In the context of family businesses, conflicts of interest may arise due to the complex relationships between family, ownership, and management. These conflicts can have significant implications for the dynamics, as well as the performance, of the family business. In this article, we will explore the issue of conflicts of interest in family businesses, examining how the occurrence of these conflicts takes place, the possible types of conflicts of interest, their implications, and potential solutions.

Emergence of Conflicts of Interest

Conflicts of interest are common in family businesses due to the intersection of roles and responsibilities between family and the business. These conflicts may arise when the personal interests of family members diverge from the needs of the company. An example is when a family member uses company resources for personal benefit or favors certain relatives at the expense of others.

There are various types of conflicts of interest that can arise in family businesses.

Firstly, there are conflicts between family roles and management roles, where family members in managerial positions make decisions that may benefit the family but not necessarily the overall business. Secondly, generational conflicts can occur as interests and priorities differ between generations, leading to tensions and disagreements related to strategic direction, succession, and resource distribution. Thirdly, conflicts can arise between family and non-family partners, especially in areas such as decision-making, profitability, and dividend distribution. It is crucial to delineate the implications of conflicts of interest. On one hand, these conflicts can undermine trust and collaboration among family members, negatively impacting both personal and business relationships. On the other hand, conflicts of interest can hinder strategic decision-making, impeding the implementation of necessary changes that limit the growth and profitability of the family business.

We share some tips for managing and resolving conflicts of interest in family businesses:ㅤ ㅤ

• Establish Clear Policies and Procedures: Develop clear policies and procedures specifically addressing conflicts of interest. Establish guidelines to ensure impartial decision-making based on the company's best interests.
• Promote Transparent Communication: Encourage open communication, allowing family members to express concerns and viewpoints constructively.
• Training and Skill Development: Include training in business ethics as part of skill development. This supports ethical decision-making for conflict management, preparing family members to address and resolve these situations appropriately.
• Incorporate External Advisors: Engage external advisors, such as consultants or advisory board members, who can provide an objective perspective to mediate conflicts of interest, mitigating subjective needs.

Conflicts of interest are a reality in family businesses, and at Ir Foundation, we aim to contribute effective tools that facilitate the recognition of their origins and propose appropriate solutions. These tools aid in managing conflicts, promoting strong governance, preserving family harmony, and fostering long-term business success.

Proper management of conflicts of interest is essential to preserve integrity, aligning with the sustainability of the family business.