Harm / Trust Issues

The potential for loss of trust and other types of harm can have a powerful bearing on the analysis and resolution of various COI issues, as will be examined here.

Future conflicts of interest

First, a plug: at the upcoming annual conference of the Ethics and Compliance Officer Association , I’ll be speaking on a panel on “A view from the edge: exploring the future of ethics and compliance.”  It is a topic I addressed at the very first ECOA conference – held in 1992, when the organization had a grand total of 19 members and the entire C&E field was so new.  I hope to see you at this year’s event, which will be held next month in Dallas.

Second, the COI story of the week – is also about the future. It concerns the Clinton Global Initiative (CGI) accepting contributions from foreign governments, notwithstanding the prospect that Hillary Clinton will run for President.  When she was Secretary of State, the organization did not take such donations, but they lifted the ban when she resigned from that post.

Of course, since she isn’t president, technically this isn’t an actual conflict.  Rather, it is a potential COI.

What’s the difference? As discussed in this earlier post: Potential conflicts refer, as a general matter, to situations that do not necessarily constitute or appear to constitute a COI but where there is a reasonable possibility of an actual or apparent COI coming into play.

As with the risk analysis of any COI, with potential COIs one should consider the dimensions of likelihood and impact.

On likelihood, there are actually two questions relevant to this inquiry. First, how likely is the COI-triggering event to happen?  Here, that event – Hillary becoming President – seems reasonably likely to occur. (The analysis might be different if we were dealing with a “Bernie Sanders Global Initiative,” or organization associated with another long-shot seeker of the office.)

Second, if the triggering event does occur, can effective mitigation measures then be implemented? That might be difficult in this instance because, if she did win the Presidency, presumably returning the donations to the foreign governments, though not impossible, would be pretty unpalatable – particularly if the money was already spent on the many critically important causes the CGI supports.

Finally, the potential impact of a COI seems high here as well.  That is, the donations from foreign governments could undermine the trust that the American people have in the President, and perhaps cause suspicion in other countries too.

So I agree that CGI should ban foreign government contributions.  But I also applaud the organization for its effective work on climate change (and in other areas), as the actual conflicting interest we have with future generations on that issue may be the greatest COI of all time.

(Some additional reading:

Two conflicts of the apocalypse.

Is the road to risk paved with good intentions?

COI policies for non-profits.)

 

 

Referral fees and conflicts of interest

The recent indictment of NY State Assembly Speaker Sheldon Silver on corruption charges has – at least for  the moment – focused some  attention on the age-old practice of “referral fees,” under which a lawyer or other professional receives compensation for referring an individual or entity to some other service provider.  In the Silver case, the (now ex-) Speaker received such fees from two different law firms.  As described in this piece in the NY Times , one of these firms –  “a  large personal injury law firm where he has worked for more than a decade” – paid him more than three million dollars based on  client referrals from a doctor whose research center had been given $500,000 in state grants orchestrated by Silver.  Another part of the prosecution’s case involves his receipt of referral fees from a real estate law firm to which he had steered clients and his performing official action to benefit those clients.

In both of these alleged schemes the principal victims were the taxpayers of NY, whose interests were subordinated to Silver’s personal interest. The element of harm to the two firms’ respective clients was less a part of the picture (although some harm could be presumed with the personal injury referral fees). But in a traditional referral fee situation the harm is principally and often entirely to the client.

Of course, it is not only lawyers who pay/receive referral fees – and who face ethical questions involving these practices.  For instance, architects must, as a matter of professional standards, disclose referral fees.  As noted in this Advisory Opinion from the American Institute of Architects: “It makes no difference under the disclosure rules whether the architect is certain that the contractor he recommends is the best one for the job or that he would make the same recommendation even if no referral fee were paid. Though the architect may be confident there is no actual conflict of interest, any referral fee is an interest substantial enough to create an appearance of partiality and is a factor about which the client is entitled to know.”

Legal and ethical issues regarding referral fees are disturbingly common in the medical profession.  For a discussion of the conflicts of interest inherent in such arrangements see this post  from Chris MacDonald’s excellent Business Ethics Blog: “If the person you’re relying on for advice is financially beholden to the person he or she is recommending, you have every reason to doubt that advice.”

Such practices are also common in the financial advisory services realm.  See this discussion of  relevant ethical standards,  and note that – as with doctors – these cases sometimes cross legal, as well as ethical, lines.

Finally, the regulation of referral fees in the legal profession has existed for many years. However, the area is increasingly complicated by the phenomenon of referrals being made by non-attorneys to law firms, as described in this paper by John Dzienkowski of the University of Texas School of Law.

Indeed, in my own practice I have been offered referral fees by vendors selling C&E products and services.  I always say No.  I’d like to think that my steadfastness is the result of being virtuous, but in reality, it is just a matter of common sense. That is, for clients or prospective clients to have to worry about whether my advice was tainted would be devastating to my business.  And no referral fee could ever compensate for that.

 

The cost of director and officer conflicts of interest just went up

In the vast realm of conflicts of interest those involving boards of directors tend to stand out. That is because part of the reason the role of corporate director even exists is to mitigate the conflict-of-interest-type tensions (which fall under the broad heading of “agency problems”) that managements may have vis a vis shareholders.  Moreover, while the role of officers obviously differs somewhat from that of director, the duty of loyalty that both owe shareholders is the same.

Director and officer COIs can arise in many settings but often the most consequential of these involves mergers. And, as described in a post last week in the D&O Diary:  ”Within the past few days, two merger objection settlements – one involving Activision Blizzard, Inc. and the other involving Freeport-McMoRan, Inc. — have been announced involving massive cash payments,… The Activision settlement may represent the largest cash settlement payment ever in a shareholder derivative lawsuit.” The post further describes that “[t]he common feature of these two cases that may account for the magnitude of the cash payments seems to be the conflicts of interest that were alleged to be part of the challenged transactions.”

The specific facts of these two cases – both of which are complex, as COI cases involving mergers typically are – may be less important than is what they (and another one last year involving News Corp, which is discussed in the same post) may mean for insurance costs to companies: “The rise of jumbo shareholder derivative lawsuit settlements has a number of implications. Among other things, it is a topic that will have to be taken into account as D&O insurance buyers consider how much insurance they will need to ensure that their interests are adequately protected.”

While most directly relevant to risk managers and others in companies in charge of securing D&O coverage,  I think C&E professionals also need to know about this development – because directors and officer of their companies  likely will and will be concerned about it.  And, hopefully this awareness will contribute to a greater overall sensitivity at high levels in companies to COIs generally – meaning that this may be a good time to train (or retrain – or schedule training of) your directors and officers on COIs.

For those looking to develop such training, here is a prior post on that topic.  And here are some other posts, portions of which might provide helpful ideas or information for training boards on COIs:

Friendship – and the ties that blind (directors to conflicts of interest).

CEOs’ ethical standards and the limits of compliance.

Are private companies more ethical than public ones?

Catching up on the backdating cases

Behavioral ethics training.

Catching up on CEO COIs.

Catching up on director COIs.

The largest derivative lawsuit settlements (from the D&O Diary).

Here are some pertinent words of wisdom from two good friends of the blog: Steve Priest (on keeping ethics training real) and Scott Killingsworth (on mitigating C-Suite risks).

Finally, if you are training your board, and want to use the occasion to look beyond the COI area to general C&E oversight by directors this recent article by Rebecca Walker and me  from Compliance and Ethics Professional magazine might be useful.

 

 

Conflicts of interest, compliance programs and “magical thinking”

An article earlier this week in the New York Times takes on the issue of “Doctors’ Magical Thinking about Conflicts of Interest.”  The piece was prompted by a just-published study  which examined “the voting behavior and financial interests of almost 1,400 F.D.A. advisory committee members who took part in decisions for the Center for Drug and Evaluation Research from 1997 to 2011” and found a powerful correlation between a committee member having a  financial interest (e.g., a consulting relationship or ownership interest ) in a drug company whose product was up for review and the member’s voting in favor of the company – at least in circumstances where the member did not also have interests in the company’s competitors.

Of course, this is hardly a surprise, and the Times piece also recounts the findings of earlier studies showing strong correlations between financial connections (e.g., receiving gifts, entertainment or  travel from a pharma company) and professional decision making (e.g., prescribing that company’s drug). Nonetheless, some physicians “believe that they should be responsible for regulating themselves.”

However, such self regulation can’t work, the article notes,  because “our thinking about conflicts of interest isn’t always rational. A study of radiation oncologists  found that only 5 percent thought that they might be affected by gifts. But a third of them thought that other radiation oncologists would be affected.  Another study asked medical residents similar questions. More than 60 percent of them said that gifts could not influence their behavior; only 16 percent believed that other residents could remain uninfluenced. This ‘magical thinking’ that somehow we, ourselves, are immune to what we are sure will influence others is why conflict of interest regulations exist in the first place. We simply cannot be accurate judges of what’s affecting us.”

While the findings of these and similar studies are, of course, most relevant to conflicts involving doctors and life science companies, there is a broader learning here which, I think, is vitally important to C&E programs generally.  That is, they help to show that “we are not as ethical as we think” – a condition hardly limited to the field of medicine or to conflicts of interest, as has been discussed in various prior postings on this blog.

One of the overarching implications of this body of knowledge is that we humans need structures – for business organizations this means  C&E programs, but more broadly these have been called “ethical systems” – to help save us from falling victim to our seemingly innate sense of ethical over-confidence.  So, to make that case, C&E professionals should – in training or otherwise communicating with employees (particularly managers) and directors  – address the issue of “magical thinking” head-on.

Moreover, using the example of COIs to prove the larger point here may be an effective strategy, because employees are more likely to have experience with ethical challenges in this area  than with other major risks, such as corruption, competition law or fraud – which indeed may be so scary as to be largely unimaginable to many employees.  I.e., these and other “hard-core” C&E risk areas might be subject to an even greater amount of magical thinking than is done regarding COIs.  So, at least in some companies,  discussing COIs might offer the most accessible “gateway” to addressing the larger topic of ethical over-confidence.

Friendship – and the ties that blind (directors to conflicts of interest)

King Herod the Great had something of a problem: he had backed the losing side in the contest between Marc Antony and Octavian to rule Rome,  and now fully expected to lose his life for it.  But, as described in Jerusalem: the  Biography, by Simon Sebag Montefiore,  when they met he cleverly asked Octavian “not to consider whose friend he had been but ‘what sort of friend I am.’”  Octavian was evidently persuaded by this, for not only was Herod’s life spared but the size of his kingdom was increased.

Loyalty is, of course, fundamental to friendship.  But, while potentially more physically dangerous in the Roman Empire than it is today, friendship in our world can be ethically treacherous.

In “Will Disclosure of Friendship Ties between Directors and CEOs Yield Perverse Effects?”  (to be published in the July 2014 issue of the Accounting Review), Jacob M. Rose, Anna M. Rose, Carolyn Strand Norman and Cheri R. Mazza  describe how they conducted thought experiments involving both actual corporate directors and MBA students to determine  whether “directors who have  friendship ties with the CEO [are more likely that are directors without such friendships] to manage earnings to benefit the CEO in the short term while potentially sacrificing the welfare of the company in the long term” and also whether “public disclosure of friendship ties mitigate or exacerbate such behavior, and will disclosure of friendship ties influence investors’ perceptions of director decisions.”

Sadly but not surprisingly, their research  found “that friendship ties caused directors to be more willing to approve reductions to research and development (R&D) expenses that cause earnings to rise enough to meet the CEO’s minimum bonus target more often than  when the directors and CEO were not friends.” Seemingly more of a surprise, they also found that “disclosing friendship ties resulted in even greater reductions in R&D expenses and higher CEO bonuses than not disclosing friendship ties.”

But this latter finding is not so surprising – given other  behavioral research showing that disclosure can “morally license” individuals  to act inappropriately when faced with a conflict of interest ( as discussed in this   and other prior posts.) As described in a recent piece in the NY Times  by Gretchen Morgenson, one of the study’s authors explained: “When you disclose things, it may make you feel you’ve met your obligations…They’re not all that worried about doing something to help out the C.E.O. because everyone has had a fair warning.”

Morgenson added: “There are two messages in this study. One is for regulators: Simply disclosing a conflict or friendship does not eliminate its potential to create problems. The other,” again quoting one of the study’s authors (but echoing Herod) “is for investors: ‘Shareholders should take a more active role in finding out what kinds of relationships their boards and C.E.O.s have…and recognize the potential traps created by them’.”

For more on conflicts of interest and directors see the posts collected here .

 

Spanking bankers for conflicts of interest. Again.

Two years ago the Delaware Chancery Court had harsh words about Goldman Sachs’ advising El Paso Corporation on a possible sale of the company while also having an ownership interest in the buyer.   Ultimately, the bank lost a $20 million fee due to this and other conflicts.

Goldman’s ethical lapse was not unique in the banking world.  Indeed, just a few months before the El Paso case, Barclay’s paid/gave up claims for about $45 million to settle a lawsuit in the Chancery Court based on its undisclosed dual role  in advising Del Monte on a sale the company while also providing financing to the buyers.  

The most recent addition to the banking COI hall of infamy is the Royal Bank of Canada, which, as described in this Reuters piece, the Chancery Court last week found should be “held liable to former shareholders of Rural/Metro Corp because [the bank] failed to disclose conflicts of interest that tainted the $438 million buyout of [Rural/Metro. The bankers] were so eager to collect higher fees that they convinced Rural/Metro directors to sell the company in June 2011 to private equity firm Warburg Pincus LLC at an unreasonably low” price,  while “conceal[ing] their efforts to provide financing to fund the buyout and other transactions,…” The court will “decide later how much RBC should pay former Rural/Metro shareholders in damages, including possibly damages for bad faith.”

That this could happen after the El Paso and Del Monte cases seems amazing.  But maybe it isn’t – since we’re seeing only the cases where the conflicted bankers got caught.  Perhaps there are many others where the betrayal went undetected and the wrongdoing proved profitable.  If so, the prospect of giving back fees – even large fees – may be a weak deterrent.

A piece on the case in the Wall Street Journal concluded:   “The bottom line is that investment banks that aren’t paying attention the Chancery Court’s continuing admonitions on conflicts will continue to be spanked.”  Yes, but will they be spanked enough to deter future COIs of this sort?

(For those wanting to learn more about the actual spanking, the court’s 91-page opinion can be found here.) 

An important real-world conflict of interest experiment

In today’s NY Times, Michael Greenstone, an economics professor at MIT, writes about a study on auditor COIs that he –  together with Esther Duflo of M.I.T.;  and Rohini Pande  and Nicholas Ryan, both of Harvard – recently published.   The study was conducted in Gujarat, India, where industrial plants with high pollution risks are required  “to hire and pay auditors to check air and water pollution levels three times annually and then submit a yearly report to” a governmental body. In the study, for a randomly selected set of companies, but not for a control group, “auditors were paid a fixed fee from a central pool of money, a subset of the audits was chosen to have its findings re-examined, and auditors received payments for accurate reports, judged by comparisons with the re-examinations. The control group continued under the status quo system in which auditors were chosen and paid by the plants they were auditing.”

The results of this real-world experiment  powerfully demonstrate the impact on the ethicality of conduct that financial incentives can have – even on the judgment of individuals who, by virtue of their professional norms, are supposed to be resistant to COIs.  That is: “While many of the plants violated the pollution standards, few of the auditors in the control group reported these violations. In the case of particulate matter, an especially harmful air pollutant, auditors reported that only 7 percent of industrial plants violated the pollution standard. In reality, 59 percent of plants exceeded it.” However, “[t]he rules changes [in the experiment] caused the auditors to report more truthfully. In the restructured market, auditors were 80 percent less likely to falsely report a pollution reading as in compliance, and their reported pollution readings were 50 to 70 percent higher than when they were working in the status quo system. This difference was as large even when comparing reports of auditors working simultaneously under the two systems. Finally, and most important, the plants that were required to use the new auditing system significantly reduced their emissions of air and water pollution, relative to the plants operating in the status quo system. Presumably, this was because the plants’ operators understood that the regulators were receiving more accurate information and would follow up on it.”

Three comments on this important study.

First, while most directly relevant to auditors, these results can, I believe, be broadly applicable to COIs generally.  That is, if professionals who are trained to rise above COIs fare this poorly, one can only imagine the impact of COIs on the rest of us.

Second, the more important compliance and ethics program efforts become to society, the greater the need for not just C&E auditing but other forms of checking – such as monitoring, as was discussed in a piece in Corporate Compliance Insights.   But monitoring  (as a general matter) is even less independent than is auditing, so this recent study underscores  the considerable  challenges for making forms of checking beyond auditing effective.

Third, research to determine “what works”   is vitally important for the C&E field to mature and realize its full promise,  and real-world studies such as this one can be particularly valuable in that regard.  Interestingly, another article in today’s NY Times describes how in the UK there is now an government-run effort (headed by a “Behavioral Insights Team”) to use research to determine what works with respect to various public policies, including some compliance-related ones. I hope that the US and other countries will follow the UK’s lead here.

Finally, here is a prior post on auditor COIs

 

Thanksgiving edition: conflicts of interest and cholesterol

For millions of individuals (including me) Thanksgiving is not only a time for giving thanks but also for thinking about cholesterol.  And  if guidelines recently issued by the American Heart Association and American College of Cardiology are followed, the number of us who use  statins – cholesterol reducing drugs – will increase substantially, as described in this piece from Forbes.   But as described in this piece in Time (and also in the Forbes article) “the chair of the panel responsible for the new advice, which many see as favorable to … statins, had previous ties to a number of drug makers that manufacture those very same medications,” as did six of the other fourteen members of the panel.

I should add that the financial ties were duly disclosed and applicable guidelines (issued by the Institute of Medicine) were complied with, in that the guidelines do not prohibit any such COIs – only COIs by a majority of members of a panel.  Still, one cannot help feel uneasy about this situation for several reasons.

First, with respect to the panel’s report, one should not assume that disclosure cures the COI.  Indeed, as described in earlier posts in this blog, behavioral ethics experiments have shown just the opposite – that disclosure may “license” conflicts-inspired decision making.

Second, it is not clear to what extent the disclosures here are sufficiently processed.  As described in this article in MedPage Today by a faculty member at Harvard Medical School: “[A]midst all the late-breaking clinical trial presentations and ask-the-expert sessions, what I didn’t hear were the speakers’ financial conflicts of interest. Don’t get me wrong — the AHA mandates that all speakers present a disclosure slide at the beginning of every talk, and this rule was reliably followed by all presenters … in the following manner: ‘Here are my disclosures’ — PowerPoint slide flashes on screen with a list of pharmaceutical/device companies. Yet, by the time the speaker finishes speaking those four words, the slide deck has already advanced to the next slide. I, and my fellow audience members, didn’t even have enough time to read the disclosures, let alone process them.”

Finally, and on a broader level, COIs of this sort could have a more pernicious effect beyond directly impacting the patients involved, because of the great extent to which health-care costs are borne by the country as a whole.  As discussed in this recent post:

–          there are certain challenges (such as climate change and public debt) that both pose great risks to society as a whole and will require broad-based sacrifice to successfully address; and

–          COIs can imperil the likelihood that all relevant parties will be willing to make such sacrifices.

Health care costs fit into this category, too, and, like the others, key players in these areas have, in my view, a higher (i.e., “Caesar’s wife”) duty when it comes to addressing COIs ethically.

Two conflicts of the apocalypse

The COI Blog has, since its launch in 2011, examined a host of different types of conflicts.  (For those new to the blog, you can explore this “parade of horribles” through the various tabs and sub-tabs to your left on this site.)  But, of course, not all conflicts should be of equal concern. Rather, and as described in this earlier post,  worrisome conflicts typically involve one of several types of “market failures,” as those are the conflicts  for which market mechanisms provide insufficient corrective capacities. Indeed, that is only part of the picture, because while a market failure analysis can explain the likelihood  of an unaddressed COI, the possible impact of a COI is important tooAnd, at the risk of drifting into the realm of politics (which I have tried to keep this blog out of in its young life) there seem to be two areas involving COIs that could have a  truly apocalyptic impact on our society, both politically charged.

One of these is public debt, and particularly the conflict in saddling future generations with an insurmountable debt burden.  Indeed,  two of the principal areas of focus of this blog are highly relevant to the risks here: behavioral ethics, and particularly the phenomenon of overly discounting the future; and moral hazard (i.e., present generation takes the risks, future generations bear the costs).

But in addition to these two structural conflict-like challenges in dealing with public debt there are also plain-old COIs to be identified and addressed.  As noted in an article last week in the NY Times – in discussing an investigation by New York’s financial services superintendent into COIs in the handling of the state’s pension funds – COIs may have played a role in leading Detroit to what is clearly a financial apocalypse: the city’s “municipal pension fund suffered severe losses on real estate investments, among other problems, and now that the city is bankrupt, investigators are trying to find out exactly what went wrong. In some cases, certain Detroit pension trustees were taken on junkets dressed up as investment site inspections. And in one instance, an investment promoter paid a bribe to win pension money for real estate projects in the Caribbean but then spent the money building an $8.5 million mansion in Georgia.”

Of course, whatever COIs may have existed or still exist in any state or municipality likely cannot explain more than a small fraction of the entity’s debt.  But conflicts can undermine the trust and sense of shared sacrifice that will be needed to work our way out of these debts – in the same way that a COI can undermine the sense of organizational justice needed to promote compliance and ethics generally in an organization, as discussed in this post.  Another way to think about this is that COIs not only directly cause individual harms but they can make it harder to prevent and remediate a broad range of harms. For this reason, COIs in the public pension area seem to deserve an extra degree of attention, and investigations like that now taking place in New York are, in my view, worth pursuing.

The other area where – given the potential harmful impact at issue – we need to be extra careful about COIs is, of course, climate change.  Here the prospect of an apocalypse dwarfs even that in the area of public debt.

The principal COI issues here concern the science of climate change, and particularly the extent to which those speaking to those issues as experts have conflicting interests.  This recent post on the web site of the Union of Concerned Scientists– while clearly weighing in on one side of that issue – makes a lot of sense to me, and I urge readers of the COI Blog to read it.

Of course, I’m not a scientist and am in no position to say anything meaningful about the science involved in climate change.  But I do know something about conflicts of interest, and when – as the above post describes – scientists who have no financial interest in the issue are accused of COIs by climate change deniers who receive fossil fuel industry funding, that to me suggests not only a flawed ethical analysis but a strategy of deflecting attention from the merits of the scientific issues at hand.

More generally, given what is at stake in getting such issues right, those involved in all sides of the climate science debate have a particularly important obligation to get the ethics right. And that includes avoiding spurious charges of COIs, which can have the same trust-destroying harmful impact that actual ones do.

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Massive but (mostly) harmless conflicts of interest

The conflicts of interest will be enormous when  the recently announced merger between Publicis and Omnicom – each a giant ad agency (or collection of agencies) in its own right – is finalized.  Both companies, through their respective subsidiaries,  represent major players in such industries as automotive,   telecommunications,  food,  beverages, and beer (as described in this article) .   Are conflicts of this sort something that business-ethics-minded individuals should find of concern?

Not in my view – because such conflicts can, at least as a general matter,  be addressed by market forces.  By contrast, truly dangerous conflicts typically involve one of several types of “market failures.”

The first such failure is “information asymmetry,” meaning where market players lack the information needed to make an informed – and hence optimal – decision.  In the COI context, this can occur when a conflict isn’t fully disclosed, which, in some cases, can be seen not only as an ethical breach but a legally actionable instance of fraud or corruption.  To this classic type of information asymmetry one should add the various findings of behavioral ethicists – some discussed in this earlier post – showing that, for a variety of reasons,   even when COIs are disclosed the information doesn’t seem to be processed in an optimal manner. (I’m not sure if this would truly count as an information asymmetry, but it is in that neck of the woods.)

The other most often relevant market failure to COIs concerns externalities, meaning where the cost of a COI is not borne by the individual/entity in a position to address it but by a third party who doesn’t have a seat at the decision making table.  COIs in the health care field – the costs of which are passed on in large measure to taxpayers and insurance companies – are a prominent example of the great harm that externalities can cause.  Moreover, the phenomenon of   “moral hazard” – also addressed in various prior posts – can be seen as causing harm in this way.   Of course, some COIs – like public-sector corruption – involve more than one type of  market failure.

COIs caused by the mergers of ad agencies certainly don’t raise the issue of externalities, at least not as a general matter. For the sake of completeness, I should note that if the merger creates a monopoly that would be yet another form of market failure –  but this seems very unlikely to ever happen, due to (what I assume are) relatively low barriers to entry in the advertising industry.

Finally, while it is possible that the above-mentioned behaviorist findings about the weakness of disclosure does raise the prospect  of information asymmetry (or the behaviorist version thereof) in this setting,  I think that the strong presence of market forces in the form of competitors pointing out to advertisers  the risks of staying with a conflicted agency would largely negate harms of this sort too.  Indeed, astute ad agencies looking to recruit new clients could do worse than trying to utilize some of this behaviorist science for their commercial advantage.

For further reading:

here’s a description of the various forms of market failures;  

here’s a piece about another context  – joint venture governance  – in which COIs should not be seen as inherently troublesome; and

here’s something on how market failures should factor into anti-corruption risk assessment.