Conflicts of Interest

Laws governing Corporations in the United States are fairly standard from one state to the next. The Oklahoma Statute provides detailed rules regarding shareholder meetings  voting, and  voting trusts.

Matters upon which members vote include the approval or disapproval when it is found that a director has a conflict of interest. The affected board member in such a situation has a potential for divided loyalties.

To avoid problems, the minutes should show that the board member disclosed the potential conflict and that the board member with the conflict abstained from the vote.
Every board member owes a legal duty of good faith, full disclosure, fair dealing and undivided loyalty to the corporation. Directors must positively renounce anything that is unfair. A breach or violation of this duty typically occurs where directors have a conflict of interest to the detriment of the corporation.

Directors must act in the best interests of the corporation and its members.

The existence of a conflict of interest may not, in and of itself, be evidence of wrongdoing. In fact,  it is virtually impossible to avoid having conflicts of interest from time to time. A conflict of interest can, however, become a legal matter for example when an individual tries (and/or succeeds in) influencing the outcome of a decision. A director of a corporation will be subject to legal liability if a conflict of interest breaches his duty of loyalty.

There often is confusion over these two situations. Someone accused of a conflict of interest may deny that a conflict exists because he/she did not act improperly. In fact, a conflict of interest can exist even if there are no improper acts as a result of it. (One way to understand this is to use the term "conflict of roles".) A person with two roles,  for example—may experience situations where those two roles conflict. The conflict can be mitigated but it still exists.