What is Corporate Conflict of Interest?
A conflict of interest exists when a director, executive, or employee’s personal interests could influence — or appear to influence — their professional judgement. It does not require actual wrongdoing; the appearance is enough to require disclosure and management.
How It Works
- Common cases: related-party transactions, dual directorships, vendor relationships, family connections
- Disclosure: the conflicted person tells the board or compliance function in writing
- Recusal: the conflicted person does not vote on or influence the related decision
- Approval: independent directors or an audit committee approve the transaction at arm’s length
- Public listed companies disclose material related-party transactions in their annual report
Saudi Context
Saudi CMA Corporate Governance Regulations require directors to disclose direct and indirect interests in any transaction the company enters into, abstain from voting on it, and ensure pricing is at arm’s length. Major related-party deals also need general-assembly approval.
Example
A board director of a Saudi listed company also owns 30% of a supplier the company wants to sign a SAR 50 million contract with. He discloses the interest in writing, recuses himself from the discussion and vote, and the independent directors approve the contract after benchmarking the price against two other bids.