Why Do Conflicts Matter? Lessons from the Classroom

How much does it matter that organizations, individuals and governments pay close attention to identifying and mitigating conflicts of interest?  One way to answer this question is to consider – as I ask students in my business school ethics class to do – what the world would look like without such focus and sensitivity.  Below are some of the observations that I have heard from them over the years.

In “Conflict of Interest World,”

– Individuals might be reluctant to take the medicines that their doctors recommend for fear that those recommendations are motivated more by the doctors’ financial relationships with pharma companies than by the patients’ well-being.

– Individuals and organizations might not use financial advisors for fear that the advice they receive is driven by hidden, adverse interests – and would instead devote otherwise productive time to trying to become their own financial experts, resulting in a significant misallocation of capital as well as time.

– Organizations could hesitate to take a wide range of everyday actions for which they need to trust their employees and agents to do what’s right by the organizations – or would proceed only with highly intrusive and costly surveillance-like measures in place.

In short, Conflict of Interest World is a place of needlessly diminished lives, resources and opportunities.

Additionally, from the perspective of “normative compliance” – an important concept in the C&E field which will be addressed in future postings – in Conflict of Interest World legal and ethical standards beyond those that are COI-related would be weakened, too.

Bottom line: a short visit to this unhappy imaginary world – a place of “all against all” – is reminder of the vital role that sufficient attention to COIs play in our very real world.

 

2 Comments
  1. Scott Killingsworth 3 years ago

    In one sense Type 1 Conflicts are endemic to law firms, in that these conflicts inhere, to some degree, in most fee arrangements. The hourly rate attracts a lot of flack because the lawyer has a short-term financial interest in maximizing fees by endlessly researching, delaying settlement or closing, etc. Of course a fixed fee includes an incentive for the lawyer to under-work the case, to the possible detriment of outcome; contingent fees can reward lawyers more for optimizing the effort/outcome ratio rather than for maximizing the outcome for the client, at least in many cases; etc. What I think is interesting about this is that changes in the legal profession have exacerbated rather than alleviated the significance of these conflicts. In a world where the lawyer has a good chance of a long-term relationship with a client if the lawyer consistently “does right by the client,” the COI incentive to maximize fees in a given matter is obviously shortsighted and is outweighed by both the value, and the great pleasure, of having a happy client over two or three decades. In a world where engagements are increasingly shopped and bid upon and doled out on an essentially relationship-free basis, the incentive to maximize revenues from each assignment is much more apparent.

  2. Jkaplan 3 years ago

    Thanks, Scott. I definitely agree with you in principle. But note the research discussed here http://conflictofinterestblog.com/2012/08/should-dentists-and-lawyers-be-rotated-like-auditors.html suggests that different forces are at work.

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