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Conflict of interestFor Wikipedia's rules against editing with ulterior motives, see Wikipedia:Conflict ofinterest.For other uses, see Conflict of Interest (disambiguation).

A conflict of interest (COI) is a situation in which a person or organization is involvedin multiple interests (financial, emotional, or otherwise), one of which could possiblycorrupt the motivation of the individual or organization.

The presence of a conflict of interest is independent of the occurrence of impropriety.Therefore, a conflict of interest can be discovered and voluntarily defused before anycorruption occurs. A widely used definition is: "A conflict of interest is a set ofcircumstances that creates a risk that professional judgement or actions regarding a

primary interest will be unduly influenced by a secondary interest."[1] Primary interestrefers to the principal goals of the profession or activity, such as the protection of clients,the health of patients, the integrity of research, and the duties of public office. Secondaryinterest includes not only financial gain but also such motives as the desire for professionaladvancement and the wish to do favours for family and friends, but conflict of interestrules usually focus on financial relationships because they are relatively more objective,fungible, and quantifiable. The secondary interests are not treated as wrong in themselves,but become objectionable when they are believed to have greater weight than the primaryinterests. The conflict in a conflict of interest exists whether or not a particular individualis actually influenced by the secondary interest. It exists if the circumstances arereasonably believed (on the basis of past experience and objective evidence) to create a riskthat decisions may be unduly influenced by secondary interests.

Related to the practice of law

Judicial disqualification, also referred to as recusal, refers to the act of abstaining fromparticipation in an official action such as a court case/legal proceeding due to a conflict ofinterest of the presiding court official or administrative officer. Applicable statutes orcanons of ethics may provide standards for recusal in a given proceeding or matter.Providing that the judge or presiding officer must be free from disabling conflicts of



interest makes the fairness of the proceedings less likely to be questioned.[2]

In the legal profession, the duty of loyalty owed to a client prohibits an attorney (or a lawfirm) from representing any other party with interests adverse to those of a current client.The few exceptions to this rule require informed written consent from all affected clients,i.e., an "ethical wall". In some circumstances, a conflict of interest can never be waived by aclient. In perhaps the most common example encountered by the general public, the samefirm should not represent both parties in a divorce or child custody matter. Found conflictcan lead to denial or disgorgement of legal fees, or in some cases (such as the failure tomake mandatory disclosure), criminal proceedings. In the United States, a law firm usuallycannot represent a client if its interests conflict with those of another client, even if theyhave separate lawyers within the firm, unless (in some jurisdictions) the lawyer issegregated from the rest of the firm for the duration of the conflict. Law firms often employsoftware in conjunction with their case management and accounting systems in order tomeet their duties to monitor their conflict of interest exposure and to assist in obtainingwaivers.

Generally (unrelated to the practice of law)

More generally, conflicts of interest can be defined as any situation in which an individualor corporation (either private or governmental) is in a position to exploit a professional orofficial capacity in some way for their personal or corporate benefit.

Depending upon the law or rules related to a particular organization, the existence of aconflict of interest may not, in and of itself, be evidence of wrongdoing. In fact, for manyprofessionals, it is virtually impossible to avoid having conflicts of interest from time totime. A conflict of interest can, however, become a legal matter, for example, when anindividual tries (and/or succeeds in) influencing the outcome of a decision, for personalbenefit. A director or executive of a corporation will be subject to legal liability if a conflictof interest breaches his/her duty of loyalty.

There often is confusion over these two situations. Someone accused of a conflict ofinterest may deny that a conflict exists because he/she did not act improperly. In fact, aconflict of interest can exist even if there are no improper acts as a result of it. (One way tounderstand this is to use the term "conflict of roles". A person with two rolesan



individual who owns stock and is also a government official, for examplemay experiencesituations where those two roles conflict. The conflict can be mitigatedsee belowbut itstill exists. In and of itself, having two roles is not illegal, but the differing roles willcertainly provide an incentive for improper acts in some circumstances.)

As an example, in the sphere of business and control, according to the Institute of InternalAuditors:

conflict of interest is a situation in which an internal auditor, who is in aposition of trust, has a competing professional or personal interest. Suchcompeting interests can make it difficult to fulfill his or her duties impartially. Aconflict of interest exists even if no unethical or improper act results. A conflict ofinterest can create an appearance of impropriety that can undermine confidence inthe internal auditor, the internal audit activity, and the profession. A conflict ofinterest could impair an individual's ability to perform his or her duties and

responsibilities objectively.[3][4]

Organizational

An organizational conflict of interest (OCI) may exist in the same way as described above,for instance where a corporation provides two types of service to the government and theseservices conflict (e.g.: manufacturing parts and then participating on a selection committeecomparing parts manufacturers). Corporations may develop simple or complex systems tomitigate the risk or perceived risk of a conflict of interest. These risks can be evaluated by agovernment agency (for example, in a U.S. Government RFP) to determine whether therisks create a substantial advantage to the organization in question over its competition, orwill decrease the overall competitiveness of the bidding process.

Conflict of interest in the health care industry

Main article: Conflict of interest in the health care industry

The influence of the pharmaceutical industry on medical research has been a major causefor concern. In 2009 a study found that "a number of academic institutions" do not have

clear guidelines for relationships between Institutional Review Boards and industry.[5]



In contrast to this viewpoint, an article and associated editorial in the New EnglandJournal of Medicine in May 2015 emphasized the importance of pharmaceutical industry-physician interactions for the development of novel treatments, and argued that moraloutrage over industry malfeasance had unjustifiably led many to overemphasize theproblems created by financial conflicts of interest. The article noted that major healthcareorganizations such as National Center for Advancing Translational Sciences of theNational Institutes of Health, the Presidents Council of Advisors on Science andTechnology, the World Economic Forum, the Gates Foundation, the Wellcome Trust, andthe Food and Drug Administration had encouraged greater interactions between

physicians and industry in order to bring greater benefits to patients.[6][7]

Types

The following are the most common forms of conflicts of interests:

Self-dealing, in which an official who controls an organization causes it to enter into atransaction with the official, or with another organization that benefits the officialonly. The official is on both sides of the "deal."Outside employment, in which the interests of one job conflict with another.Nepotism, in which a spouse, child, or other close relative is employed (or applies foremployment) by an individual, or where goods or services are purchased from arelative or from a firm controlled by a relative. To avoid nepotism in hiring, manyemployment applications ask if the applicant is related to a current employee of thecompany. This allows recusal if the employed relative has a role in the hiring process.If this is the case, the relative could then recuse from any hiring decisions.Gifts from friends who also do business with the person receiving the gifts or fromindividuals or corporations who do business with the organization in which the giftrecipient is employed. Such gifts may include non-tangible things of value such astransportation and lodging.Pump and dump, in which a stock broker who owns a security artificially inflates theprice by "upgrading" it or spreading rumors, sells the security and adds shortposition, then "downgrades" the security or spreads negative rumors to push theprice down.

Other improper acts that are sometimes classified as conflicts of interests are probably



better classified elsewhere. Accepting bribes can be classified as corruption. Use ofgovernment or corporate property or assets for personal use is fraud. Nor shouldunauthorized distribution of confidential information, in itself, be considered a conflict ofinterest. For these improper acts, there is no inherent conflict of roles (see above).

COI is sometimes termed competition of interest rather than "conflict", emphasizing aconnotation of natural competition between valid interests rather than violent conflict withits connotation of victimhood and unfair aggression. Nevertheless, denotatively, there istoo much overlap between the terms to make any objective differentiation.

Examples

Environmental hazards and human health

Baker[8] summarized 176 studies of the potential impact of Bisphenol A on human health

as follows:[9]

Funding Harm No HarmIndustry 0 13 (100%)Independent (e.g., government) 152 (86%) 11 (14%)

Lessig[10] noted that this does not mean that the funding source influenced the results.However, it does raise questions about the validity of the industry-funded studiesspecifically, because the researchers conducting those studies have a conflict of interest;they are subject at minimum to a natural human inclination to please the people who paidfor their work. Lessig provided a similar summary of 326 studies of the potential harm

from cell phone usage with results that were similar but not as stark.[11]

Self-policing

Self-policing of any group is also a conflict of interest. If any organization, such as acorporation or government bureaucracy, is asked to eliminate unethical behavior withintheir own group, it may be in their interest in the short run to eliminate the appearance ofunethical behavior, rather than the behavior itself, by keeping any ethical breaches hidden,instead of exposing and correcting them. An exception occurs when the ethical breach isalready known by the public. In that case, it could be in the group's interest to end the



ethical problem to which the public has knowledge, but keep remaining breaches hidden.

Insurance claims adjusters

Insurance companies retain claims adjusters to represent their interest in adjusting claims.It is in the best interest of the insurance companies that the very smallest settlement isreached with its claimants. Based on the adjuster's experience and knowledge of theinsurance policy it is very easy for the adjuster to convince an unknowing claimant to settlefor less than what they may otherwise be entitled which could be a larger settlement. Thereis always a very good chance of a conflict of interest to exist when one adjuster tries torepresent both sides of a financial transaction such as an insurance claim. This problem isexacerbated when the claimant is told, or believes, the insurance company's claimsadjuster is fair and impartial enough to satisfy both theirs and the insurance company'sinterests. These types of conflicts could be easily be avoided by the use of disclosures.

Purchasing agents and sales personnel

A person working as the equipment purchaser for a company may get a bonusproportionate to the amount he's under budget by year end. However, this becomes anincentive for him to purchase inexpensive, substandard equipment. Therefore, this iscounter to the interests of those in his company who must actually use the equipment. W.Edwards Deming listed "purchasing on price alone" as number 4 of his famous 14 points,and he often said things to the effect that "He who purchases on price alone deserves to getrooked."

Government officials

Regulating conflict of interest in government is one of the aims of political ethics. Publicofficials are expected to put service to the public and their constituents ahead of theirpersonal interests. Conflict of interest rules are intended to prevent officials from makingdecisions in circumstances that could reasonably be perceived as violating this duty ofoffice. Rules in the executive branch tend to be stricter and easier to enforce than in the

legislative branch.[12] Two problems make legislative ethics of conflicts difficult and

distinctive.[13] First, as James Madison wrote, legislators should share a "communion ofinterests" with their constituents. Legislators cannot adequately represent the interests of



constituents without also representing some of their own. As Senator Robert S. Kerr oncesaid, "I represent the farmers of Oklahoma, although I have large farm interests. Irepresent the oil business in Oklahoma...and I am in the oil business...They don't want tosend a man here who has no community of interest with them, because he wouldn't be

worth a nickel to them."[14] The problem is to distinguish special interests from the generalinterests of all constituents. Second, the "political interests" of legislatures includecampaign contributions which they need to get elected, and which are generally not illegaland not the same as a bribe. But under many circumstances they can have the same effect.The problem here is how to keep the secondary interest in raising campaign funds fromoverwhelming what should be their primary interestfulfilling the duties of office.

Politics in the United States is dominated in many ways by political campaign

contributions.[2] Candidates are often not considered "credible" unless they have acampaign budget far beyond what could reasonably be raised from citizens of ordinarymeans. The impact of this money can be found in many places, most notably in studies ofhow campaign contributions affect legislative behavior. For example, the price of sugar inthe United States has been roughly double the international price for over half a century.In the 1980s, this added $3 billion to the annual budget of U.S. consumers, according to

Stern,[15] who provided the following summary of one part of how this happens:

Contributions from the sugarlobby, 19831986

Percent voting in 1985 against graduallyreducing sugar subsidies

> $5,000 100%$2,5005,000 97%$1,0002,500 68%$11,000 45%$0 20%

This $3 billion translates into $41 per household per year. This is in essence a tax collectedby a nongovernmental agency: It is a cost imposed on consumers by governmentaldecisions, but never considered in any of the standard data on tax collections.

Stern notes that sugar interests contributed $2.6 million to political campaigns,representing well over $1,000 return for each $1 contributed to political campaigns. This,however, does not include the cost of lobbying. Lessig cites six different studies that



consider the cost of lobbying with campaign contributions on a variety of issues considered

in Washington, D.C.[16] These studies produced estimates of the anticipated return on each$1 invested in lobbying and political campaigns that ranged from $6 to $220. Lessig notesthat clients who pay tens of millions of dollars to lobbyists typically receive billions.

Lessig insists that this does not mean that any legislator has sold his or her vote.[10] One ofseveral possible explanations Lessig gives for this phenomenon is that the money helpedelect candidates more supportive of the issues pushed by the big money spent on lobbyingand political campaigns. He notes that if any money perverts democracy, it is the largecontributions beyond the budgets of citizens of ordinary means; small contributions from

common citizens have long been considered supporting of democracy.[17]

When such large sums become virtually essential to a politician's future, it generates asubstantive conflict of interest contributing to a fairly well documented distortion on thenation's priorities and policies.

Beyond this, governmental officials, whether elected or not, often leave public service towork for companies affected by legislation they helped enact or companies they used toregulate or companies affected by legislation they helped enact. This practice is called the"revolving door". Former legislators and regulators are accused of (a) using insideinformation for their new employers or (b) compromising laws and regulations in hopes ofsecuring lucrative employment in the private sector. This possibility creates a conflict ofinterest for all public officials whose future may depend on the Revolving door.

Finance industry and elected officials

Conflicts of interest among elected officials is part of the story behind the increase in thepercent of US corporate domestic profits captured by the finance industry depicted in thataccompanying figure.

From 1934 through 1985, the finance industry averaged 13.8% of U.S. domestic corporateprofit. Between 1986 and 1999, it averaged 23.5%. From 2000 through 2010, it averaged32.6%. Some of this increase is doubtless due to increased efficiency from bankingconsolidation and innovations in new financial products that benefit consumers. However,if most consumers had refused to accept financial products they did not understand, e.g.,



Finance as a percent of USDomestic Corporate Profits Financeincludes banks, securities andinsurance. In 1932-1933, the totalU.S. domestic corporate profit wasnegative. However, the financialsector made a profit in those years,which made its percentage negative,below 0 and o the scale in this plot.[18]

negative amortization loans, the finance industry wouldnot have been as profitable as it has been, and the Late-2000s recession might have been avoided or postponed.

Stiglitz[19] noted that the Late-2000s recession wascreated in part because, "Bankers acted greedily becausethey had incentives and opportunities to do so". They didthis in part by innovating to make consumer financialproducts like retail banking services and home mortgagesas complicated as possible to make it easy for them tocharge higher fees. Consumers who shop carefully forfinancial services typically find better options than theprimary offerings of the major banks. However, fewconsumers think to do that. This explains part of thisincrease in financial industry profits.

However, a major portion of this increase and a drivingforce behind Late-2000s recession has been the corrosive effect of money in politics,giving legislators and the President of the U.S. a conflict of interest, because if they protectthe public, they will offend the finance industry, which contributed $1.7 billion to political

campaigns and spent $3.4 billion ($5.1 billion total) on lobbying from 1998 to 2008.[20][21]

[22]

To be conservative, suppose we attribute only the increase from 23.5% of 1986 through1999 to the recent 32.6% average to governmental actions subject to conflicts of interestcreated by the $1.7 billion in campaign contributions. That's 9% of the $3 trillion in profitsclaimed by the finance industry during that period or $270 billion. This represents a returnof over $50 for each $1 invested in political campaigns and lobbying for that industry.(This $270 billion represents almost $1,000 for every man, woman and child in the UnitedStates.) There is hardly any place outside of politics with such a high return on investmentin such a short time.

Finance industry and economists

Economists (unlike other professions such as sociologists) do not formally subscribe to aprofessional ethical code. Close to 300 economists have signed a letter urging the



American Economic Association (the disciplines foremost professional body), to adoptsuch a code. The signatories include George Akerlof, a Nobel laureate, and Christina

Romer, who headed Barack Obamas Council of Economic Advisers.[23]

This call for a code of ethics was supported by the public attention the documentary InsideJob (winner of an Academy Award) drew to the consulting relationships of several

influential economists.[24] This documentary focused on conflicts that may arise wheneconomists publish results or provide public recommendation on topics that affectindustries or companies with which they have financial links. Critics of the professionargue, for example, that it is no coincidence that financial economists, many of whom wereengaged as consultants by Wall Street firms, were opposed to regulating the financial

sector.[25]

In response to criticism that the profession not only failed to predict the 2007-2008financial crisis but may actually have helped create it, the American Economic Associationhas adopted new rules in 2012: economists will have to disclose financial ties and otherpotential conflicts of interest in papers published in academic journals. Backers argue suchdisclosures will help restore faith in the profession by increasing transparency which will

help in assessing economists' advice.[26]

Stockbrokers

A conflict of interest is a manifestation of moral hazard, particularly when a financialinstitution provides multiple services and the potentially competing interests of thoseservices may lead to a concealment of information or dissemination of misleadinginformation. A conflict of interest exists when a party to a transaction could potentiallymake a gain from taking actions that are detrimental to the other party in the transaction.[27]

There are many types of conflicts of interest such as a "pump and dump" by stockbrokers.This is when a stockbroker who owns a security artificially inflates the price by upgradingit or spreading rumors, and then sells the security and adds short position. They will thendowngrade the security or spread negative rumors to push the price back down. This is anexample of stock fraud. It is a conflict of interest because the stockbrokers are concealingand manipulating information to make it misleading for the buyers. The broker may claim



to have the "inside" information about impeding news and will urge buyers to buy thestock quickly. Investors will buy the stock, which creates a high demand and raises theprices.

This rise in prices can entice more people to believe the hype and then buy shares as well.The stockbrokers will then sell their shares and stop promoting, the price will drop, andother investors are left holding stock that is worth nothing compared to what they paid forit. The brokers are using their knowledge and position in a way to influence and controlothers and gain personally, which is morally wrong.

The Enron scandal is a major example of pump and dump. Executives participated in anelaborate scheme, falsely reporting profits, thus inflating its stock prices, and covered upthe real numbers with questionable accounting; 29 executives sold overvalued stock for

more than a billion dollars before the company went bankrupt.[citation needed]

Media

Any media organization has a conflict of interest in discussing anything that may impactits ability to communicate as it wants with its audience. For example, the WikimediaFoundation has a conflict of interest in discussing the Stop Online Piracy Act or any otherlegislation or governmental action that could impact its ability to deliver content to itsintended audience.

The business model of commercial media organizations (i.e., any that accept advertising) is

selling behavior change in their audience to advertisers.[28][29][30] However, few in theiraudience are aware of the conflict of interest between the profit motive and the altruisticdesire to serve the public and "give the audience what it wants".

Many major advertisers test their ads in various ways to measure the return on investmentin advertising. Advertising rates are set as a function of the size and spending habits of theaudience as measured by the Nielsen Ratings. Media action expressing this conflict ofinterest is evident in the reaction of Rupert Murdoch, Chairman of News Corporation,owner of Fox, to changes in data collection methodology adopted in 2004 by the NielsenCompany to more accurately measure viewing habits. The results corrected a previousoverestimate of the market share of Fox. Murdoch reacted by getting leading politicians to



denounce the Nielsen Ratings as racists. Susan Whiting, president and CEO of NielsenMedia Research, responded by quietly sharing Nielsen's data with her leading critics. The

criticism disappeared, and Fox paid Nielsen's fees.[31] Murdoch had a conflict of interestbetween the reality of his market and his finances.

Commercial media organizations lose money if they provide content that offends eithertheir audience or their advertisers. The substantial media consolidation that occurred sincethe 1980s has reduced the alternatives available to the audience, thereby making it easierfor the ever larger companies in this increasingly oligopolistic industry to hide news andentertainment potentially offensive to advertisers without losing audience. If the mediaprovide too much information on how congress spends its time, a major advertiser couldbe offended and could reduce their advertising expenditures with the offending mediacompany; indeed, this is one of the ways the market system has determined whichcompanies won and which either went out of business or were purchased by others in thismedia consolidation. (Advertisers don't like to feed the mouth that bites them, and oftendon't. Similarly, commercial media organizations are not eager to bite the hand that feedsthem.) Advertisers have been known to fund media organizations with editorial policiesthey find offensive if that media outlet provides access to a sufficiently attractive audiencesegment they cannot efficiently reach otherwise.

Election years are a major boon to commercial broadcasters, because virtually all politicaladvertising is purchased with minimal advance planning, paying therefore the highestrates. The commercial media have a conflict of interest in anything that could make it

easier for candidates to get elected with less money.[29]

Accompanying this trend in media consolidation has been a substantial reduction in

investigative journalism,[29] reflecting this conflict of interest between the businessobjectives of the commercial media and the public's need to know what government isdoing in their name. This change has been tied to substantial changes in law and culture inthe United States. To cite only one example, researchers have tied this decline in

investigative journalism to an increased coverage of the "police blotter".[32] This hasfurther been tied to the fact that the United States has the highest incarceration rate in theworld.



Beyond this, virtually all commercial media companies own substantial quantities ofcopyrighted material. This gives them an inherent conflict of interest in any public policyissue affecting copyrights. McChesney noted that the commercial media have lobbiedsuccessfully for changes in copyright law that have led "to higher prices and a shrinking ofthe marketplace of ideas", increasing the power and profits of the large media corporationsat public expense. One result of this is that "the people cease to have a means of clarifying

social priorities and organizing social reform".[33] A free market has a mechanism forcontrolling abuses of power by media corporations: If their censorship becomes tooegregious, they lose audience, which in turn reduces their advertising rates. However, theeffectiveness of this mechanism has been substantially reduced over the past quarter

century by "the changes in the concentration and integration of the media."[34] Would theAnti-Counterfeiting Trade Agreement have advanced to the point of generating substantialprotests without the secrecy behind which that agreement was negotiatedand would thegovernment attempts to sustain that secrecy have been as successful if the commercialmedia had not been a primary beneficiary and had not had a conflict of interest insuppressing discussion thereof?

Mitigation

Removal

Sometimes, people who may be perceived to have a conflict of interest resign from aposition or sell a shareholding in a venture, to eliminate the conflict of interest goingforward. For example, Lord Evans of Weardale resigned as a non-executive director of theUK National Crime Agency after a tax-avoidance-related controversy about HSBC, whereLord Evans was also a non-executive director. This resignation was stated to have taken

place in order to avoid the appearance of conflict of interest.[35]

"Blind trust"

A politician who owns shares in a company that may be affected by government policy mayput those shares in a blind trust with themselves or their family as the beneficiary. It isdisputed whether this really removes the conflict of interest, however.

Blind trusts may in fact obscure conflicts of interest, and for this reason it is illegal to fund



political parties in the UK via a blind trust if the identity of the real donor is concealed.

Disclosure

Commonly, politicians and high-ranking government officials are required to disclosefinancial informationassets such as stock, debts such as loans, and/or corporatepositions held, typically annually. To protect privacy (to some extent), financial figures areoften disclosed in ranges such as "$100,000 to $500,000" and "over $2,000,000". Certainprofessionals are required either by rules related to their professional organization, or bystatute, to disclose any actual or potential conflicts of interest. In some instances, thefailure to provide full disclosure is a crime.

However, there is limited evidence regarding the effect of conflict of interest disclosure

despite its widespread acceptance.[36] A 2012 study published in the Journal of theAmerican Medical Association showed that routine disclosure of conflicts of interest byAmerican medical school educators to pre-clinical medical students were associated with

an increased desire among students for limitations in some industry relationships.[37]

However, there were no changes in the perceptions of students about the value ofdisclosure, the influence of industry relationships on educational content, or the

instruction by faculty with relevant conflicts of interest.[38]

And, an increasing line of research suggests that disclosure can have "perverse effects" or,

at least, is not the panacea regulators often take it to be.[39]

Recusal

Those with a conflict of interest are expected to recuse themselves from (i.e., abstain from)decisions where such a conflict exists. The imperative for recusal varies depending uponthe circumstance and profession, either as common sense ethics, codified ethics, or bystatute. For example, if the governing board of a government agency is considering hiring aconsulting firm for some task, and one firm being considered has, as a partner, a closerelative of one of the board's members, then that board member should not vote on whichfirm is to be selected. In fact, to minimize any conflict, the board member should notparticipate in any way in the decision, including discussions.



Judges are supposed to recuse themselves from cases when personal conflicts of interestmay arise. For example, if a judge has participated in a case previously in some otherjudicial role he/she is not allowed to try that case. Recusal is also expected when one of thelawyers in a case might be a close personal friend, or when the outcome of the case mightaffect the judge directly, such as whether a car maker is obliged to recall a model that ajudge drives. This is required by law under Continental civil law systems and by the RomeStatute, organic law of the International Criminal Court.

Third-party evaluations

Consider a situation where the owner of a majority of a public companies decides to buyout the minority shareholders and take the corporation private. What is a fair price?Obviously it is improper (and, typically, illegal) for the majority owner to simply state aprice and then have the (majority-controlled) board of directors approve that price. Whatis typically done is to hire an independent firm (a third party), well-qualified to evaluatesuch matters, to calculate a "fair price", which is then voted on by the minorityshareholders.

Third-party evaluations may also be used as proof that transactions were, in fact, fair("arm's-length"). For example, a corporation that leases an office building that is owned bythe CEO might get an independent evaluation showing what the market rate is for suchleases in the locale, to address the conflict of interest that exists between the fiduciary dutyof the CEO (to the stockholders, by getting the lowest rent possible) and the personalinterest of that CEO (to maximize the income that the CEO gets from owning that officebuilding by getting the highest rent possible).

Conclusion

Generally, conflicts of interests should be eliminated. Often, however, the specifics can becontroversial. Should therapists, such as psychiatrists, be allowed to have extra-professional relations with patients, or ex-patients? Should a faculty member be allowed tohave an extra-professional relationship with a student, and should that depend on whetherthe student is in a class of, or being advised by, the faculty member?

Codes of ethics help to minimize problems with conflicts of interests because they can spellout the extent to which such conflicts should be avoided, and what the parties should do



where such conflicts are permitted by a code of ethics (disclosure, recusal, etc.). Thus,professionals cannot claim that they were unaware that their improper behavior wasunethical. As importantly, the threat of disciplinary action (for example, a lawyer beingdisbarred) helps to minimize unacceptable conflicts or improper acts when a conflict isunavoidable.

Since codes of ethics cannot cover all situations, some governments have established anoffice of the ethics commissioner, who can be appointed by the legislature and report to thelegislature.

See also

Arm's length principleChinese wallInsider tradingJudicial disqualificationJury nullificationMoral hazardPerverse incentiveRevolving door (politics)

References

1. ^ Lo and Field (2009). The definition originally appeared in Thompson (1993).

2. ^ a b Lessig 2011, pp. 29-323. ^ "1120-Individual Objectivity". Institute of Internal Auditors. Retrieved July 7, 2011.4. ^ "Policies & Procedures of the Internal Audit Activity". City College of San

Francisco. Retrieved July 7, 2011.5. ^ Policies regarding IRB members' industry relationships often lacking.6. ^ "Revisiting the CommercialAcademic Interface NEJM".7. ^ "Reconnecting the Dots Reinterpreting IndustryPhysician Relations NEJM".8. ^ Baker, Nena (2008). The Body Toxic. North Point Press. p. 142. "cited from Lessig

2011, p. 25"9. ^ Fisher's exact test computed using the fisher.test function in R (programming

language) returned a significance probability of 2e-13, i.e., there are 200 chances in a



million billion of getting a table as extreme as this with the given marginals by chancealone. In other words, it is not credible to claim that the funding source has no impacton the outcome of this many independent studies.

10. ^ a b Lessig 201111. ^ Lessig 2011, pp. 262812. ^ Painter, Richard (2009), Getting the Government America Deserves: How Ethics

Reform Can Make a Difference, Oxford University Press 978-0-19-537871-913. ^ Thompson (1995)14. ^ Kerr, Robert S. "Senator Kerr Talks about Conflict of Interest", U.S. News & World

Report, September 3, 1962, p. 86.15. ^ Stern, Philip M. (1992). Still the Best Congress Money Can Buy. Regnery

Gatgeway. pp. 168176.16. ^ Lessig 2011, pp. 4352, 11717. ^ Lessig 2011, pp. 12012118. ^ From Table 6.16 of the National Income and Product Accounts (NIPA) compiled by

the Bureau of Economic Analysis of the federal government of the United States. Formore information, see the USFinanceIndusty data set in the Ecdat package for R(programming language) available from R-Forge.

19. ^ Stiglitz, Joseph E. (2010). Freefall: America, Free Markets, and the Shrinking ofthe World Economy. Norton. pp. 56.

20. ^ Lessig 2011, p. 8321. ^ Sachs, Jeffrey D. (2011). The Price of Civilization: Reawakening American Virtue

and Prosperity. Random House. ISBN 978-0-679-60502-7.22. ^ Reinhart, Carmen M.; Rogoff, Kenneth S. (2009). This Time Is Different: Eight

Centuries of Financial Folly. Princeton University Press. ISBN 978-0-691-15264-6.23. ^ Letters from 300 economists to the American Economic Association, 3 January

2011.24. ^ "Stung by 'Inside Job,' economists pen a code of ethics", Wall Street Journal, 12

October 2011.25. ^ "Dismal ethics, An intensifying debate about the case for a professional code of

ethics for economists", The Economist, 6 January 2011.26. ^ "Economists set rules on ethics", Wall Street Journal, 9 January 2012.27. ^ Mehran, Hamid. "Economics of Conflicts of Interest in Financial Institutions".



SSRN Electronic Journal. doi:10.2139/ssrn.943447.28. ^ Herman, Edward S.; Chomsky, Noam (1988). Manufacturing Consent: The

Political Economy of the Mass Media. Pantheon. ISBN 0-394-54926-0.

29. ^ a b c McChesney, Robert W. (2004). The Problem of the Media: U.S.Communication Politics in the 21st Century. Monthly Review Press. ISBN 1-58367-105-6.

30. ^ McCheney, Robert W. (2008). The Political Economy of the Media: EnduringIssues, Emerging Dilemmas. Monthly Review Press. ISBN 978-1-58367-161-0.

31. ^ Bianco, Anthony; Grover, Ronald (September 20, 2004). "How Nielsen Stood Up toMurdoch". Business Week.

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Conflict of Interest Disclosure by Preclinical Lecturers and Medical Students'Attitudes Toward the Pharmaceutical and Device Industries". Journal of theAmerican Medical Association 308 (21): 21872189. doi:10.1001/jama.2012.25315.Check date values in: |date=, |accessdate= (help);

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Further reading

Acocella, N. and Di Bartolomeo, G. and Piacquadio, P.G. [2009], Conflict of interest,



(implicit) coalitions and Nash policy games, in: Economics Letters, 105: 303-305.Black, William K. (2005). The Best Way to Rob a Bank Is to Own One. Austin, TX:University of Texas Press. ISBN 0-292-72139-0.Davis, Michael; Andrew Stark (2001). Conflict of interest in the professions. Oxford:Oxford University Press. ISBN 0-19-512863-X.Lessig, Lawrence (2011). Republic, Lost: How Money Corrupts Congress -- and aPlan to Stop It. Twelve. ISBN 978-0-446-57643-7.Lo, Bernard; Marilyn J. Field (2009). Conflict of Interest in Medical Research,Education, and Practice. Washington DC: National Academies Press. ISBN 978-0-309-13188-9.Porter, Roger J.; Thomas E. Malone (1992). Biomedical research: collaboration andconflict of interest. Baltimore: Johns Hopkins University Press. ISBN 0-8018-4400-2.Thompson, Dennis (1995). Ethics in Congress: From Individual to InstitutionalCorruption. Washington DC: Brookings Institution Press. ISBN 0-8157-8423-6.Thompson, Dennis (1993). "Understanding financial conflicts of interest". NewEngland Journal of Medicine 329 (8): 57376.doi:10.1056/NEJM199308193290812.

External links

Thacker, Paul D. (November 2006). "Environmental journals feel pressure to adoptdisclosure rules". Environmental Science & Technology 40 (22): 68736875.doi:10.1021/es062808a.McDonald, Michael. "Ethics and Conflict of Interest". W. Maurice Young Centre forApplied Ethics. Archived from the original on 2007-11-03.

conflict of interest - wikipedia, the free encyclopedia

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