COIs in the News (033112): the Cost of Conflicts

From Chris MacDonald’s The Business Ethics Blog, a piece on the far reaching costs of COIs, occasioned by a story about employees of a public school system receiving gifts from vendors: “when conflicts are accepted and fostered… they erode confidence in the judgment not just of individuals, but of entire institutions.”  As Chris notes, the fault is not with  the receiver alone – and he uses subordination of perjury as a metaphor for the giver’s culpability in third-party situations such as these. We definitely agree with him that not causing COIs in others is a topic worth greater attention, and, also feel that that the costs to society of COIs need to be better understood.

What about the costs to the wrongdoers themselves? Here, the news of the week is mixed (as it likely is in any given week).

Reflecting a strict approach, the head of the Dutch arm of Deloitte resigned due to violations of the firm’s policy regarding investing in audit clients.  This can be seen as a relatively high cost for what was (based on my knowledge of prior similar cases) probably an inadvertent violation, and a reflection of the need for strong compliance measures for businesses (such as auditing) where independence and trust are of the highest importance.

At the other end of the spectrum, in a criminal COI case – where the wrongdoing concerned  receipt of $385,000  in a side deal on maintenance contracts, and thus went well beyond a technical policy violation  – a former general manager of the Los Angeles Memorial Coliseum will escape prison in return for repaying the ill-gotten gains, doing 1,500 hours of community service and possibly paying additional fines.  Indeed, “[a]fter he serves three years of probation, he will be eligible to apply to reduce the felony charge to a misdemeanor, according to the plea agreement.”  While I’m sure there is a lot about the case of which I’m unaware, it is hard to look at this resolution as reflecting the serious impact that conflicts have on our world.

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