Teaching and Scholarship

How are COI issues taught in business school classes? And what lessons does social science and other scholarly research – including work in the behavioral ethics field – hold for C&E officers of business organizations?

Behavioral ethics teaching and training

In “Teaching Behavioral Ethics” – which will be published next year by the Journal of Legal Studies Education, and a draft of which can be found here  – Robert Prentice of the McCombs School of Business at the University of Texas  presents his pedagogical approach to  behavioral ethics.  The paper should be useful not only to other business school professors in preparing their own ethics classes but also to C&E professionals who are considering training business people on “‘the next big thing’ in ethics…”

Prentice’s article describes in considerable detail what he covers in each session of his course. The first addresses why it is important to be ethical, including the many positive as well as negative reasons, and the second the sources of ethical judgments, with a key point being that such judgments tend to be more emotion based than is commonly realized.

The next few classes are about “Breaking down the defenses,” which make the overarching behaviorist point “we are not as ethical as we think” and which explore many key concepts in the field, including self-serving bias;  role morality; framing;  the effect of various environmental factors – such as time pressure and transparency – on ethical behavior;  obedience to authority; conformity bias; overconfidence; loss aversion; incrementalism; the tangible and the abstract; bounded ethicality; ethical fading; fundamental attribution error; and moral equilibrium.  Prentice also discusses research showing that “people are of two minds,” and “tend to be very good at thinking of themselves as good people who do as they should while simultaneously doing as they want,” as well as the related facts that we often don’t do a very good job in predicting the ethicality of future actions and are not especially accurate in remembering the ethicality of our past actions.  At various points in the paper he illustrates these phenomena not only with behavioral studies but also with well-known cases of legal/ethical transgression (e.g., Martha Stewart’s conviction for obstruction of justice as a possible manifestation of loss aversion).

The final part of Prentice’s course is aimed at helping students be their “best selves.” This begins with teaching the differences between the “should self” and the “want self,” and the importance of incorporating the needs of the want self in advance, e.g., by rehearsing what one would do if faced by a particular ethical dilemma. Also important to being one’s best self is “keeping one’s ethical antennae up….[to] always be looking for the ethical aspect of a decision so that [one’s]  ethical values can be part of the frame through which” a problem is examined.  As well, Prentice exhorts his students to “monitor their own rationalizations,” and use pre-commitment devices to decrease the influence of the “want self.” Finally, he discusses research by Mary Gentile showing that more often than is appreciated, “one person can, even in the face of peer pressure or instructions from a superior, turn things in an ethical direction if only they will try.”

All told, this seems like a great course, and I wish that it could be taught in every company as well as in business school. Of course, those providing C&E training in the workplace typically are not given a semester’s worth of time to do so, and indeed there seems to be a recent trend in the field of C&E training – particularly given the “training fatigue” that one finds in some companies – to try to do more with even less.   However, I do think some of the behavioral notions discussed in Prentice’s article can be the basis of compelling workplace training.

First, the fact that it is a relatively new area of knowledge, that it is science based and that it is clearly interesting can make online hypnosis training more appealing to business people than a lot of traditional C&E training. Indeed, using behavioral ethics ideas and information can be a welcome relief from “training fatigue.”

Second, the lessons about how to become our “best selves” are indeed quite practical, and for that reason should be welcome in the workplace.  Indeed, given the many careers that have been damaged/destroyed by  business people not keeping their “ethical antennae up,” these lessons should be seen as business survival skills.

Third, the totality of these studies showing we’re not as ethical as we think  helps makes the case – as well as any legal imperative ever could – for the need for companies to have strong C&E programs.  This should be part of any C&E training (as well, in my view, business school ethics classes), but is particularly important to include in training of boards of directors and senior managers.

Finally, directors and senior managers have an espescially strong need to learn about behavioral ethics research showing that those with power tend to be more ethically at risk than are others, as discussed in various prior posts – such as this one  (review of an important paper by Scott Killingsworth), this one  and this one, to which should be added this recently posted paper  about a study to showing that “employees higher in a hierarchy are more likely to engage in deception…” than are others.  To my mind, the prospect of helping companies with the politically sensitive task of bringing sufficient compliance focus to bear on their heavy hitters is as important as is any of the other possible real-world contributions of this promising and fascinating new field of knowledge.

A comparative approach to conflicts of interest

In a recent article in the Penn State Law Review, Conflicts of Interest in Medicine, Research and Law: A Comparison, Stacey A. Tovino of the University of Nevada at Las Vegas law school reviews approaches to managing COIs in three different professional settings.  The piece begins with an analysis of legal regimes regarding COIs in clinical medicine, and particularly those arising from the involvement of individuals who, whether due to age or otherwise, have impaired decision making capacities; then examines how different state laws address COIs in human subjects research (a context that, “[u]nlike treatment…is fraught with” COIs); and, finally, compares and contrasts the above-mentioned approaches with those used for managing COIs in the context of legal representation.

Tovino “finds that the law imposes more stringent duties relating to the identification and management of conflicts of interest in the context of legal representation compared to the contexts of clinical medicine and human subjects research.” Among other things, the latter standards do not “recognize and explicitly refer to the concept of ‘conflict of interest,’” to the extent the former does.  They are also less stringent with respect to disclosure of conflicts than are the relevant legal representation standards, and the same is true regarding aspects of conflicts management.  Based on this analysis, Tovino argues that “state laws governing conflicts of interest in clinical medicine and human subject research should consider borrowing approaches to conflicts management that are set forth in state rules of attorney professional conduct.”

I applaud Tovino’s exercise in comparative COI analysis.  Indeed, in establishing this blog, one of my goals was to provide a compendium of information about the treatment of COIs in different industries or other business contexts (the beginnings of which are collected here)  in the hope that those dealing with conflicts in one setting – whether as regulators, compliance personnel or in other roles – can benefit from the experience of others in doing so.

(Thanks to Bill Sachs of HCCS  for letting me know about Tovino’s article.)

Mapping a territory of ethical impairment

“The world is an evil place,” a character in Sydney Lumet’s Before the Devil Knows You’re Dead memorably says, but some parts are more wicked than others.  The Conflict of Interest Blog tries to stay out of the very worst ethical neighborhoods (e.g., wherever Lance Armstrong is coming from is too scary for me!).  Our beat is not the heart of darkness but several of the grayer precincts – each close by the others, and together forming a territory of ethical impairment. What are these places, and how well mapped are they?

The biggest consists of conflicts of interest and it is also the best explored.  Indeed, concern with COIs goes back a long ways – at least 3500 years by one account,  and this territory has been mapped by various scholars, such as Ingo Walter of NYU’s Stern School of Business, who developed a typology of COIs   (for the financial services industry) and, more recently, by Professor Klaus J. Hopt of  the Max-Planck-Institute for Comparative and International Private Law (for corporate directors). Moreover, COIs are often addressed – and thereby illuminated – by various laws/legal doctrines (as described in this series of prior posts).  Of course, part of the mission of this blog is to continue to fill in various parts of the COI map (as evidenced by all the Categories tabs and sub-tabs on this page!)

A somewhat less sprawling part of this territory – at least insofar as it relates to business (the focus of this blog) – consists of bias.  (Note: while bias can, of course, arise from a COI, as used here it means the purely attitudinal type of bias.)   The recognition of bias also goes back thousands of years (in that various ancient writers claimed to be free of it).  However, legal prohibitions/restrictions concerning bias in the business world are not nearly as extensive as they are for COIs.  This is presumably because the law is generally loathe to regulate pure thought, as opposed to action or status. (There are, however, some notable bias-related laws outside the business world – such as laws requiring judicial recusal in the event of personal prejudice concerning the parties to a case.)

Moreover, while the general concept of bias is indeed of ancient origins, its application has expanded in recent years based on the notion of cognitive bias that helps inform the emerging field of behavioral ethics.  Posts discussing this field can be found here.   However, this part of our map is not as well developed as is that dealing with COIs – partly because this knowledge is fairly new, and also because legal requirements (and the compliance and ethics program expectations that arise from such requirements) have thus far done little to address the implications of  behavioral ethics information and ideas.  With time I imagine that will change – and hopefully do so in ways that will help business organizations up their game in promoting law abiding and ethical conduct by their employees.

Finally, a small and relatively new (only a few hundred years old) but important neighborhood on this “map” is the area of moral hazard – which concerns the harmful effects that can arise from disconnects between the interests/incentives of risk takers on the one hand and those likely to be affected by the risk taking in question on the other.  Notwithstanding its name, moral hazard analysis is largely based in economics, not ethics; it was originally applied to insurance and risk.  Its application to the realm of C&E  is still mostly unexplored, but here are a few posts on this challenge/opportunity.

Does it make sense to include all of the above areas of impairment – i.e., those based on psychology and economics, as well as law and ethics – on one “map”?  My hope is that – given the similarities among them – doing so can provide a basis for asking questions that will enhance mitigation approaches for each.  For instance, is there enough of an economic and psychological dimension to how we deal with COIs?  Should moral hazard  be addressed by risk assessments, the way COIs generally are?  And what can be learned about mitigating COIs and moral hazard from studying the phenomenon of cognitive bias?

Throughout the course of the coming year we hope to address these and related questions.

(Note: the following prior posts are somewhat related to this “map.”

A law map of the C&E  world

Conflict of interest world: what our lives be like if there were no ethical or legal restrictions on COIs )

Breaking news: just-published study shows that COI policies can…work!

One of the sources of frustration of toiling in the C&E field is the relatively small amount of data from the workplace on the efficacy of various program measures in actually reducing wrongdoing and otherwise promoting ethical conduct.   While unfortunate, this dearth of proof is not surprising; after all, what company would allow some or all of its employee population to serve as a control group for an “ethics experiment”?

But, as suggested by this article published yesterday in Science Daily, part of this proof gap has been filled by a recent study:  “Psychiatrists who are exposed to conflict-of-interest (COI) policies during their residency are less likely to prescribe brand-name antidepressants after graduation than those who trained in residency programs without such policies, according to a new study by researchers from the Perelman School of Medicine at the University of Pennsylvania. The study is the first of its kind to show that exposure to COI policies for physicians during residency training — in this case, psychiatrists — is effective in lowering their post-graduation rates of prescriptions for brand medications, including heavily promoted and brand reformulated antidepressants.” The study will be published in the February issue of Medical Care.

Note that while evidently precedent setting in terms of medical COIs, there is other  data – from the behavioral ethics field –  showing that well-timed exposure to a rule or ethical standard can  impact behavior in desirable ways. That research – and the ways in which its teachings might form the basis of effective C&E communications strategies – is discussed here.

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.