A conflict of interest (COI) occurs when an
individual or
organization is involved in multiple interests, one of which could
possibly
corrupt the motivation for an act in another.
The presence of a conflict of interest is independent from the
execution of impropriety. Therefore, a conflict of interest can be
discovered and voluntarily defused before any
corruption occurs. A widely used definition is: "A conflict of
interest is a set of circumstances that creates a risk that professional
judgement or actions regarding a primary interest will be unduly
influenced by a secondary interest."[1]
Primary interest refers to the principal goals of the profession
or activity, such as the protection of clients, the health of patients,
the integrity of research, and the duties of public office. Secondary
interest includes not only financial gain but also such motives as
the desire for professional advancement and the wish to do favours for
family and friends, but conflict of interest rules usually focus on
financial relationships because they are relatively more objective,
fungible, and quantifiable. The secondary interests are not treated as
wrong in themselves, but become objectionable when they are believed to
have greater weight than the primary interests. The conflict in a
conflict of interest exists whether or not a particular individual is
actually influenced by the secondary interest. It exists if the
circumstances are reasonably believed (on the basis of past experience
and objective evidence) to create a risk that decisions may be unduly
influenced by secondary interests.
William K. Black insists that "Conflicts of interest matter."[2]
In the run up to the
Savings and loan crisis of the 1980s and early 1990's,
control frauds like
Charles Keating were able to get legislators like Speaker of the
House
Jim
Wright, the
Keating Five Senators and majorities in both the US House and Senate
to suppress investigations of massive criminality until their
Ponzi schemes finally collapsed. Only then did citizen pressure and
media involvement force political action. Then regulators filed
thousands of criminal referrals that translated into over a thousand
felony convictions. The current
foreclosure and
Sub prime mortgage crisis is similar to the run up to the S&L crisis
with zero criminal referrals and zero prosecutions of key finance
executives. Black calls this the de facto decriminalization of elite
financial fraud.[3]
As with the S&L crisis, the current situation is facilitated by
conflicts of interest in the
media and the
US system of privately funded political campaigns.
Conflicts of interest related to the practice of law
Professional responsibility |
Duties to the client |
- Avoiding conflict of interest
|
Duties to the court |
|
Duties to the profession |
|
Sources of law |
|
Penalties for misconduct |
|
|
Judicial disqualification, also referred to as recusal,
refers to the act of abstaining from participation in an official action
such as a court case|legal proceeding due to a conflict of interest of
the presiding
court official or administrative officer. Applicable statutes or
canons of
ethics may provide standards for recusal in a given proceeding or
matter. Providing that the judge or presiding officer must be free from
disabling conflicts of interest makes the fairness of the proceedings
less likely to be questioned.[4]
In the
legal profession, the duty of loyalty owed to a client prohibits an
attorney (or a
law
firm) from representing any other party with interests adverse to
those of a current client. The few exceptions to this rule require
informed written consent from all affected clients, i.e., an "ethical
wall". In some circumstances, a conflict of interest can never be waived
by a client. In perhaps the most common example encountered by the
general public, the same firm should not represent both parties in a
divorce or child custody case.
A prohibited or undisclosed representation involving a conflict of
interest can subject an attorney to disciplinary hearings, the denial or
disgorgement of legal fees, or in some cases (such as the failure to
make mandatory disclosure), criminal proceedings. In the
United States, a law firm usually cannot represent a client if its
interests conflict with those of another client, even if they have
separate lawyers within the firm, unless (in some jurisdictions) the
lawyer is segregated from the rest of the firm for the duration of the
conflict. Law firms often employ software in conjunction with their case
management and accounting systems in order to meet their duties to
monitor their conflict of interest exposure and to assist in obtaining
waivers.
Conflicts of interest generally (unrelated to the practice of law)
More generally, conflicts of interest can be defined as any situation
in which an individual or corporation (either private or governmental)
is in a position to exploit a professional or official capacity in some
way for their personal or corporate benefit.
Depending upon the law or rules related to a particular organization,
the existence of a conflict of interest may not, in and of itself, be
evidence of wrongdoing. In fact, for many professionals, 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, for personal benefit. A director or executive of a
corporation will be subject to legal liability if a conflict of interest
breaches his/her
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—an
individual who owns
stock and
is also a
government official, for example—may experience situations where
those two roles conflict. The conflict can be mitigated—see below—but it
still exists. In and of itself, having two roles is not illegal, but the
differing roles will certainly provide an incentive for improper acts in
some circumstances.)
As an example, in the sphere of business and control, according to
the
Institute of Internal Auditors:
conflict of interest is a situation in which an
internal auditor, who is in a position of trust, has a
competing professional or personal interest. Such competing
interests can make it difficult to fulfill his or her duties
impartially. A conflict of interest exists even if no
unethical or improper act results. A conflict of interest
can create an appearance of impropriety that can undermine
confidence in the internal
auditor, the
internal audit activity, and the profession. A conflict of
interest could impair an individual's ability to perform his or
her duties and responsibilities objectively.
[5][6]
Organizational conflict of interest
An organizational conflict of interest (OCI) may exist in the same
way as described above, in the realm of the private sector providing
services to the Government, where a corporation provides two types of
services to the Government that have conflicting interest or appear
objectionable (i.e.: manufacturing parts and then participating on a
selection committee comparing parts manufacturers). Corporations may
develop simple or complex systems to mitigate the risk or perceived risk
of a conflict of interest. These risks are typically evaluated by a
governmental office (for example, in a U.S. Government
RFP) to determine whether the risks pose a substantial advantage to
the private organization over the competition or will decrease the
overall competitiveness in the bidding process.
Relationship to medical research
The influence of the
pharmaceutical industry on medical research has been a major cause
for concern. In 2009 a study found that "a number of academic
institutions" do not have clear guidelines for relationships between
Institutional Review Boards and industry.[7]
Types
of conflicts of interests
The following are the most common forms of conflicts of interests:
-
Self-dealing, in which an official who controls an organization
causes it to enter into a transaction with the official, or with
another organization that benefits the official. The official is on
both sides of the "deal."
- Outside employment, in which the interests of one job contradict
another.
- Family interests, in which a spouse, child, or other close
relative is employed (or applies for employment) or where goods or
services are purchased from such a relative or a firm controlled by
a relative. For this reason, many employment applications ask if one
is related to a current employee. If this is the case, the relative
could then recuse from any hiring decisions. Abuse of this type of
conflict of interest is called
nepotism.
- Gifts from friends who also do business with the person
receiving the gifts. (Such gifts may include non-tangible things of
value such as
transportation and
lodging.)
- Pump and dump, in which a stock broker who owns a security
artificially inflates the price by "upgrading" it or spreading
rumors, sells the security and adds
short position, then "downgrades" the security or spreads
negative rumors to push the price down.
Other improper acts that are sometimes classified as conflicts of
interests are probably better classified elsewhere. Accepting
bribes can be classified as corruption; almost everyone in a
position of authority, particularly public authority, has the potential
for such wrongdoing. Similarly, use of government or corporate property
or assets for personal use is
fraud,
and classifying this as a conflict of interest does not improve the
analysis of this problem. Nor should unauthorized distribution of
confidential information, in itself, be considered a conflict of
interest. For these improper acts, there is no inherent conflict of
roles (see above), unless being a (fallible)
human being rather than (say) a
robot in
a position of power or authority is considered to be a conflict.
COI is sometimes termed
competition of interest rather than "conflict", emphasizing a
connotation of natural
competition between valid interests rather than violent conflict
with its connotation of victimhood and unfair aggression. Nevertheless,
denotatively, there is too much overlap between the terms to make
any objective differentiation.
Examples
|
The
examples and perspective in this section deal primarily with
the United States and do not represent a
worldwide view of the subject.
Please
improve this article and discuss the issue on the
talk page. (April 2013)
|
Environmental Hazards and Human Health
Baker[8]
summarized 176 studies of the potential impact of
Bisphenol A on human health as follows:[9]
Funding |
Harm |
No Harm |
Industry |
0 |
13 (100%) |
Independent (e.g., government) |
152 (86%) |
11 (14%) |
Lessig[10]
noted that this does not mean that the funding source influenced the
results. However, it does raise questions about the validity of the
industry-funded studies specifically, because the researchers conducting
those studies have a conflict of interest; they are subject at minimum
to a natural human inclination to please the people who paid for their
work. Lessig provided a similar summary of 326 studies of the potential
harm from cell phone usage with results that were similar but not as
stark.[11]
Self-Policing
Self-policing of any group is also a conflict of interest. If any
organization, such as a corporation or government bureaucracy, is asked
to eliminate unethical behavior within their own group, it may be in
their interest in the short run to eliminate the appearance of unethical
behavior, rather than the behavior itself, by keeping any ethical
breaches hidden, instead of exposing and correcting them. An exception
occurs when the ethical breach is already known by the public. In that
case, it could be in the group's interest to end the ethical problem to
which the public has knowledge, but keep remaining breaches hidden.
Insurance
Claims Adjusters
Insurance companies retain
claims adjusters to represent their interest in adjusting claims. It
is in the best interest of the insurance companies that the very
smallest settlement is reached with its claimants. Based on the
adjuster's experience and knowledge of the insurance policy it is very
easy for the adjuster to convince an unknowing claimant to settle for
less than what they may otherwise be entitled which could be a larger
settlement. There is always a very good chance of a conflict of interest
to exist when one adjuster tries to represent both sides of a financial
transaction such as an insurance claim. This problem is exacerbated when
the claimant is told, or believes, the insurance company's
claims adjuster is fair and impartial enough to satisfy both theirs
and the insurance company's interests. These types of conflicts could be
easily be avoided by the use of disclosures.
Purchasing Agents and Sales Personnel
A person working as the equipment purchaser for a company may get a
bonus proportionate to the amount he's under budget by year end.
However, this becomes an incentive for him to purchase inexpensive,
substandard equipment. Therefore, this is counter to the interests of
those in his company who must actually use the equipment.
W. Edwards Deming listed "purchasing on price alone" as number 4 of
his famous
14 points, and he often said things to the effect that "He who
purchases on price alone deserves to get rooked."
Governmental
Officials
Regulating conflict of interest in government is one of the aims of
political ethics. Public officials are expected to put service to
the public and their constituents ahead of their personal interests.
Conflict of interest rules are intended to prevent officials from making
decisions in circumstances that could reasonably be perceived as
violating this duty of office. Rules in the executive branch tend to be
stricter and easier to enforce than in the legislative branch.[12]
Two problems make legislative ethics of conflicts difficult and
distinctive.[13]
First, as James Madison wrote, legislators should share a "communion of
interests" with their constituents. Legislators cannot adequately
represent the interests of constituents without also representing some
of their own. As Senator Robert S. Kerr once said, "I represent the
farmers of Oklahoma, although I have large farm interests. I represent
the oil business in Oklahoma ... and I am in the oil business. ... They
don't want to send a man here who has no community of interest with
them, because he wouldn't be worth a nickel to them."[14]
The problem is to distinguish special interests from the general
interests of all constituents. Second, the "political interests" of
legislatures include campaign contributions which they need to get
elected, and which are generally not illegal and not the same as a
bribe. But under many circumstances they can have the same effect. The
problem here is how to keep the secondary interest in raising campaign
funds from overwhelming what should be their primary interest:
fulfilling the duties of office.
Politics in the U.S. is dominated in many ways by political campaign
contributions.[4]
Candidates are often not considered "credible" unless they have a
campaign budget far beyond what could reasonably be raised from citizens
of ordinary means. The pernicious impact of this money can be found in
many places, most notably in studies of how campaign contributions
affect legislative behavior. For example, the price of sugar in the US
has been roughly double the international price for over half a century.
In the 1980s, this added $3 billion to the annual budget of US
consumers, according to Stern,[15]
who provided the following summary of one part of how this happens:
Contributions from the sugar lobby, 1983–1986 |
Percent voting in 1985 against gradually reducing sugar
subsidies |
> $5,000 |
100% |
$2,500–5,000 |
97% |
$1,000–2,500 |
68% |
$1–1,000 |
45% |
$0 |
20% |
This $3 billion translates into $41 per household per year. This is
in essence a tax
collected by a nongovernmental agency: It is a cost imposed on consumers
by governmental decisions, but never considered in any of the standard
data on tax
collections.
Stern notes that sugar interests contributed $2.6 million to
political campaigns, representing well over $1,000 return for each $1
contributed to political campaigns. This, however, does not include the
cost of lobbying. Lessig[16]
cites six different studies that consider the cost of lobbying with
campaign contributions on a variety of issues considered in Washington,
DC. These studies produced estimates of the anticipated return on each
$1 invested in lobbying and political campaigns that ranged from $6 to
$220. Lessig notes that clients who pay tens of millions of dollars to
lobbyists typically receive billions.
Lessig,[10]
insists that this does not mean that any legislator has sold his or her
vote. One of several possible explanations Lessig gives for this
phenomenon is that the money helped elect candidates more supportive of
the issues pushed by the big money spent on lobbying and political
campaigns. He notes that if any money perverts democracy, it is the
large contributions beyond the budgets of citizens of ordinary means;
small contributions from common citizens have long been considered
supporting of democracy.[17]
When such large sums become virtually essential to a politician's
future, it generates a substantive conflict of interest contributing to
a fairly well documented distortion on the nation's priorities and
policies.
Beyond this, governmental officials, whether elected or not, often
leave public service to work for companies affected by legislation they
helped enact or companies they used to regulate or companies affected by
legislation they helped enact. This practice is called the
Revolving door. Former legislators and regulators are accused of (a)
using inside information for their new employers or (b) compromising
laws and regulations in hopes of securing lucrative employment in the
private sector. This possibility creates a conflict of interest for all
public officials whose future may depend on the
Revolving door.
Finance Industry and Elected Officials
Conflicts of interest among elected officials is part of the story
behind the increase in the percent of US corporate domestic profits
captured by the finance industry depicted in that accompanying figure.
Finance as a percent of US Domestic Corporate Profits
Finance includes banks, securities and insurance. In
1932-1933, the total US domestic corporate profit was
negative. However, the financial sector made a profit in
those years, which made its percentage negative, below 0 and
off the scale in this plot.
[18]
From 1934 through 1985, the finance industry averaged 13.8% of U.S.
domestic corporate profit. Between 1986 and 1999, it averaged 23.5%.
From 2000 through 2010, it averaged 32.6%. Some of this increase is
doubtless due to increased efficiency from banking consolidation and
innovations in new financial products that benefit consumers. However,
if most consumers had refused to accept financial products they did not
understand, e.g.,
negative amortization loans, the finance industry would not have
been as profitable as it has been, and the
Late-2000s recession might have been avoided or postponed. Stiglitz[19]
noted that the
Late-2000s recession was created in part because, "Bankers acted
greedily because they had incentives and opportunities to do so". They
did this in part by innovating to make consumer financial products like
retail banking services and home mortgages as complicated as possible to
make it easy for them to charge higher fees. Consumers who shop
carefully for financial services typically find better options than the
primary offerings of the major banks. However, few consumers think to do
that. This explains part of this increase in financial industry profits.
However, a major portion of this increase and a driving force behind
Late-2000s recession has been the corrosive effect of money in
politics, giving legislators and the President of the U.S. a conflict of
interest, because if they protect the public, they will offend the
finance industry, which contributed $1.7 billion to political campaigns
and spent $3.4 billion ($5.1 billion total) on lobbying from 1998 to
2008.[20][21][22]
To be conservative, suppose we attribute only the increase from 23.5%
of 1986 through 1999 to the recent 32.6% average to governmental actions
subject to conflicts of interest created by the $1.7 billion in campaign
contributions. That's 9% of the $3 trillion in profits claimed by the
finance industry during that period or $270 billion. This represents a
return of over $50 for each $1 invested in political campaigns and
lobbying for that industry. (This $270 billion represents almost $1,000
for every man, woman and child in the U.S.) There is hardly any place
outside of politics with such a high
return on investment in such a short time.
Finance Industry and economists
Economists (unlike other professions such as sociologists) do not
formally subscribe to a professional ethical code. Close to 300
economists have signed a letter urging the
American Economic Association (the discipline’s foremost
professional body), to adopt such a code. The signatories include
George Akerlof, a Nobel laureate, and
Christina Romer, who headed Barack Obama’s Council of Economic
Advisers.[23]
This call for a code of ethics was supported by the public attention
the documentary
Inside Job (winner of an Academy Award) drew to the consulting
relationships of several influential economists.[24]
This documentary focused on conflicts that may arise when economists
publish results or provide public recommendation on topics that affect
industries or companies with which they have financial links. Critics of
the profession argue, for example, that it is no coincidence that
financial economists, many of whom were engaged as consultants by Wall
Street firms, were opposed to regulating the financial sector.[25]
In response to criticism that the profession not only failed to
predict the 2007-2008 financial crisis but may actually have helped
create it, the American Economic Association has adopted new rules in
2012: economists will have to disclose financial ties and other
potential conflicts of interest in papers published in academic
journals. Backers argue such disclosures will help restore faith in the
profession by increasing transparency which will help in assessing
economists' advice.[26]
Stockbrokers
A conflict of interest is a manifestation of the moral hazard
problem, particularly when a financial institution provides multiple
services and the potentially competing interests of those services may
lead to a concealment of information or dissemination of misleading
information. A conflict of interest exists when a party to a transaction
could potentially make a gain from taking actions that are detrimental
to the other party in the transaction.[27]
There are many types of conflicts of interest such as a "pump and
dump" by stockbrokers. This is when a stockbroker who owns a security
artificially inflates the price by upgrading it or spreading rumors, and
then sells the security and adds short position. They will then
downgrade the security or spread negative rumors to push the price back
down. This is an example of stock fraud. It is a conflict of interest
because the stockbrokers are concealing and manipulating information to
make it misleading for the buyers. The broker may claim to have the
"inside" information about impeding news and will urge buyers to buy the
stock quickly. Investors will buy the stock, which creates a high demand
and raises the prices.
This rise in prices can entice more people to believe the hype and
then buy shares as well. The stockbrokers will then sell their shares
and stop promoting, the price will drop, and other investors are left
holding stock that is worth nothing compared to what they paid for it.
The brokers are using their knowledge and position in a way to influence
and control others and gain personally, which is morally wrong.
One major example of pump and dump would be with Enron, in which
executives participated in an elaborate scheme that fooled even the most
experienced analysts on Wall Street. Enron falsely reported profits,
which inflated stock prices, and covered the real numbers by using
questionable accounting practices; 29 executives sold overvalued stock
for more than a billion dollars before the company went bankrupt[28]
Media
Any
media organization has a conflict of interest in discussing anything
that may impact its ability to communicate as it wants with its
audience. For example, the
Wikimedia Foundation has a conflict of interest in discussing the
Stop Online Piracy Act or any other legislation or governmental
action that could impact its ability to deliver content to its intended
audience.
The business model of commercial media organizations (i.e., any that
accept advertising) is selling behavior change in their audience to
advertisers.[29][30][31]
However, few in their audience are aware of the conflict of interest
between the
profit motive and the altruistic desire to serve the public and
"give the audience what it wants."
Many major advertisers
test their ads in various ways to measure the
return on investment in advertising. Advertising rates are set as a
function of the size and spending habits of the audience as measured by
the
Nielsen Ratings. Media action expressing this conflict of interest
is evident in the reaction of
Rupert Murdoch, Chairman of
News Corp., owner of
Fox, to changes in data collection methodology adopted in 2004 by
the Nielsen Company to more accurately measure viewing habits. The
results corrected a previous overestimate of the market share of
Fox.
Murdoch reacted by getting leading politicians to denounce the
Nielsen Ratings as racists.
Susan Whiting, president and CEO of Nielsen Media Research,
responded by quietly sharing Neilsen's data with her leading critics.
The criticism disappeared, and Fox paid Nielsen's fees.[32]
Murdoch had a conflict of interest between the reality of his market and
his finances.
Commercial media organization lose money if they provide content that
offends either their audience or their advertisers. The substantial
media consolidation that occurred since the 1980s has reduced the
alternatives available to the audience, thereby making it easier for the
ever larger companies in this increasingly
oligopolistic industry to hide news and entertainment potentially
offensive to advertisers without losing audience. If the media provide
too much information on how congress spends its time, a major advertiser
could be offended and could reduce their advertising expenditures with
the offending media company; indeed, this is one of the ways the market
system has determined which companies won and which either went out of
business or were purchased by others in this media consolidation.
(Advertisers don't like to feed the mouth that bites them, and often
don't. Similarly, commercial media organizations are not eager to bite
the hand that feeds them.) Advertisers have been known to fund media
organizations with editorial policies they find offensive if that media
outlet provides access to a sufficiently attractive audience segment
they cannot efficiently reach otherwise.
Election years are a major boon to commercial broadcasters, because
virtually all political advertising is purchased with minimal advance
planning, paying therefore the highest rates. The commercial media have
a conflict of interest in anything that could make it easier for
candidates to get elected with less money.[30]
Accompanying this trend in media consolidation has been a substantial
reduction in
investigative journalism,[30]
reflecting this conflict of interest between the business objectives of
the commercial media and the public's need to know what government is
doing in their name. This change has been tied to substantial changes in
law and culture in the U.S. To cite only one example, researchers have
tied this decline in investigative journalism to an increased coverage
of the "police blotter".[33]
This has further been tied to the fact that the United States has the
highest incarceration rate in the world.
Beyond this, virtually all commercial media companies own substantial
quantities of copyrighted material. This gives them an inherent conflict
of interest in any public policy issue affecting copyrights. McChesney
noted that the commercial media have lobbied successfully for changes in
copyright law that have led "to higher prices and a shrinking of the
marketplace of ideas", increasing the power and profits of the large
media corporations at public expense. One result of this is that "the
people cease to have a means of clarifying social priorities and
organizing social reform".[34]
A free market has a mechanism for controlling abuses of power by media
corporations: If their censorship becomes too egregious, they lose
audience, which in turn reduces their advertising rates. However, the
effectiveness of this mechanism has been substantially reduced over the
past quarter century by "the changes in the concentration and
integration of the media."[35]
Would the
Anti-Counterfeiting Trade Agreement have advanced to the point of
generating substantial
protests without the secrecy behind which that agreement was
negotiated—and would the government attempts to sustain that secrecy
have been as successful if the commercial media had not been a primary
beneficiary and had not had a conflict of interest in suppressing
discussion thereof?
Ways to mitigate conflicts of interests
Removal
The best way to handle conflicts of interests is to avoid them
entirely. For example, someone elected to political office might sell
all corporate
stocks that they own before taking office, and resign from all
corporate boards. Or that person could move their corporate stocks to a
special trust, which would be authorized to buy and sell without
disclosure to the owner. (This is referred to as a "blind
trust".) With such a trust, since the politician does not know in
which companies they have investments, there should be no
temptation to act to their advantage.
Disclosure
Commonly, politicians and high-ranking government officials are
required to disclose financial information - assets such as stock,
debts such
as loans,
and/or corporate positions held, typically annually. To protect privacy
(to some extent), financial figures are often disclosed in ranges such
as "$100,000 to $500,000" and "over $2,000,000".
Certain professionals are required either by rules related to their
professional organization, or by
statute,
to disclose any actual or potential conflicts of interest. In some
instances, the failure to provide full disclosure is a crime.
However, there is limited evidence regarding the effect of conflict
of interest disclosure despite its widespread acceptance.[36]
A 2012 study published in the
Journal of the American Medical Association showed that routine
disclosure of conflicts of interest by American medical school educators
to pre-clinical medical students were associated with an increased
desire among students for limitations in some industry relationships.
However, there were no changes in the perceptions of students about the
value of disclosure, the influence of industry relationships on
educational content, or the instruction by faculty with relevant
conflicts of interest.[37]
Recusal
Those with a conflict of interest are expected to
recuse themselves from (i.e., abstain from) decisions where such a
conflict exists. The imperative for recusal varies depending upon the
circumstance and profession, either as common sense ethics, codified
ethics, or by
statute.
For example, if the governing board of a government agency is
considering hiring a consulting firm for some task, and one firm being
considered has, as a partner, a close relative of one of the board's
members, then that board member should not vote on which firm is to be
selected. In fact, to minimize any conflict, the board member should not
participate in any way in the decision, including discussions.
Judges
are supposed to recuse themselves from cases when personal conflicts of
interest may arise. For example, if a judge has participated in a case
previously in some other judicial role he/she is not allowed to try that
case. Recusal is also expected when one of the lawyers in a case might
be a close personal friend, or when the outcome of the case might affect
the judge directly, such as whether a car maker is obliged to recall a
model that a judge drives. This is required by law under Continental
civil law systems and by the
Rome Statute, organic law of the
International Criminal Court.
Third-party
evaluations
Consider a situation where the owner of a majority of a publicly held
corporation decides to buy out the minority shareholders and take the
corporation private. What is a fair price? Obviously it is improper
(and, typically, illegal) for the majority owner to simply state a price
and then have the (majority-controlled)
board of directors approve that price. What is typically done is to
hire an independent firm (a third party), well-qualified to evaluate
such matters, to calculate a "fair price", which is then voted on by the
minority shareholders.
Third-party evaluations may also be used as proof that transactions
were, in fact, fair ("arm's-length"). For example, a corporation that
leases an office building that is owned by the
CEO might get an independent evaluation showing what the market rate
is for such leases in the locale, to address the conflict of interest
that exists between the fiduciary duty of the CEO (to the stockholders,
by getting the lowest rent possible) and the personal interest of that
CEO (to maximize the income that the CEO gets from owning that office
building by getting the highest rent possible).
Conclusion
Generally, conflicts of interests should be eliminated. Often,
however, the specifics can be controversial. Should
therapists, such as
psychiatrists, be allowed to have extra-professional relations with
patients, or ex-patients? Should a faculty member be allowed to have an
extra-professional relationship with a student, and should that depend
on whether the student is in a class of, or being advised by, the
faculty member?
Codes of ethics help to minimize problems with conflicts of interests
because they can spell out the extent to which such conflicts should be
avoided, and what the parties should do where such conflicts are
permitted by a code of ethics (disclosure,
recusal, etc.). Thus, professionals cannot claim that they were
unaware that their improper behavior was unethical. As importantly, the
threat of disciplinary action (for example, a
lawyer
being
disbarred) helps to minimize unacceptable conflicts or improper acts
when a conflict is unavoidable.
Since codes of ethics cannot cover all situations, some governments
have established an office of the ethics commissioner, who can be
appointed by the
legislature and report to the legislature.
See also
External links
Further reading
-
Black, William K. (2005). The Best Way to Rob a Bank Is to
Own One. Austin, TX:
University of Texas Press.
ISBN 0-292-72139-0.
- Davis, Michael; Andrew Stark (2001).
Conflict of interest in the professions.
Oxford:
Oxford University Press.
ISBN 0-19-512863-X.
-
Lessig, Lawrence (2011). Republic, Lost: How Money Corrupts
Congress -- and a Plan to Stop It. Twelve.
ISBN 978-0-446-57643-7.
- Lo, Bernard; Marilyn J. Field
(2009). Conflict of Interest in Medical Research, Education, and
Practice.
Washington DC:
National Academies Press.
ISBN 978-0-309-13188-9.
- Porter, Roger J.; Thomas E. Malone
(1992). Biomedical research: collaboration and conflict of
interest.
Baltimore:
Johns Hopkins University Press.
ISBN 0-8018-4400-2.
- Thompson, Dennis (1995). Ethics
in Congress: From Individual to Institutional Corruption.
Washington DC:
Brookings Institution Press.
ISBN 0-8157-8423-6.
-
Thompson, Dennis (1993). "Understanding financial conflicts of
interest." New England Journal of Medicine 329 (8): 573–76.
References
-
^ Lo and Field
(2009). The definition originally appeared in Thompson (1993).
-
^ Black (2005, pp.
253–254)
-
^
Black, William K. (Dec. 28, 2010).
"2011 Will Bring More De facto Decriminalization of Elite
Financial Fraud". Next New Deal: Blog of the Roosevelt
Institute. Retrieved
September 9, 2012.Black,
William K. (20 August 2012).
"Black Report: No Criminal Prosecution of Wall St. and Who is
the European, Romney or Obama?". The Real News.com.
Retrieved Sept. 9, 2012.
-
^
a
b
Lessig 2011, pp. 29-32
-
^
"1120-Individual Objectivity". Institute of Internal
Auditors. Retrieved July 7,
2011.
-
^
"Policies & Procedures of the Internal Audit Activity". City
College of San Francisco.
Retrieved July 7, 2011.
-
^
Policies regarding IRB members' industry relationships often
lacking.
-
^
Baker, Nena (2008).
The Body Toxic. North Point Press. p. 142. [cited
from Lessig 2011, p. 25 Lay summary]
.
-
^
Fisher's exact test computed using the fisher.test function
in
R (programming language) returned a significance probability
of 2e-13, i.e., there are 200 chances in a million billion of
getting a table as extreme as this with the given marginals by
chance alone. In other words, it is not credible to claim that
the funding source has no impact on the outcome of this many
independent studies.
-
^
a
b
Lessig 2011
-
^ Lessig 2011, pp.
26–28
-
^ Painter, Richard
(2009), Getting the Government America Deserves: How Ethics
Reform Can Make a Difference Oxford University Press
978-0-19-537871-9
-
^ Thompson (1995)
-
^ Kerr, Robert S.
"Senator Kerr Talks about Conflict of Interest," US News and
World Report, September 3, 1962, p. 86.
-
^
Stern, Philip M. (1992). Still
the Best Congress Money Can Buy. Regnery Gatgeway.
pp. 168–176.
-
^ Lessig 2011, pp.
43–52, 117
-
^ Lessig 2011, pp.
120–121
-
^ From Table 6.16 of
the
National Income and Product Accounts (NIPA) compiled by the
Bureau of Economic Analysis of the
Federal government of the United States. For more
information, see the USFinanceIndusty data set in the Ecdat
package for
R (programming language) available from
R-Forge.
-
^
Stiglitz, Joseph E. (2010).
Freefall: America, Free Markets, and the Shrinking of the World
Economy. Norton. pp. 5–6.
-
^ Lessig 2011, p. 83
-
^
Sachs, Jeffrey D. (2011). The Price of Civilization:
Reawakening American Virtue and Prosperity. Random House.
ISBN 978-0-679-60502-7.
-
^
Reinhart, Carmen M.;
Rogoff, Kenneth S. (2009). This Time Is Different: Eight
Centuries of Financial Folly. Princeton University Press.
ISBN 978-0-691-15264-6.
-
^
Letters from 300 economists to the
American Economic Association, 3 January 2011.]
-
^
Wall Street Journal, Stung by 'Inside Job,' economists pen a
code of ethics, 12 October 2011.
-
^
The Economist, Dismal ethics, An intensifying debate about
the case for a professional code of ethics for economists, 6
January 2011.
-
^
Wall Street Journal, Economists set rules on ethics, 9 January
2012.
-
^
Mehran, Hamid.
or http://dx.doi.org/10.2139/ssrn.943447 "Economics of Conflicts
of Interest in Financial Institutions".
-
^
Wikipedia Contributors.
"Conflict of Interest".
-
^
Herman, Edward S.;
Chomsky, Noam (1988). Manufacturing Consent: The
Political Economy of the Mass Media. Pantheon.
ISBN 0-394-54926-0.
-
^
a
b
c
McChesney, Robert W. (2004). The Problem of the Media:
U.S. Communication Politics in the 21st Century. Monthly
Review Press.
ISBN 1-58367-105-6.
-
^
McCheney, Robert W. (2008).
The Political Economy of the Media: Enduring Issues, Emerging
Dilemmas. Monthly Review Press.
ISBN 978-1-58367-161-0.
-
^
Bianco, Anthony; Grover, Ronald
(September 20, 2004).
"How Nielsen Stood Up to Murdoch". Business Week.
-
^
[Gary
W.]; [Victor
E.], eds. (1998).
Constructing Crime: Perspectives on Making News and Social
Problems. Waveland Press.
ISBN 0-88133-984-9.
Retrieved 2012-02-09.
-
^
McChesney, Robert W. (2008). The Political Economy of the
Media: Enduring Issues, Emerging Dilemas. Monthly Review Pr.
pp. 335–337.
ISBN 978-1-58367-161-0.
-
^
Lessig, Lawrence (2004).
Free Culture. pp. 162ff.
ISBN 978-1-59420-006-9.
-
^
Institute of Medicine (2009.).
"Conflict of Interest in Research, Education and Practice".
National Academies Press.
-
^
Kim, Azalea; Lawrence Mumm,
Deborah Korenstein (12/5/2012). "Routine Conflict of Interest
Disclosure by Preclinical Lecturers and Medical Students'
Attitudes Toward the Pharmaceutical and Device Industries".
JAMA 308 (21): 2187–2189.
doi:10.1001/jama.2012.25315.