potential conflicts transparent, including through:
- General disclosures of interest;
- Specific disclosures of interest;
- Disclosure of gifts and entertainment; and
- Due diligence procedures.
Once interests are transparent, they should be either approved, or actively managed.
4. Lastly, one should consider a training and awareness approach to influence the
organisational culture on conflicts of interest.
In managing conflicts of interest, there are a number of considerations that should be

kept in mind.
• Control vs. inculcation of responsibility
What a compliance approach neglects is helping people

understand the basic principles of conflicts of interest, and
building an organisational culture where people proactively
disclose their conflicts as and when they arise.
Some approaches to managing conflicts of interest take more of a compliance than an
ethics approach. In practice this means getting people to submit disclosures of all their
interests on an annual basis, and (in some cases) the organisation then verifying those
interests. What it neglects is helping people understand the basic principles of conflicts
of interest, and building an organisational culture where people proactively disclose
their conflicts as and when they arise.
An unintended outcome of a strong focus on annual disclosures is that employees may

read between the lines that they have now disclosed their interests, and if there is a
conflict, the organisation will tell them.

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Imagine the scenario where I am sitting in a bid evaluation committee where a company
in which I have an interest has submitted a bid. If I disclosed my interest in the company
in my annual disclosure, I might feel that it is unnecessary for me to disclose again, and
that the responsibility is now on the organisation to let me know if there is a conflict. This
would however require the organisation to go back to the disclosure forms and check
for any conflicts. This step frequently does not happen – especially where forms are
kept manually.
Rather than communicating to staff that the organisation is controlling their conflicts of
interest once they have disclosed, it is important to convey to employees that they retain
the moral responsibility to raise possible conflicts as and when they occur.
• Rules vs. principles
It is best to specify some broad principles for the avoidance of

conflicts of interest, and then have some rules and examples
that set out more specific cases.
While there are some employees who are actively trying to extract wealth from the sys-
tem through self-dealing and nepotism, most are likely above board and will try to do
the right thing. The challenge is to decide whether we manage conflicts of interest by
trying to catch out the first group, or by creating a supportive culture for the second
group. One will likely have to find the balance and do a bit of both.
When trying to catch out culprits one is tempted to write rules that are very specific so
that people can be retrospectively held accountable if they did not comply. For ex-
ample: like the Companies Act does, one might be very specific about defining family
members, and very specific about what ‘knowing’ about their interests means. While
this might retrospectively help to hold someone accountable when they have defrauded
the organisation through conflicts of interest, it limits some other aspects of conflict of
interest management, such as disclosures related to friends. We cannot regulate
disclosures when friends are involved, because it would be impossible to clearly draw
a line between which friends would be included, and which not.
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For this reason, it is probably best to specify some broad principles for the avoidance of
conflicts of interest, and then have some rules and examples that set out more specific cases.
• Organisational risk vs. employee rights
The organisation has to consider how much it needs to know

about employee interests to balance employees’ right to privacy.
Employees have a right to external interests, as long as these do not go against the
interest of the organisation, and do not impact negatively on their work. The organisa-
tion has to consider how much it needs to know about employee interests to balance
employees’ right to privacy with its risk appetite.
Some organisations choose to have employees disclose all their external interests for
transparency purposes. An organisation may then scrutinise the disclosures and
engage employees on those issues that they consider could pose conflicts of interest.
Many organisations, however, miss out on the scrutiny step, and simply require disclo-
sures. It is not clear what value these disclosures then have in the pro-active management
of conflicts.
Another approach is to only require employees to disclose interests that they think
could pose a possible conflict. So not all interests are disclosed – simply those that
could be problematic. This lowers the administrative burden on the organisation, and
also imposes more of a pro-active responsibility on employees. But it requires more of
an active training and awareness campaign to inculcate employees with this responsi-
bility. This approach might not be suitable for all organisations.
3.1. People
As any management area, managing conflicts of interest will require capacity develop-
ment in staff members. Organisations should consider this from the outset, as it might
determine the extent of one’s processes. The more comprehensive the processes, the
more capacity will be required.

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Organisations will also need to decide who will be responsible for managing conflicts.
This will often be the Ethics Officer, or sometimes a compliance or risk practitioner. In
some organisations disclosures of interest are seen as an HR issue, and it is managed
from there. One should, however, consider that the staff members who manage
conflicts should do so with the correct mindset of influencing a transparent culture.
Many organisations find that a well-functioning automated disclosure system is critical

to assist with the workload.
In some organisations, the disclosures of interest of directors are dealt with separately
from that of staff, and it then falls to the Company Secretary to manage that component.
3.2. Policy
The policy sets out an organisation’s position on conflicts of interest. It will

specify what is allowed and not allowed, and what is required from employees.
Core principles
A good policy will set out its core principles first, so that everything else in the policy can
be measured against that.
In section 2.2 of this handbook the elements of conflicts of interest were set out. It
makes sense to craft principles that address each of these elements.
Elements Principles to manage them

Official function We deal in good faith with the organisation and make
decisions in its best interest and in line with our official duty.
Private interest We are proactively transparent in order to manage
conflicts of interests.
Action, decision-making We apply ourselves objectively in the best interest of the
or influence company and ensure that there are no conflicting
interests that can impact on this objectivity.
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Of course, the underlying principle is what is also found in the common law, which is to
act in good faith in the best interest of the company. This is the core principle against
which all conflicts of interest decisions should be measured.
Rules and examples
Guard against rules that are too narrowly written.
While some rules will be necessary to manage conflicts of interest, one should guard
against rules that are too narrowly written. If there are things that one wants to expressly
forbid, it should be clearly stated that these are in addition to the general principles and
that the principles still apply to all decisions.
Employees might feel that the general principles are too vague to apply in practice, and
might need more clarity on what is allowed, what is not allowed, and what needs to be
disclosed. To assist with this one might make use of examples rather than rules. This
helps employees understand the boundaries more clearly, but still urges them to assess
their conflicts in terms of the core principles.
Contested areas
While there is broad convergence on managing conflicts of interest, there are a few
key areas where approaches differ, and where an organisation will have to take a clear
policy stance.
- Doing business with staff or family of staff
Most businesses have a policy that they do not, as a rule, do business with staff. This
may be reviewed if there is a business case for it, though such decisions are rare. Sec-
tion 13.c. of the Public Service Regulations (2016), specifies that an employee “may not
conduct business with any organ of state, or be a director of a public or private company
conducting business with an organ of state”. This is a very broad ban on employees
doing work with their employer, which sets a strong precedent.

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When it comes to doing business with family of staff, there is less of a standard ap-
proach. Many businesses will take a discretionary approach, meaning that each case
is reviewed on its merits. As with any discretionary decision, it may be difficult to apply
a consistent standard – especially when decisions are made in a decentralised manner
by line managers.
Supply chain management are viewed as high-risk staff as

they engage with procurement decisions on a regular basis.
Other organisations take a risk-based approach, banning family of high-risk staff from
doing work with the company. This might include senior managers and executives, and
those working in supply chain management. The thinking is that the more senior a per-
son is, the greater the perception that they may be influencing decision-making. Those
in supply chain management are viewed as high risk as they engage with procurement
decisions on a regular basis.
The South African Public Service does not ban family members doing work for the state,
but full disclosure is required to actively manage possible conflicts.
- Defining ‘related parties’
Another decision would be how broadly one would define ‘family’ or ‘related parties’.
Many organisations take their cue from the Companies Act definition of related parties,
and work with two degrees of consanguinity or affinity (see section 2.6), as well as busi-
nesses that are under ‘control’ of the individual.
Some organisations define related parties as those who live in a financially interdependent
way with the staff member – such as living in the same household. For example, if my
spouse benefits financially, then it is financially beneficial to me as well. If my child is
dependent on me financially, we are interdependent, and if they benefit financially, it
reduces my financial burden. This approach considers direct and indirect financial
gain to the staff member, but does not necessarily consider non-financial pressures
that might apply.
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- Perceived conflicts of interest
Perceived, or apparent conflicts of interest were explained in section 2.3, but in short,
it is where there seems to be a conflict of interest, but this is not actually the case. An
example would be where a company contracts with the child of the CEO, even though
due process has been followed. While the CEO may have had no part in the decision,
the power dynamics do make it seem unlikely that no influence was wielded. Where
senior people are involved, the perception of a conflict of interest can be as damaging
to the organisation’s reputation as an actual conflict of interest. For this reason, it is
seen as good practice to include perceived conflicts in definitions of conflicts of interest.
Some organisations, however, feel that the mere perception of a conflict of interest is
insufficient grounds for limiting someone’s rights and participation. There is also a fear
that the definition might be abused as it is very subjective. The instances of perceived
conflicts of interest are probably few and far between, and one can imagine that it would
mostly apply to those at the top of the organisation who wield significant influence.
- Business with former employees
Many companies have contractual inclusions with business

partners and suppliers that prohibits the revolving door practice.
An often-forgotten conflict of interest is what is referred to as the revolving door. This is
where an employee uses their organisational powers to set up business opportunities
for themselves outside the company and then leaves for that opportunity as soon as
things are in place.
An example of this would be a manager negotiating with a potential business partner

on behalf of their organisation. Halfway through the negotiations the business partner
offers them a job with a massive salary. This will, however, only commence once the
negotiations are finalised. It is clear that the manager will be less protective of the interest
of their current company, and more lenient towards the potential business partner.

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To mitigate such risks many companies have contractual inclusions with business part-
ners and suppliers that prohibits this practice. One may also put in place contractual
inclusions with staff directly, but this can be difficult to enforce once employment ends.
3.3. Procedures
a) General disclosures of interest
One of the most common practices in managing conflicts of interest is the annual dis-
closure of interests. This is also referred to as a general disclosure, because it requires
employees and directors to disclose not only interests where there could be a possible
conflict, but all of their interests in general.
This is usually done on an annual basis, but also as soon as there is any change in
interests.
What should be disclosed?
The South African Public Service Regulations (2016) require designated employees
to disclose the following:
• Shares / equity in companies • Consultancies and retainers

• Income generating assets • Sponsorships
• Trusts • Gifts and hospitality
• Directorships and partnerships • Ownership in immovable property
• External remunerated work • Vehicles
This is a very broad list of disclosures, and extends beyond merely assessing con-
flicts of interest. It contains information on movable and immovable property that
also allows the employer to conduct a broad lifestyle audit. If an employee has
wealth that goes beyond their salary and interests (i.e. unexplained wealth), it could
be seen as a red flag that has to be investigated. Most private sector entities do not
go to this extent.
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Organisations differ in what they require to be disclosed. The following is a relatively

comprehensive list.
- Board memberships
• Including boards of professional bodies or not-for-profit organisations.
- Financial interests in businesses
• Generally, excludes shares held through collective investment funds such
as retirement annuities.
- Outside work
• Paid or unpaid
- Loans or sponsorships
• Specifically, from people or organisations who are not registered Financial
Service Providers.
- Relationships in the organisation
• Family or romantic relationships in the workplace
- Gifts and hospitality
• This is sometimes dealt with in a separate policy and system, but can as
easily be dealt with as part of general disclosures.
Disclosures must be made prior to joining the organisation, then annually, or as there
are significant changes.
General disclosures are usually restricted to the employee’s own interests and would
not include that of their related parties or family members. As the following text box
indicates, King IV gives a different view on the interest of directors’ related parties.
King IV (Part 5.3, Principle 7, Practice 25)

Subject to legal provisions, each member of the governing body should
submit to the governing body a declaration of all financial, economic and
other interests held by the member and related parties at least annually
or whenever there are significant changes.
- IoDSA, 2016

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This places a massive burden on directors to pro-actively approach related parties,

which might include parents-in-law, or siblings, about all their financial interests. In
many families this information is deemed to be private, and it is not clear how practical
this guidance would be. The Companies Act, 71 of 2008, requires disclosure only of
such interests of related parties that may cause a conflict (in other words ‘specific dis-
closures’). This seems to be a much more realistic approach, and it is not recommend-
ed that non-directors be required to follow King IV’s guidance on this matter.
Who should disclose?
The regulatory framework requires directors and politicians to disclose. In the Public
Service, members of the Senior Management Service, as well as other ‘designated
employees’ are required to disclose.
A good practice would be for senior managers to be required to make a general disclo-
sure, together with people who work in high-risk areas such as procurement, sponsor-
ships, acquisition and disposal of property, and regulatory or enforcement roles.
What should be done with the information?
Information should be kept in a digital format for a due

diligence process associated with third party risk management.
Some thought needs to be given to what the organisation is going to do with this infor-
mation. It serves very little purpose for an organisation to require general disclosures
and then to simply file it away. One argument is that, should a conflict be discovered at
a later stage, one can check whether an employee had disclosed it. If they had not, they
might face disciplinary consequences. What is not clear is what one would do if they
had disclosed it, but nothing was done with this information.
Ideally the information should be kept in a digital format so that it can be searched as
part of the due diligence process associated with third party risk management. (See
section d) below). Some organisations still make use of paper-based disclosure forms,
but these serve very little value as the information cannot be digitally searched.
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Many organisations require line managers or divisional managers to sign off on the
disclosures submitted by their subordinates. They will typically evaluate each disclosure
to determine if there is a possible conflict of interest that needs to be further managed.
This will be discussed in depth under section e) ‘Approval and management of conflicts’.
Confidentiality of information
Information should be confidential, and only accessed by those

who are responsible for managing conflict of interest risk.
Another consideration is the privacy of the information that has been disclosed. Ideally
the information should be confidential, and only accessed by those who are responsible
for managing conflict of interest risk.
In the public sector there are requirements for some of the information – especially of
public representatives (i.e., politicians) – to be made public. Due to the public nature
of the position, it makes sense for this to happen, but there should still be a limitation
on what is shared. Good practice suggests that the interests should be listed without
financial information, as this gives the public sufficient information to identify a possible
conflict.
b) Specific disclosures of interest
While the general disclosures process is a broad disclosure of all interests, the specific
disclosure process is limited to specific interests which could pose a conflict of interest,
and most likely relate to a matter currently under consideration.
In-meeting disclosures
Specific disclosures of interest are typically raised at the point of decision-making or

influence, for example at a committee meeting where a specific matter is under consid-
eration. An example would be, sitting on a selection committee and realising that my
niece is one of the applicants. I would then formally raise this interest in line with the
procedure set out.

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King IV (Part 5.3, Principle 7, Practice 26)

At the beginning of each meeting of the governing body or its committees,
all members should be required to declare whether any of them has any
conflict of interest in respect of a matter on the agenda. Any such conflicts
should be proactively managed as determined by the governing body and
subject to legal provisions.
- IoDSA, 2016
As the King IV practice above indicates, it is not sufficient to simply disclose. The interest
should be discussed, and ‘proactively managed’.
Most organisations have a formal process in place for committee meetings where peo-
ple disclose their interests prior to the meeting commencing. Generally, there is a form
where people have to indicate if they have a conflict of interest to disclose or not.
Good practice would be for members of committees to also

declare their conflicts verbally.
Good practice would be for members of committees to also declare their conflicts ver-
bally. If this is not done the chairperson of the meeting should engage with the disclo-
sure forms prior to the meeting commencing and determine what action should be
taken to mitigate the risk.
The Companies Act, 71 of 2008, specifies that directors should recuse themselves from
the decision, leave the room, and not participate in the making or execution of the de-
cision. While this would be good practice for staff as well, one can imagine situations
where the possible conflict of interest is deemed insignificant. For example – I might
disclose that one of the parties that submitted a bid under consideration was in my
class at university. The committee should engage with the level of conflict and deter-
mine whether it would be or be, perceived to be a significant conflict to the extent that I
should recuse myself. This should be weighed against the specific expertise that I bring
to the meeting and the composition of the meeting in terms of expertise and diversity.
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It is important to note that specific disclosures should be made over and above general
disclosures. In other words, even if I had disclosed an interest in my annual disclosure,
I should raise it again at the point of decision-making. It is unlikely that the committee
members are aware of what I disclosed in my general disclosure, and would therefore
not be able to make an informed decision about how to manage the situation unless I
raise it again. It should be communicated to employees that the responsibility for raising
conflicts of interest always remain with themselves.
Disclose related-party interests when doing specific disclosures.
Another important difference between general and specific disclosures is that one
would also disclose related-party interests when doing specific disclosures. For example,
if I know that my brother has an interest in a company that has submitted a bid under
consideration, I should raise this in the meeting.
Out of meeting disclosures
Besides raising specific interests during meetings, staff should also raise possible con-
flicts as they arise in their ordinary work. The following are some examples of issues that
should be disclosed:
- As above, if my brother is submitting a bid there for a tender, he should dis-

close this in the bidding documents. I should also raise this if there is any
concern about perceived conflicts.
- A manager should make a specific disclosure if they start to date one of their
subordinates.
- An employee should disclose when their spouse is promoted into a position at
their company, causing them to be the relationship manager with the spouse.
There should ideally be a specific way for employees to raise these interests. The eas-
iest way is for them to raise it in writing with their line manager. Some organisations use
electronic disclosure systems for their general disclosures. These specific disclosures
can then be disclosed using the same system.

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c) Gifts and hospitality
Excessive gifts and entertainment can cause an employee to

give preference to the gift giver above other candidates.
Gifts and hospitality are sometimes governed by a separate policy and procedure. It
should, however, be kept in mind that the reason we are concerned about gifts and
hospitality is because it may cause bias in recipients. Excessive gifts and entertainment
can cause an employee to give preference to the gift giver above other candidates, or to
abuse their power in the interest of the gift giver. In other words, it can create a conflict
of interest.
Organisations differ vastly in terms of their approach to managing gifts and hospitality.
Some have a zero-gift policy, while others simply require the disclosure of all gifts. A
good middle ground would be that all gifts above a certain cumulative value per year,
should be disclosed. The employee’s line manager should sign off on anything above
this value. Some gifts that are deemed excessive should be returned, or if this may be
considered offensive, can be donated to a charity.
Hospitality, such as travel and accommodation should be pre-approved by line manag-

ers. Most organisations however have policies that specify that travel and accommo-
dation will be paid for by the organisation itself if it deems the trip to have a business
purpose.
If the organisation has a good online disclosure process that automatically escalates
certain decisions to the appropriate manager, it makes sense to also use this process
for the escalation of gifts and hospitality decisions.
d) Due diligence
More and more organisations are completing due diligence checks on their suppliers,
third parties and intermediaries. The purpose of such exercises is to protect themselves
from business and reputational risk. Many international anti-corruption laws require that
organisations make sure that the people they do business with are legitimate, are not
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involved in money laundering or corruption, or even human rights or environmental

abuses. For this reason, it is also important to know who the beneficial owners of or-
ganisations are so that possible risks of doing business with Politically Exposed Per-
sons (PEPs) or Prominent Influential Persons (PIPs) can be managed.
For the purposes of this handbook, we are more interested in utilising the due diligence
processes to avoid doing business with staff or managing other possible conflicts of
interest.
The following due diligence checks can be performed to determine possible conflicts:
- Checking whether staff have disclosed all their interest by verifying the dis-
closures (based on their ID numbers) against the records of the Companies
and Intellectual Property Commission (CIPC);
- Checking company registration numbers of suppliers and potential new
suppliers with those disclosed by staff;
- Related party transactions (e.g., having shares in business partners) can be
analysed for frequency of work given to them, or the value of their contracts.
There are service providers that conduct these checks and who can go even further to
ascertain if the company is doing business with family of staff members. From a pro-
tection of personal information perspective, it is important that only publicly available
information, or information disclosed by staff for this specific purpose be utilised for
such checks.
It is important to note that information obtained from the CIPC may be out of
date. One should therefore first approach employees about their interests before
accusing them of wrongdoing.
e) Approvals and management
As was indicated above, the disclosure of interests, as well as due diligence processes
are merely the first step of managing conflicts of interest. They serve to increase trans-
parency so that conflicts can be appropriately dealt with.

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Who approves interests?
The two main approaches are that it be done centralised (for

example by the Ethics Officer), or that it be done decentralised
by line managers or divisional managers.
There are various approaches as to who considers the interests that have been dis-
closed. The two main approaches are that it be done centralised (for example by the
Ethics Officer), or that it be done decentralised by line managers or divisional managers.
The benefit of centrally approved disclosures is that one is likely to achieve greater
consistency in how matters are dealt with across the organisation. On the downside,
the Ethics Officer is unlikely to know the ins and outs of an employee’s tasks, and may
not be as informed when making the decision. They will therefore still have to consult
with the employee and the manager in making the decision. In large organisations it
can mean that dedicated staff will have to be appointed simply for managing conflicts
of interest.
For this reason, many organisations specify that line, or divisional managers be the
ones that approve or decline the interests of their subordinates. This, however, requires
that these managers be trained on the principles of conflicts of interest so that they can
make informed decisions. Even with training, managers find themselves out of their
comfort zones, and many cases are still referred to the Ethics Office.
Some organisations require the manager to make a recommendation, while the final
decision is taken by the Ethics Office. In other organisations managers take the decision,
and the Ethics Office monitors a sample of the decisions annually. This monitoring is
an essential step to indicate to managers that their decisions are important and will be
scrutinised.
What if interests are declined?
In many cases the general disclosures of interest may be signed off without incident as none
of the interests are deemed to conflict with the employee’s professional responsibilities.
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There will however be cases that are deemed to pose a conflict of interests and that
have to be managed one way or another.
Some mitigation measures that can implemented include the following:
- The employee can recuse themselves from the decision-making process, or be

removed from the process. This is an obvious solution for once-off decisions. Care
should however be taken to ensure that there is not the perception that influence
was nevertheless wielded by the employee – specifically if they are in a senior position.
- The employee can be transferred to another area of operations. For example, if my
romantic partner is my direct manager, the situation could be resolved by one of us
transferring to another division.
- The employee can disinvest from the interest, or step down from an external position.
- Independent third-party oversight can be brought in. This might have cost implica-
tions and is not an ideal long-term solution for recurring conflicts.
- The employee might need to choose between their current employ and their exter-
nal interest. This might mean that they need to resign if there is no other solution.
Sometimes certain interests can be allowed to continue, provided that it does not in-
terfere with an employee’s performance and duties. For example, if I am moonlighting in
a part time second job, there is the potential that it can interfere with my ability to do my
job according to standard. In such cases an employee’s manager will have to monitor
their performance to ensure that it does not deteriorate as the interest continues. This
can be included in quarterly performance conversations.
Sometimes the best way of managing the conflict is to ask the employee for their view
on the way forward. Employees frequently understand the conflict and come up with
viable solutions.
It is important to be fair when making decisions. One should keep in mind that you are
dependent on employees for being transparent, and they are unlikely to come forward
if your approach to conflict of interest management seems unnecessarily strict or un-
reasonable.

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Appeals and escalation
Policies should allow for decisions to be taken on review or escalated. Such review
decisions are often taken by the Ethics Officer if the line manager was responsible for
the first decision. Alternatively, an operational Ethics Committee can be responsible for
oversight on escalated matters.
3.4. Training and awareness
When managing organisational risk, we refer to the hard control environment and the
soft control environment. The hard control environment would include all the processes
set out above, whereas the soft control environment would be the culture of transpar-
ency in the organisation, and the general sense of self-awareness and integrity that
leaders and staff have in terms of avoiding conflicts of interest.
Training and awareness will be critical to raise awareness of the policy and
procedures, but should also be used to influence the general understanding
of conflicts of interest so that people internalise this in their decisions-making.
A good training programme will target all staff that may

need to disclose.
A good training programme will target all staff that may need to disclose. As indicated
earlier, when managers are required to make decisions on their staff’s interests, they
will also require special training that uses scenario-based exercises that get them to
practice their decision-making skills.
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4. Making conflicts of interest decisions ETHICS

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Since it is impossible to describe every conflict of interest situation, and each situation is
likely to differ somewhat, it can be challenging to evaluate possible conflicts of interest
situations. While the legislation and organisational policy prescripts will provide some
guidance, one may still need to apply additional judgement in making determinations.
As a result, managers and employees often require guidance when making such
decisions.
Employees should be encouraged to escalate their potential

conflicts of interest.
Employees should be encouraged to escalate their potential conflicts of interest by
transparently disclosing them. Managers will however need to make a determination on
whether a situation poses a conflict, and if so, how it should be managed. Managers
must evaluate the general disclosures made by their employees every time it is updat-
ed, and may also be the ones to make a call when a specific disclosure is made.
In many organisations the Ethics Officer will be required to either provide over-
sight of the decisions, or to make the final call based on recommendations
from managers.
4.1. Regulatory and policy considerations
A good starting point for evaluating conflicts is the regulatory and policy environment.
As indicated in section 2.6 which deals with the regulatory environment, this can differ
significantly from one sector to another, and one needs to study the prescripts that are
applicable to one’s sector. At its broadest, the common law principle of good faith to
the employer would apply to all sectors, and this should always be considered as the
most basic requirement.
When utilising regulation or policies, one should be careful of getting caught up in the
minutiae of the rules. One should first assess the situation against the broader principles
that generally deal with good faith, objectivity, and transparency. The remainder of the
rules generally give clarity as to how these broad principles should be applied.

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Furthermore, it is important to apply each prescript to the purpose for which it was
intended. For example, the policy might say that one should do a general annual disclo-
sure for oneself and close family. This should not be interpreted to mean that a conflict
can only occur when there is close family involved. If I have to investigate a close friend,
it would undoubtedly put me in a difficult situation. One should go back to the broad
principle and assess whether the person can be deemed able to apply their mind ob-
jectively to the situation.
Another example where rules are mis-applied relates to the financial limits of gift disclo-
sures. If a gift of above R350 requires permission, it does not automatically mean that
anything below R350 would be acceptable. It again needs to be measured against the
broad principle of whether it influences decision-making. One can see how a ‘gift’ of
R200 can be deemed to influence a traffic officer, regardless of the gift limit set by the
regulations.
Disclosure requirements are introduced to raise transparency levels. As such, the act
of making a disclosure is simply the first step in managing a conflict. Having made a
disclosure does not automatically make the conflict disappear.
4.2. Principle-based considerations
When considering broad policy statements there should at least be some princi-
ple-based criteria to guide managers when making conflict of interest decisions. This
is to avoid managers being overly lenient or overly strict when applying the policy. One
wants to reach a point where decisions are made fairly and consistently across the
organisation.
The following list of questions can be a useful checklist to consider:
YES NO
1 Will the employee be competing with the employer?
2 Is the employee seeking to do business with the em-
ployer?
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YES NO
3 Is there a potential to abuse organisational influence to
benefit the employee?
4 Is there the potential for the abuse of confidential infor-
mation?
5 Will the employee be conducting work with employer’s
clients?
6 Is there a possibility of reputational damage to the
employer?
7 Will the employee be using organisational time and
resources to further their own interests?
8 Will the employee still have sufficient time and energy to
do their work?
9 Is the employee’s current work performance up to
standard?
This checklist should be used to guide decision-makers in making informed choices. A

‘yes’ may not necessarily mean that an interest is automatically declined.
One needs to keep in mind that the reason we manage conflicts of interest is to protect
the interest of the organisation. We should therefore, after all is said and done, ask the
question of ‘what is in the best interest of the organisation?’. It may be that an employee
has a sideline business, but they are the only supplier in a specific area, and using
another supplier might pose significant additional costs. In such a case it might be in
the best interest of the organisation to do business with the employee, and manage any
potential conflicts that may arise.
Other lenses that could be used are:
1. Materiality
- How material is the decision to the organisation?
- How material is the impact on the employee, and as a consequence, how
likely is it to affect the employee’s decision?

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2. Extent of discretion
- How much discretion does the employee have to influence the decision by
themselves? Can they make the decision, or are there others who would bal-
ance their views?
3. Perceived influence
- How senior is the person involved, and how likely is it that people will suspect
undue influence?
Conflict of interest decisions will invariably still require significant judgement. The
only way to develop judgement is to practice, and to discuss one’s decisions with
colleagues and peers.
Conclusion
While there are many procedural issues that are important to mention when discussing
the management of conflicts of interest, one should never lose sight of the big picture.
At the end of the day, one wants to build an organisational culture where employees fulfil
their obligations in good faith and with professionalism, where they are transparent when
conflicts arise, and deal with such matters with integrity.
We should consider this when designing our conflict of interest management process-
es. We should avoid systems that do not make employees consider the ethics of their
actions, but just whether they are following procedure.
Yes, it is important to try to catch the bad apples, but we should avoid removing
the morality from work in the process.
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References ETHICS
INSTITUTE
Catchick, P. 2014. Conflict of Interest: Gateway to Corruption. Association of Certified

Fraud Examiners. Available at: https://www.acfe.com/uploadedFiles/ACFE_Website/Content/
european/Course_Materials/2014/cpp/2B-Paul-Catchick.pdf, accessed 2 February 2020.
Coetzer, N and Wingfield, C. 2022. Conflicts of Interest Explained. Cowan-Harper-Madik-

izela Attorneys. Available at: https://www.chmlegal.co.za/conflicts-interest-explained.
Crime and Misconduct Commission Queensland, and Independent Commission

Against Corruption. 2004. Managing Conflicts of Interest in the Public Sector. Available at:
https://www.ccc.qld.gov.au/publications/managing-conflicts-interest-public-sec-
tor-guidelines-and-toolkit
GRI Implementation Manual. 2013. G4 Sustainability Reporting Guidelines: Implementation

Manual. Global Reporting Initiative. Retrieved from:
<https://www.globalreporting.org/resourcelibrary/GRIG4-Part2-Implementation-Manual.pdf>
International Chamber of Commerce. 2018. Guidelines on Conflicts of Interest in Enterprises.

Available at: https://iccwbo.org/news-publications/policies-reports/icc-guidelines-con-
flicts-interest-enterprises/
IoDSA. 2016. King IV Report on Corporate Governance for South Africa. Johannesburg,
South Africa: IoDSA.
IoDSA. 2018. King IV Practice note – Declaration of Interests. Johannesburg, South Africa:
IoDSA.
Jenkins. M. 2015. Topic Guide on Conflicts of Interest. Transparency International.

Available at: https://knowledgehub.transparency.org/assets/uploads/kproducts/Top-
ic_Guide_Conflicts_of_Interest.pdf
Organisation for Economic Cooperation and Development (OECD), 2005. Managing

Conflict of Interest in the Public Sector – A Toolkit. Available at: https://www.oecd.org/
publications/managing-conflict-of-interest-in-the-public-sector-9789264018242-en.htm

THE
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Paxton, S. 2019. Best Practice Guide – Conflicts of Interest, Chartered Secretaries

Southern Africa. Available at:https://www.chartsec.co.za/documents/latestNews/CSSA-
Best-Practice-Guide-Conflict-of-Interest-2019.pdf
South Africa. 1998. Executive Members Ethics Act no. 82 of 1998. Available at:
https://www.gov.za/sites/default/files/gcis_document/201409/a82-98.pdf
South Africa. 2000. Executive Ethics Code, Notice No. 41 of 2000.

Available at: https://static.pmg.org.za/docs/020628execethicscode.htm
South Africa. 2000. Municipal Systems Act no. 32 of 2000. Available at:
https://www.gov.za/sites/default/files/gcis_document/201409/a32-000.pdf
South Africa. 2008. Companies Act no. 71 of 2008. Available at:

https://www.gov.za/sites/default/files/gcis_document/201409/321214210.pdf
South Africa. 2014. Code of Ethical Conduct and Disclosure of Members’ Interests for
Assembly and Council Members. Available at:
https://www.parliament.gov.za/storage/app/media/PRandNews/content/code_of_Conduct_for_
MPs_adopted_13_March_2014_2.pdf
South Africa. 2016. Public Service Regulations. Available at:

https://www.dpsa.gov.za/dpsa2g/documents/acts&regulations/regulations2016/PUB-
LIC%20SERVICE%20REGULATIONS%2016%20April%202019.pdf
South Africa. 2021. Municipal Structures Amendment Act no.3 of 2021. Available at:
https://www.gov.za/sites/default/files/gcis_document/202106/44647gon320.pdf
Transparency International. What is corruption? Available at:

https://www.transparency.org/en/what-is-corruption, accessed 17 April 2021
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Wagener, G. 2016. Section 75 of the Companies Act – Personal Financial Interest.

Knowles Husain Lindsay Inc Attorneys. Available at: https://www.polity.org.za/article/
section-75-of-the-companies-act-personal-financial-interest-2016-02-29
Wikipedia. Table of Consanguinity. Available at:

https://en.wikipedia.org/wiki/Consanguinity#/media/File:Table_of_Consanguinity_
showing_degrees_of_relationship.svg – Accessed 17 April 2021
World Bank, the Organisation for Economic Cooperation and Development (OECD),
and the United Nations Office on Drugs and Crime (UNODC). 2020. Preventing and
Managing Conflicts of Interest in the Public Sector – Good Practices Guide. Available at:
https://www.unodc.org/documents/corruption/Publications/2020/Preventing-and-Man-
aging-Conflicts-of-Interest-in-the-Public-Sector-Good-Practices-Guide.pdf

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About the Author ETHICS

INSTITUTE
Kris Dobie is senior manager for organisational ethics at The Ethics Institute (TEI),
based in Pretoria, South Africa.
His involvement in organisational ethics started in 2004, and he has a special interest
in corruption prevention and conflicts of interest. Over the years he has supported the
South African Government with numerous policy projects, including the development
of the Minimum Anti-Corruption Capacity Guidance, and the 2016 South African Local
Government Anti-Corruption Strategy.
He is continuously involved in TEI’s advisory and consulting activities for a diverse range
of clients from the public and private sectors. He has initiated and led a number of fund-
ed initiatives, including the Local Government Ethical Leadership Initiative under which
the Code for Ethical Leadership in Local Government has been developed.
Kris was the lead researcher on various editions of the South African Citizens’ Bribery
Survey, as well as the Public Sector Ethics Survey, and he co-authored the Ethics Re-
porting and Auditing Handbook.
He served on the Global Reporting Initiative’s anti-corruption working group for the re-
view of the ethics and anti-corruption reporting guidelines for the GRI’s G4 reporting
standard, and more recently served on the National Anti-Corruption Strategy Reference
Group.
He holds a degree in Landscape Architecture from the University of Pretoria, as well as

MPhil in Workplace Ethics (cum laude) from the same institution.
PAGE 51
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About The Ethics Institute ETHICS

INSTITUTE
The Ethics Institute is an independent institute producing original thought leadership

and offering a range of services and products related to organisational ethics.
Our vision is: Building an ethically responsible society.
We pursue our vision through thought leadership and an organisational ethics-related

offering, including training, advisory serviced, assessments, products and supporter
opportunities. We work with the public and private sectors and with professional asso-
ciations.
All original research work produced by The Ethics Institute, including the Ethics Handbook
Series, is freely available on our website.
The Ethics Institute
www.tei.org.za
012 342 2799
@TheEthicsInstitute
@EthicsInst

Every act of corruption entails a conflict of interest. In South Africa, and
globally, organisations are more than ever aware of their responsibility to
manage conflicts of interest effectively.
This book builds on numerous consultations with organisations who have

walked the hard miles in developing their conflict of interest management
systems. It is aimed at those who are responsible for managing conflicts
of interest in their organisations, be it in the public or private sectors.
It is divided into three sections:
1. Understanding conflicts of interest

This section defines conflicts of interest and gives a vocabulary for
talking about different types of conflicts with examples. It also sets out
the South African regulatory and common law environment dealing
with conflicts of interest.
2. Managing conflicts of interest
This section gives guidance on considerations and approaches to
managing conflicts of interest in organisations. It discusses policies,
procedures and systems for managing conflicts of interest.
3. Making conflict of interest decisions
This section considers the thinking process of evaluating and resolving
individual conflict of interest situations.
The Ethics Institute is an independent institute producing original thought leadership

and offering a range of ethics-related products and services. All original research
work produced by The Ethics Institute, including the Ethics Handbook Series,
is freely available on our website: www.tei.org.za.

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Conflict

Conflict of Interest Handbook

Published by: The Ethics Institute

© This publication is licensed under a Creative Commons Attribution

Published by The Ethics Institute 2023

Conflict of Interest Handbook

isational ethics with practical hands-on resources to deal

Prof Deon Rossouw

Conflict of Interest Handbook PAGE 2

Although a small sub-field of organisational ethics management, conflicts of interest have

The handbook considers conflicts of interest predominantly from an ethical perspective

The handbook is divided into three sections:

1. Understanding conflicts of interest

2. Managing conflicts of interest

3. Making conflict of interest decisions

Conflict of Interest Handbook PAGE 4

2. Understanding conflicts of interest ETHICS

2.1. Principal-agent relationship

Another example of a principal-agent relationship is where I am employed by an organ-

When I am employed by an organisation I act in its interest, not my own.

2.2. Defining conflicts of interest

“Conflict of Interest: A situation where an individual is confronted with choosing

There are three distinct elements to a conflict of interest:

1. Official function. This is generally one’s responsibility to the employer.

Conflict of Interest Handbook PAGE 6

Direct vs indirect interests

Beneficial owner is a term used to indicate who, once the intermediary

Financial vs non-financial interests

- A financial interest is the most common in conflicts of interest. I, or some-

2.3. Types of conflicts of interest

• Perceived, or apparent conflicts of interest are where it may reasonably seem to

It is important to not only be ethical, but also to be perceived

For purposes of building and maintaining a trust relationship with stakeholders it

Conflict of Interest Handbook PAGE 8

2.4. Examples of conflicts of interest

• Having a financial interest or directorship in a company that competes with your

Conflicts of interest are related to the concepts of nepotism and cronyism,

2.5. Conflicts of interest and corruption

- Conflict of interest: “A situation where an individual is confronted with

Conflict of Interest Handbook PAGE 10

Those responsible for the governance of an organisation should ensure that

2.6. Regulatory environment

1. “It is an implied term of every contract of employment that an employee

4. “Calculated silence in the face of a duty to inform an employer of material

Conflict of Interest Handbook PAGE 12

Adapted from Cowan Harper Madiki:

a) Private sector – Directors

The two most important regulatory documents related to conflicts of interest

Companies Act, 71 of 2008

In the Companies Act, it is specifically Section 75 on ‘Director’s

- The interest must be disclosed;

Personal financial interests (What needs to be disclosed?)

Section 2(1) of the Companies Act defines a related party as follows:

Conflict of Interest Handbook PAGE 14

To understand degrees of ‘natural or adopted consanguinity’, the diagram below is

2nd DEGREE Brother / Sister

Adapted from: http://www.jsu.edu/hr/nepotism/index.html

consanguinity or affinity grandparents, grandchildren, 2 4

seems to misinterpret the definition of second-degree 5