What is a conflict of interest?

A conflict of interest is a situation where a person or group stands to benefit from a decision or action they are responsible for making, even if it harms another. In Texas, corporate law has rules to prevent a conflict of interest from occurring. Generally, a conflict of interest exists when the decision-maker has a financial or personal interest that could influence their decision-making process or resulting outcome. For example, in Texas, a company board member may not be allowed to vote on a measure that would benefit a company they have a financial interest in. In such a situation, the board member is in a conflict of interest and must abstain from voting. The same is true for corporate officers and employees. In addition, it is against the law for corporate directors and officers to use confidential company information to make personal investments or benefit their business interests. If they do so, that is considered a conflict of interest, and they can be subject to criminal prosecution. To avoid a conflict of interest, the Texas corporate law encourages businesses to establish policies and procedures that clearly state what is and is not allowed when dealing with these types of issues. Businesses should also monitor the activities of their directors, officers, and staff to ensure they are acting in the best interest of the company.

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