Blood is not thicker than water when trust is broken

By Prof. Enriquer Soriano

The flood control scandal has shocked the nation. Ghost projects and kickbacks have siphoned billions from public coffers, enriching a select few. Family businesses face a similar threat—not from the public, but from within. When governance is absent, conflict of interest quietly becomes the norm, enabling family members or in-laws to enrich themselves at the expense of the enterprise and its rightful shareholders.

Understanding Conflict of Interest in Families

Conflict of interest occurs when someone in a position of trust uses it for personal gain rather than for the enterprise or family as a whole. In family businesses, this is often disguised as loyalty or practicality, but the consequences are serious: financial leakage, broken trust, and fractured relationships.

Common forms of conflict of interest include:

Sweetheart Deals – Awarding contracts to companies owned by relatives or spouses, often at inflated prices or under preferential terms.

Self-Dealing Real Estate Transactions – Selling or leasing company-owned property to family members below market value.

Related-Party Loans – Using company funds to finance a relative’s side business or personal project, often without repayment.

Hidden Partnerships – Holding undisclosed stakes in suppliers, customers, or competitors, influencing decisions for personal benefit.

Nepotism Without Merit – Hiring or promoting relatives or in-laws without qualifications, creating inflated salaries and unchecked authority.

Much like ghost projects in government, these acts are subtle, often rationalized as “family benefits,” yet over time they quietly drain wealth and destroy trust.

Case Study: Siblings and In-Laws Deepen the Divide

A family enterprise operating in both food and real estate illustrates how multiple siblings and in-laws can exacerbate conflict. Five siblings assumed operational control after the founder’s passing, and in-laws quickly became active participants, each lobbying for personal gain:

One brother, responsible for operations, diverted food distribution contracts to his wife’s cousins, ensuring profits flowed to his branch of the family.

Another sibling, overseeing real estate, sold prime company property to a son-in-law at a fraction of its market value, under the pretext of “keeping it in the family.”

The youngest sister, managing the treasury, extended large interest-free loans to her husband’s retail business, using company funds as if they were her own.

Several nephews and nieces were appointed to managerial roles without qualifications, enjoying inflated salaries and unchecked authority.

Initially, silence prevailed as family members feared confrontation or “dishonoring” the family legacy. But over time, profits dwindled, irregularities became noticeable, and minority shareholders demanded accountability. In-laws, emboldened by their spouses’ authority, actively lobbied for more influence, turning board meetings and family gatherings into arenas of conflict.

When auditors finally investigated, tens of millions in irregularities were uncovered. Litigation ensued and the company’s reputation in the market collapsed. What should have been a thriving enterprise became a cautionary tale of how unchecked self-interest can destroy decades of work.

Why Conflict of Interest is So Destructive

Conflict of interest is more than a financial issue—it is a trust killer. Once family members suspect others of self-enrichment, relationships fracture. Resentment festers, and even legitimate decisions are questioned.

Unlike external competition, which is visible and manageable, internal self-interest silently erodes both wealth and cohesion, leaving families bitterly divided.

Closing Reflection: Act Before It’s Too Late

Just as padded contracts and ghost projects rob citizens of public resources, sweetheart deals and self-dealing quietly rob families of their legacy. Conflict of interest often starts small, hidden under the guise of “family privilege,” but its impact compounds over time.

If your family has not yet implemented conflict of interest policies, mandatory disclosure rules, or independent audits, your wealth is already at risk. Silence and inaction are the greatest enablers of corruption in family enterprises.

The choice is clear: either take action today, or watch decades of hard-earned wealth unravel before your eyes.

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Power without accountability destroys wealth and trust. Sweetheart deals, self-dealing, and unchecked in-law influence quietly erode not just profits, but the very relationships that hold a family enterprise together.

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