Conflict of Interest of Public Officials | Current Affairs | Vision IAS
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Conflict of Interest of Public Officials

Posted 22 Aug 2024

Updated 29 Aug 2024

5 min read

Introduction

Recently, a US-based firm accused the Chairperson of SEBI of violating SEBI’s Code of Conduct, leading to a potential conflict of interest. The situation presents a new potential for conflict of interests between civil servants or individuals in high-ranking positions, involving their private interests and public duties.

What is Conflict of Interest?

  • Definition: A 'conflict of interest' involves a conflict between the public duty and private interests of a public official, wherein, public official’s private interests can improperly influence the performance of his/her official duties and responsibilities (OECD)
  • Conflict of Interests between public and the private sectors have become a major issue of public concern across the globe due to close forms of collaboration such as public private partnerships, self-regulation, interchanges of personnel, sponsorships, etc.
  • Types of Conflict of Interest
    • Actual: A situation where the official’s private interest is in conflict with his/ her duty to perform in the public interest.
      • e.g., a public official awarding a lucrative contract to a company owned by their family member.
    • Potential: A situation where the official’s private interest have not yet come into conflict with his/ her duty to perform in the public interest but may do so in the future. 
      • e.g., an academic researcher receiving funding from a corporation for a study related to that company's products.
    • Perceived: A situation where the official’s private interest looks as if it is in conflict with his/ her duty to perform in the public interest, although that is not the case.
      • e.g., an elected official attending a private event hosted by a lobbyist, even if no direct favors are requested.

For Public Servants

  • Central Civil Services (Conduct) Rules, 1964: 
    • Civil Servants must declare any private interests relating to his public duties and take steps to resolve any conflicts in a way that protects the public interest;
    • Civil Servant should not misuse his/her position as civil servant and not take decisions in order to derive financial or material benefits for himself, his family or his friends.
  • Central Vigilance Commission guidelines for various procurements, bidding, and other processes outlining Conflict of Interests.
  • SEBI’s Code on Conflict of Interests for Boards Members: “A member shall take all steps necessary to ensure that any conflict of interests to which he may be subject to does not affect any decision of the Board.”

For Businesses

  • Section 166 of the Companies Act, 2013: A director of a company shall not involve in a situation in which he may have a direct or indirect interest that conflicts, or possibly may conflict, with the interest of the company.
  • SEBI Guidelines for dealing with conflict of interests of various entities such as stock exchanges, intermediaries, etc.

Way Forward to ensure effective resolution of Conflict of Interests

  • Identification of Relevant Conflict of Interest: Establish procedures for identifying, managing, and resolving conflict of interest situations by establishment of effective, complete, and prompt disclosure process.
An infographic image showing strategies for resolution of Conflict of Interest. Strategies listed include Disclosure, Divestment, Recusal, Restriction of access, Re-arrangement, Assignment, Resignation from conflicting private-capacity function, and Resiignation of the public official from their public office.
  • Demonstrate Leadership Commitment: All public officials should keep their private interests in a manner that preserves public confidence and integrity of the organization rather than mere compliance in letter.
  • Ensure wide publication and understanding of the Conflict of Interest policy: E.g. by publishing the Conflict of Interest Policy, giving regular reminders etc.
  • Periodic review of 'at-risk' areas for potential conflict of interest situations: E.g., Inside information, gifts and other forms of benefit, outside appointments, activity after leaving public office, etc.
  • Introduction of Cooling off period for public servants to prevent from revolving door: Cooling off period is the introduction of a minimum time interval restricting former public officials from accepting employment in the private sector.
    • Revolving door refers to the movement of individuals from government to the private sector and from the private sector to government.
  • Creation of independent of oversight bodies: Independent bodies or ethics commissions can be established to pro-actively monitor, investigate, and enforce conflict of interest rules.
    • e.g., Several States in the US have Ethics Commission as guardians of the standards of conduct for public officials.

Conclusion 

Addressing conflicts of interest is not merely a matter of legal compliance but a fundamental aspect of ethical governance. Public officials hold positions of trust, and safeguarding this trust requires robust mechanisms to prevent, identify, and manage conflicts of interest. By fostering a culture of transparency, accountability, and integrity, governments can ensure that decisions are made in the best interest of the citizens, thereby maintaining the legitimacy of public institutions and reinforcing the democratic principles.

An infographic stating quotation by Thomas Nixon Carver on Conflict of Interest. The quotation states that - 'The need for justice grows out of the conflict of human interests. That is to say, if there were no conflict of interests among mankind, we should never have invented the word justice, nor conceived the idea for which it stands.'

Check your Ethical Aptitude

You are a senior official in a government regulatory body. Recently, one of your close friends, who run a successful private company, has approached you with a business proposal. He wants to start a new venture in a sector that your department regulates and seeks your guidance on navigating the regulatory landscape. He assures you that this is just friendly advice and offers you a small stake in the company as a token of appreciation for your expertise.

Meanwhile, your department is in the process of formulating new policies that could significantly impact businesses in this sector. You possess insider knowledge about these upcoming changes.

On the basis of the above case study, answer the following questions:

  • Identify the ethical issues and potential conflicts of interest in this situation.
  • What course of action would you take in this scenario? Justify your response based on ethical principles and guidelines for public servants. 
  • Suggest three systemic measures that can be implemented to prevent such conflicts of interest in public administration. 
  • Tags :
  • Conflict of Interest
  • Public Service
  • Code of Conduct
  • Civil Service Conduct Rules
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