Four key categories of conflicts of interest

To gain a clearer understanding of the extent of conflicts of interest, it is beneficial to examine Boatright’s four distinct categories of conflicts of interest (2017, 96-98):

1. Exercising biased judgement
2. Engaging in direct competition
3. Misusing a position
4. Violating confidentiality

The concept of biased judgment mainly refers to professionals with specific knowledge who serve as experts in a principal-agent dynamic (lawyers, accountants, etc.). A biased judgment can arise due to various circumstances, but also as a result of deliberate choices. Classic instances in this area involve gifts that can compromise an expert’s impartiality, with the gift’s value being a key factor. In various cultures, giving gifts can be a traditional and even essential practice, which complicates the line between bribery and gift-giving. An illustration of this distinction is found in the Chinese tradition of guanxi, which initially refers simply to “relationship”. However, business relationships in the context of guanxi often involve the exchange of gifts — sometimes symbolic, but often material — as a way to strengthen mutual obligations and trust. To avoid potential conflicts of interest, many companies in the mining industry have implemented restrictions on giving and receiving gifts as a preventive measure.

The second category, engaging in direct competition, describes situations in which agents compete with their principal. For example, this could be the case when an employee offers the same services they provide for their principal as a freelancer (e.g. environmental impact assessments). Under such circumstances, the agent may not only be exercising biased judgment in his work for his principal, but may also be actively limiting his principal's profits. In some cases, companies may approve outside projects if they are disclosed, especially if the work has only a minor influence on the principal's interests.

In the third category, either the principal or the agent misuses their power for personal or organizational benefit. One typical illustration of this category is nepotism, where, for example, a hiring manager at a mining company sways the recruitment process to favor a relative applying for the position. Although this may not always result in adverse effects for the principal – as the relative could genuinely be the most qualified applicant – it still represents a conflict of interest because the choice was influenced by a personal relationship, not just the candidate's merit.

The final type of conflicts of interest is the violation of confidentiality. Imagine a situation in which a mining company collects important data while exploring a potential mining location, and a member of the exploration team shares this information with outside parties. Even if this disclosure does not negatively impact the company’s interests, it still represents a conflict of interest. Although the misuse of power and breaches of confidentiality frequently intersect, there are instances where a violation of confidentiality happens without any authority involved. For example, an employee might accidentally discover important information and share it, even without any harmful intent.