More on conflicts of interest disclosure

“Culture trumps compliance,” the old saying goes. But it still worth being reminded of it, particularly in the conflict of interest area, where the effect of culture may be less manifest than it is for various other types of misconduct (like harassment).

The latest contribution to this body of knowledge is Conflict of Interest Disclosure as a Reminder of Professional Norms: Clients First! by Dr Sunita Sah of Cornell’s business school, to be published in Organizational Behavior and Human Decision Processes. Sah writes:

“Disclosure is a popular solution for managing conflicts of interest (COIs) across a variety of industries and professions. The present work documents how perceived professional norms may influence advisors’ reactions to COI disclosure. In a series of laboratory and framed field experiments, five with monetary stakes, I demonstrate that disclosure can have differing effects on advisors who have a COI. These studies provide evidence that COI disclosure increases the salience of the perceived professional norm (‘clients first’  or ‘self-interest first’) and, correspondingly, the level of bias in advice. I show that in both the medical and financial context COI disclosure can significantly improve the advice quality of professional advisors who have norms to place clients first.” (Note: that a prior post discussed  the other side of the coin: Sah’s research on how disclosure of COIs can in some instances  exacerbate conflicted actions by those making the disclosure.) As stated  by Sah, “If self-interest first norms are prevalent, then the findings in this paper suggest that steps to change the perceived norms may be useful or even necessary as a precursor to implementing disclosure.”

Of course, most companies can’t delay implementing COI disclosure requirements. But, this research may help underscore for decision makers that disclosure alone is not enough, and that they may need to assess and possibly enhance the COI-related aspects of their culture.