Conflict of Interest

Definition of conflict of interest

A conflict of interest (تضارب المصالح), in the workplace, is a situation in which an employee has a personal interest that could influence a decision they take, or an opinion they give, on behalf of the employer.

Arabic documents may also use the form تعارض المصالح, with the same meaning. A code of conduct can list conflict of interest among the subjects it covers, with examples such as working for a competitor or contracting with a party in which the employee holds an interest.

Conflict of interest is a situation, not an act

One error in applying the concept is to regard a conflict of interest as an accusation. At root it is an existing situation, and it can arise without anyone choosing it: an employee marries someone who works for a supplier, inherits a share in a company that deals with their organisation, or finds that a relative has moved into a department that reviews their work.

The existence of the interest is therefore not a violation. The violation lies in concealing it, or in remaining in the decision while holding it. This distinction is practical, not a matter of wording: an organisation that handles disclosure as an admission of guilt receives no disclosures, and the situations remain in place without anyone knowing of them.

Forms a conflict of interest can take

• A financial interest. It is a share in, or a gain from, a party with which the employee decides how the organisation deals.
• A personal connection. It is a family tie, a friendship or a partnership with a party to a hiring, purchasing or appraisal decision.
• Outside work. It is a commitment to another party that competes with the employee’s work or falls within its field.
• Gifts and hospitality. They are whatever is accepted from an existing or prospective party to a business dealing.
• Information held through the role. It is the use, for a benefit outside the role, of what the employee knows because of it. The duty to keep the employer’s secrets is explained under trade secret.
• A future interest. It is a negotiation for a job with a party with which the employee currently decides how the organisation deals. This form can be harder to see than the others, because nothing in it exists yet.

How conflict of interest differs from nepotism and implicit bias

Conflict of interest, nepotism and implicit bias are discussed together under the integrity of decisions, and what separates them is whether an interest exists and whether the person holding it is aware of it:

• Conflict of interest. It is an existing personal interest, which may lead to no action at all. It can therefore be described before any decision is taken.
• Nepotism. It is a conscious decision to favour a connection over competence. It comes close to being a conflict of interest that was left in place and had its effect, and its field is decisions about people in particular.
• Implicit bias. It is unintended, the person holding it would reject it if it were put to them openly, and it rests on a person’s membership of a group. Its holder has no interest in it, so disclosure does not address it; the response to it lies in the design of the procedure.

For that reason no single tool serves all three. Disclosure and recusal address what the person concerned knows about; the design of the procedure addresses what they do not know about.

What an organisation does about a conflict of interest in practice

• Disclosure. The employee declares the interest when it arises and before any decision concerning the other party, not afterwards.
• Recusal. The person with the interest takes no part in the decision, in the recommendation leading to it, or in assessing its effect. Disclosure and recusal are also among the measures that can reduce nepotism.
• Moving the decision to someone with no interest in it, or raising it one level in the structure.
• Recording the reason for the decision, because a decision whose reason is not written down cannot be reviewed later. The same need for a decision maker who is not party to the matter is examined under procedural justice.
• Periodic updating of the disclosure, because interests change and do not announce themselves.
• A reporting channel for anyone who sees a situation but has no power to act on it, as described under corporate whistleblowing.

What makes a conflict of interest arrangement ineffective

• Disclosures that are collected but never examined. An annual form is filed, and no recusal and no move of a decision is ever based on it.
• A wide definition with no examples. A general clause in the code of conduct leaves the employee unable to tell whether their situation falls inside it, so they choose not to disclose.
• Handling the situation through secrecy instead of moving the decision. Concealment makes the situation worse and does not resolve it.
• Exempting those at the top of the structure. It cancels the whole arrangement in practice. The gap between what a code of conduct says and what actually happens can be measured by what follows the first violation by a senior person in the organisation.

Conflict of interest and the other documents of employment

A conflict of interest clause is examined alongside neighbouring clauses that form one set with it. A nondisclosure agreement addresses information and what is done with it, and a noncompete agreement addresses the period after the relationship ends. Conflict of interest addresses the decision while the relationship lasts. None of the three can stand in for another, because each applies to a different matter.

Conflict of interest in a worked example: what one committee member can move

Recusal can be taken for a formality as long as the decision is collective. The arithmetic says otherwise. Take a purchasing committee of five members, each with equal weight, assessing two offers:

• The first offer. Four members gave it an average of 70 out of 100, and the fifth member gave it 95. Its score is (95 + 70 × 4) ÷ 5 = (95 + 280) ÷ 5 = 375 ÷ 5 = 75.
• The second offer. Its score from the committee is 73, and for simplicity the fifth member also gave it 73, so its score is 73 with or without them.

The first offer wins by two points. If the fifth member, who holds the interest in the first supplier, had stepped aside, the first offer’s score would have been the average of the remaining four, that is 70, and the second offer would have won by three points.

The rule that follows from the arithmetic is that, on a committee of five with equal weights, one member’s effect on a score equals one fifth of the gap between the score they give and the average of the others. A deviation of 25 points by that member (95 against the others’ 70) therefore moves the result by 25 ÷ 5 = 5 points, which is larger than the two point margin that decided the example. So the number of members cannot be relied on to absorb the effect: the smaller the committee, the larger each member’s share, and the closer the offers, the smaller the deviation that is enough to reverse their order.

What makes a conflict of interest disclosure usable

A disclosure on which no arrangement is based is a sheet of paper in a file. Five elements make it fit to act on:

• The party, named specifically, not “one of the suppliers”.
• The nature of the connection: family, a share, a working relationship, or a negotiation under way.
• The date on which it arose, which makes the condition “before the decision” verifiable a year later.
• The decisions that may be affected because of the employee’s role, not a general description of their job.
• The proposed arrangement, and who approved it. A disclosure that stops at informing the organisation has changed nothing in the course of the decision.

The arrangement is not decided by the person with the interest. The case in which an employee decides for themselves that their interest “has no effect” is exactly the case the arrangement exists for, and the judgement in it belongs to someone with no interest.

Three levels of conflict of interest arrangement, by how close the employee is to the decision

• Recusal from a particular decision. It serves where the connection is confined to a single deal or nomination, and the employee carries on with the rest of their work.
• Withdrawal from the whole file. It is needed where dealings with the party extend over time, because stepping aside from one decision does not remove the person with the interest from influencing what comes before and after it: preparing the requirements, sorting the offers, and reviewing performance after the contract is signed.
• Changing the reporting line. It is needed where the connection is between an employee and the person who supervises them or appraises their performance. Recusal from a decision does not resolve that, because the relationship itself is where the conflict lies, so the reporting line is moved to someone else.

What disclosure alone does not resolve in a conflict of interest

Disclosure makes the interest known, but it does not make the decision neutral. An employee who disclosed and then stayed in the decision is in the same situation as before, with one addition: the organisation now knows about it. An organisation that regards disclosure as an end in itself builds up a complete file of known situations that have not been addressed, and that can leave it worse placed than not knowing, because what it knew can be asked about.

Recording does not resolve it alone either. Writing down the reason for a decision allows it to be reviewed later, and that is a real benefit, but it comes after the decision has been taken. The arrangement described above takes place before the decision, not after it, and what takes place after it is review, not prevention.

Conflict of interest under Article 80 of the Labor Law: when the position is exploited

The Saudi Labor Law (نظام العمل) attaches an effect to an interest that was acted on, not to its mere existence. Article 80 of the Labor Law allows the employer to rescind the contract without an award, notice or compensation in nine cases only. Among them are proof that the worker unlawfully exploited their position for personal gain, and proof that the worker disclosed industrial or commercial secrets of the work in which they are employed.

In every one of those cases, Article 80 of the Labor Law requires that the employer give the worker the opportunity to state the reasons for their objection to the rescission. That condition is part of the article, not a comment on it. Article 80 of the Labor Law is not unfair dismissal (الفصل التعسفي); it is the employer’s lawful exit from the award, the notice and the compensation, in the cases the Labor Law lists and in those alone. The nine cases are set out in our guide to dismissal under Articles 80 and 81 of the Labor Law.

The obligations an employee in Saudi Arabia carries in matters of conflict of interest come from their contract, from the work regulation (لائحة تنظيم العمل) approved for the establishment, and from its code of conduct. How that regulation is prepared is covered in our guide to the work organisation regulation. In the sources we reviewed, we found no statutory duty on an employee to disclose their interests to the employer, and no gift value above which disclosure becomes required. The worker duties listed in Article 65 of the Labor Law do not include one, and neither do the workers’ duties in Article 48 of the model work regulation (النموذج الموحّد). Anticorruption legislation fell outside our review. What follows from a breach of any of the documents above is a separate question, and the reference for it is the disciplinary procedure approved in the establishment.

The provisions relied on are those of the Saudi Labor Law as published by the Ministry of Human Resources and Social Development: Article 65 (the worker’s duties) and Article 80 (rescission without award, notice or compensation, its eighth and ninth cases, and the objection condition). Royal Decree M/44 of 1446H, in force since 19 February 2025, did not amend Articles 65 or 80 of the Labor Law; Article 80 of the Labor Law was last amended by Royal Decree M/46 of 1436H. Also relied on is Article 48 of the model work regulation, annexed to the Implementing Regulation (اللائحة التنفيذية).

This is an explanation of the concept and of the statutory provisions cited, not legal advice.

Related terms

• Corporate Whistleblowing
• Trade Secret
• Procedural Justice
• Organizational Politics
• Ombudsman