Conflict of Interest

A conflict of interest is a situation in which a person is in a position to derive personal benefit from actions or decisions made in their official capacity. A directors of corporations organized under the laws of a US state such as Delaware owes fiduciary duties of loyalty and care to the company and its stockholders. A director must put the interests of the company and its stockholders over the director’s own personal interests in making decisions for the company and evaluating opportunities. This includes not taking for the benefit of the director or the director’s affiliates any opportunities that come to the director related to the company before offering them to the company, and not divulging or using company confidential information for personal gain. If there is a potential conflict of interest, the director must disclose it and allow for the board of directors, with counsel, to determine how to proceed. For example, a director cannot recommend implementing an expensive marketing campaign that will be managed by the directors spouse without disclosing that relationship to the rest of the board.