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Finance Glossary

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Conflict Of Interest


A conflict of interest is a tricky ethical situation in which an individual, employee, or a corporate entity has a vested interest in something that makes their vote or input unreliable.


Cosmetics tycoon and board member Mabel Doughy votes in favor of granting a multi-year contract to Sticky Lipsticks, a major lipstick manufacturing company. The problem? Her son, Hughie Doughy, is CEO of Sticky Lipsticks. Her vote lets Sticky Lipsticks gain an advantage because Mabel is a board member. Not fair, which is why Mabel needs to disclose her association with Hughie and abstain from voting on this issue.