Essay Writing
What is a conflict of interest? Answer this question in relation to the moral issues raised by conflicts of interest in the professions. Refer in your answer to the relationship between medical professionals and the pharmaceutical and medical devices industries. Should medical professionals avoid relationships with such industries? Why/Why not?
Important: Your essay must incorporate a detailed discussion and analysis of the relevant arguments presented in at least two* of the assigned readings for your chosen topic. This means you should include assessments of opposing viewpoints and objections. Remember to state your own view clearly and to defend it using some of the theoretical resources (theories, principles) we have discussed in class. (*Some questions ask you to address arguments from more than two sources. In these cases you should examine all the relevant arguments in detail. Aim to use four to six sources in total. You do not need to discuss the arguments from every source in the same detail. Please use the readings from the unit reading list relevant to your topic.)
I will provide topic details
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Conflict of
Interest
M Davis, Illinois Institute of Technology, Chicago, IL, USA
ª 2012 Elsevier Inc. All rights reserved.
Glossary
Adverse interest A private interest giving one a reason
to act contrary to one’s duty as agent or trustee; not
necessary for a conflict of interest, although a common
cause.
Agent A person authorized by another, the principal, to
act on the principal’s behalf, and continuously subject to
the principal’s control.
Apparent conflict of interest A situation in which one
does not have the conflict of interest in question but
someone else would be justified in concluding that one
does.
Bias A deflection of judgment in a determinate
direction; not necessary for
conflict of interest.
Conflict of commitments (duties or obligations) A
situation in which one has at least two commitments
(duties or obligations) and fulfilling one will make fulfilling
the rest impractical; not necessarily a conflict of interest.
r, P. (Eds.). (2011). Encyclopedia of applied ethics. Retrieved from http://ebookcentral.pr
2020-01-06 21:42:15.
Conflict of interests A situation in which two or more
interests conflict, whether within one person or between
persons; not
necessarily a conflict of interest.
Conflict of roles A situation in which satisfying the
demands of one role precludes satisfying the demands
of another role one also occupies; not necessarily a
conflict of interest.
Conflicting interests Same as conflict of interests; not
necessarily a conflict of interest.
Disloyalty Acting contrary to one’s duty as agent or
trustee.
Fiduciary A person having a duty to act in another’s
behalf. Both agents and trustees are fiduciaries;
fiduciaries can have a conflict of interest only if their
duties involve exercising judgment.
Trustee A person having a duty to act on another’s
behalf, especially with respect to property, but not
subject to that other’s control. Trustees are fiduciaries
but not agents.
oqu
What is Conflict of Interest?
A conflict of interest is a situation in which some person P
(whether an individual or corporate body) is (1) in a
relationship with another requiring P to exercise judg-
ment on the other’s behalf and (2) P has a (special) interest
tending to interfere with the proper exercise of judgment
in that relationship. The crucial terms in this definition
are ‘relationship,’ ‘judgment,’ ‘interest,’ and ‘proper
exercise.’
Relationship
The term relationship (as used here) is quite general,
including any connection between P and another person
justifying that other’s reliance on P for a certain purpose.
A relationship may be quite formal (e.g., that between an
attorney and her client) or quite informal (e.g., that
between friends). A relationship can last a long time (as
familial relationships generally do) or only a minute (as
when one directs a stranger to a distant address). The
relationship required must, however, be fiduciary; that is,
it must involve one person trusting (or, at least, being
entitled to trust) another to do something for her –
exercise judgment in her service.
The legal distinction between agents and trustees is
not important here. An agent is a fiduciary who is under
the continual control of the principal (i.e., the principal
may, at any time, issue new instructions). A trustee is not
under similar control. For a time at least, the trustee does
not have to do what the principal says. Thus, for example,
the trustee of an estate, although bound by the instruc
tions of the will she administers, is a trustee precisely
because she is not subject to further instruction, either
from those who established the trust or from its
beneficiaries.
Judgment
Judgment (as used here) is the ability to make certain
kinds of decision correctly more often than would a
simple clerk with a book of rules and all, and only, the
same information. Insofar as decisions do not require
judgment, they are ‘routine,’ ‘mechanical,’ or ‘ministerial’;
they have (something like) an algorithm. The decision
maker contributes nothing special. Any difference
between his or her decision and that of someone equally
well trained would mean that (at least) one of them had
erred (something easily shown by examining what they
did). Ordinary math problems are routine in this way.
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Where judgment is required, the decision is no longer
routine. Judgment brings knowledge, skill, and insight to
bear in unpredictable ways. Where judgment is necessary,
different decision makers, however skilled, may disagree
without either being clearly wrong. Over time, we should
be able to tell that some decision makers are better than
others (indeed, that some are incompetent), but we will
not, decision by decision, be able to explain differences in
outcome merely by error – or even be able to establish
decisively that the judgment of one decision maker is
better than another’s.
The social sciences have recently begun to study
influences on judgment in a systematic and controlled
way. They have discovered that good judgment is quite
fragile. Even seemingly insignificant gifts or incentives
can have significant effects.
Anyone sufficiently adept in the exercise of judgment
of a certain kind is competent in the corresponding field.
Each profession is defined in part by a distinct kind of
judgment. Accountants are especially adept at evaluating
procedures for reporting finances, civil engineers are
especially adept at predicting the likely serviceability of
physical structures, teachers are especially adept at jud
ging academic progress, and so on.
Judgment is not only an attribute of professions. Any
agent, trustee, or other fiduciary may exercise judgment.
One may even exercise judgment in a relationship as
mundane as watching a neighbor’s children while he
answers the phone. However, not every relationship, not
even every relationship of trust or responsibility, requires
judgment. I may, for example, be asked to hold a great
sum of money in my safe until the owner returns. I have a
great trust. I am a fiduciary upon whom the owner may be
relying for her future happiness. However, I need not
exercise judgment to do what I should. My duties are
entirely routine (however much the money tempts me).
I need only put the money in the safe and leave it there
until the owner returns and asks for it. I cannot have a
conflict of interest in that role.
Interest
An interest is any influence, loyalty, concern, emotion, or
other feature of a situation tending to make P’s judgment
(in that situation) less reliable than it would normally be
(without rendering P incompetent). Financial interests
and family connections are the most common interests
discussed in this context, but love, prior statements, gra
titude, and other ‘subjective’ tugs on judgment can also be
interests (in this sense). Thus, for example, a judge has an
interest in a case if one of the parties is a friend or enemy,
just as he would if the party were his spouse or a company
in which he owned a large share. Friendship or enmity
can threaten judgment as easily as can financial or family
entanglements.
er, P. (Eds.). (2011). Encyclopedia of applied ethics. Retrieved from http://ebookcentral.proq
n 2020-01-06 21:42:15.
Training or experience can sometimes protect mem
bers of an occupation from the effect of certain tugs on
judgment. For example, would-be physicians quickly
learn to view the body as a site of disease rather than
sexuality. However, there do seem to be limits to what
training and experience can accomplish. Thus, for exam
ple, physicians have long preferred to send members of
their own family to another physician rather than care for
them themselves. They do that, in part at least, because
they do not think medical training has prepared them to
keep adequate professional distance between themselves
and someone emotionally close to them. Previous gen
erations of physicians saw the bad consequences of
supposing that family ties have no tendency to affect
professional judgment. Family ties seem to damage med
ical judgment even though they tug in the right direction.
What in fact constitutes a conflict of interest is an
empirical question, always open to revision as new evi
dence comes in. It is therefore a mistake to make a final
list of what constitutes the relevant interests. We should
not, for example, say that, by definition, a conflict of
interest must involve a financial or family interest.
Definitions cannot settle empirical questions.
There are, of course, facts about a situation, such as
loud noise or poor lighting, and even facts about a person,
such as exhaustion or extreme anger, that, although ren
dering otherwise competent judgment unreliable, do not
seem to be conflicts of interest. How are we to distinguish
such facts from ‘interests’? This is neither a morally
important question nor one difficult to answer. The ques
tion is not morally important because threats to judgment
arising from loud noise, exhaustion, or the like should be
treated much as conflict of interest should (i.e., avoided,
escaped, or disclosed and managed). The question is not
difficult because we can easily identify the conceptual
boundary between, for example, loud noise or exhaustion,
on the one hand, and the influences, loyalties, and the like
that, on the other hand, create conflicts of interest.
Conditions such as loud noise or exhaustion do not threa
ten judgment in the way conflict of interest does. They
make judgment unreliable by rendering it (temporarily)
incompetent; we are ‘unable to think.’ We might then
actually fail a test of competence we would otherwise
pass easily. Conflict of interest does not work like that.
We remain able to pass any test of competence we could
otherwise pass. What conflict of interest affects are the
ends in view, the evaluation of this or that means, and
other matters of judgment within the bounds of
competence.
Proper Exercise
What constitutes proper exercise of judgment is generally
a question of social fact, including what people ordinarily
expect; what P or the group P belongs to invites others to
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expect; and what various laws, professional codes, or other
regulations require. Because what constitutes proper
exercise of judgment is a social fact, it may change over
time and, at any time, may have a disputed boundary. For
example, architects today are supposed to consider sus
tainability when designing a building; they had no such
professional obligation as recently as 1990.
What comprises proper exercise of judgment also var
ies from one profession to another. For example, a lawyer
who resolves every reasonable doubt in favor of an
employer when presenting the employer’s case in court
exercises her professional judgment properly; an indus
trial chemist who does the same when presenting research
at a conference does not. Chemists are supposed to serve
their employer by serving the truth (not, like lawyers, to
serve the truth by serving their employer).
What comprises proper exercise of judgment may also
vary from one employer to another. For example, one
company may leave its employees free to choose their
flight even though the company is paying for it; another
may require employees to choose the least expensive
flight consistent with arriving on time. Because employ
ees are agents having a general duty not to waste their
employer’s resources, and because choosing among flights
generally involves judgment, the employees of the second
company will have less room for conflict of interest than
employees of the first. They will have less room for
conflict of interest because their employer has restricted
the domain of proper judgment more than the first did.
What is Wrong with Conflict of Interest?
A conflict of interest is like dirt in a sensitive (mechanical)
gauge. All such gauges contain some dirt, the omnipresent
particles that float in the air. Such dirt, being omnipresent,
will be taken into account in the gauge’s design. Such dirt
does not affect the gauge’s reliability. However, dirt that is
not omnipresent, the unusual bit of grease or sand, can
affect reliability, the ability of this gauge to do what
gauges of its kind should (and generally do) do. Such
‘special’ dirt might, for example, cause the gauge to stick
unpredictably. Insofar as dirt affects a gauge’s reliability, it
corresponds to the interests that create conflicts of inter
est. Thus, a conflict of interest can be objectionable for at
least one of three reasons.
First, P may be negligent in not responding to the
conflict of interest. We expect those who undertake to
act on another’s behalf to know the limits of their judg
ment when the limits are obvious. Conflicts of interest are
obvious; one cannot have an interest without knowing it,
although one can easily misjudge how much it might
affect one’s judgment. Indeed, people with a conflict of
interest often esteem too highly their own reliability.
Insofar as P is unaware of her conflict of interest, she
inger, P. (Eds.). (2011). Encyclopedia of applied ethics. Retrieved from http://ebookcentral.pr
on 2020-01-06 21:42:15.
has failed to exercise reasonable care in acting on
another’s behalf. Insofar as she has failed to exercise
reasonable care, she is negligent. Insofar as she is negli
gent, her conduct is morally objectionable.
Second, if those justifiably relying on P for a certain
judgment do not know of P’s conflict of interest but P
knows (or should know) that they do not, P is allowing
them to believe that she is more reliable than she is. She is,
in effect, deceiving them. Insofar as she is deceiving them,
she is betraying their (properly placed) trust. Insofar as
she betrays their trust, her conduct is morally
objectionable.
Third, even if P informs those justifiably relying on her
of the conflict of interest, her judgment will be less trust
worthy than it ordinarily is. She will still be less reliably
competent than usual – and perhaps appear less compe
tent than members of her profession, occupation, or
avocation should be. Conflict of interest can remain a
technical problem even after it has ceased to be a moral
problem. Even as a technical problem, conflict of interest
can harm the reputation of the profession, occupation,
avocation, or individual in question.
Not Bias
Conflict of interest is not mere bias. Bias (in a person) is a
deflection of judgment in a definite direction. Bias,
whether conscious or unconscious, is relatively easy to
correct for. For example, we can discount for the bias (e.g.,
‘take his opinion with a grain of salt’).
Conflict of interest is not bias but a tendency toward
bias. Correcting for a tendency is much more difficult
than correcting for a bias. Consider our gauge again:
Because of the special dirt in it, it has a tendency to
stick. How do we correct for that tendency? Do we accept
its first reading, strike the gauge once and then accept the
new reading, strike it several times before accepting a
reading, average all the readings, or what? How are we
to know when we have what we would have had were the
gauge as reliable as it should be?
Not Conflict of Commitments or Conflict of
Roles
A conflict of interest is not a conflict within one’s commit
ments, obligations, or duties or between one’s roles but
between some (special) interest and the proper exercise of
competent judgment in accordance with some commit
ment, obligation, duty, or role. Thus, for example, I do not
have a conflict of interest just because (in a fit of absent
mindedness) I promised to give a talk today after promis
ing to attend my son’s soccer game scheduled for the same
time. That conflict of commitments does not threaten my
judgment (although I must decide between them).
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I would, however, have a conflict of interest if I had to
referee at my son’s soccer game. I would find it more
difficult than a stranger to judge accurately when my son
had committed a foul. (After all, part of being a good
father is having a tendency to favor one’s own child.) I
honestly do not know whether I would be harder on him
than an impartial referee would be, easier, or just the
same. What I do know is that, like the dirty gauge, I
could not be as reliable as a ‘clean gauge’ would be.
The same would be true even if I refereed for a game
in which my son did not play but I had a strong dislike for
several players on one team. Would I call more fouls
against that team, fewer (because I was ‘bending over
backwards to be fair’), or the same as a similarly qualified
referee who did not share my dislike? Again, I do not
know. What I do know is that an interest, my dislike of
those players, is sufficient to make me less reliable in the
role of referee than I would otherwise be. Conflict of
interest does not require a clash of roles; one role (referee)
and one interest (a dislike of some players) is enough for a
conflict of interest.
Impartiality, Independence, and So On
We often describe an inability to judge as someone less
involved would as a loss of impartiality, independence,
objectivity, or professional distance. Such descriptions
often pick out a conflict of interest, but just as often they
do not. One can, for example, fail to be impartial, inde
pendent, or objective because one is biased or under
another’s control.
What Can Be Done About Conflict of
Interest?
Virtually all professional codes, and many corporate or
governmental codes of ethics as well, provide some gui
dance on how to deal with conflicts of interest.
Unfortunately, many say no more than ‘avoid all conflicts
of interest.’ Such a flat prohibition probably rests on at
least one of two mistakes.
One mistake is assuming that conflicts of interest can
always be avoided. Some certainly can. For example, a
public prosecutor might, upon taking office, put his assets
in a blind trust. He would then not know what special
effect his official decisions would have on his finances. His
‘objective interest’ could not affect his judgment. He
would have avoided all conflicts of interest arising from
his investments. He cannot, however, avoid all conflicts of
interest in that way. He cannot put all his interests,
including family and friendships, into a blind trust. The
prosecutor may not, for example, be able to avoid his
office having a case in which a member of his family is
the defendant’s attorney, a witness, or even the defendant.
er, P. (Eds.). (2011). Encyclopedia of applied ethics. Retrieved from http://ebookcentral.proq
n 2020-01-06 21:42:15.
The other mistake on which a flat prohibition of con
flicts of interest may rest is the assumption that having a
conflict of interest is always wrong. Having a conflict of
interest is not like stealing money or taking a bribe. One
can have a conflict of interest without doing anything
wrong (e.g., the prosecutor does nothing wrong just
because the defense has called the prosecutor’s mother
as a witness). To have a conflict of interest is to have a
moral problem. What will be morally right or wrong, or at
least morally good or bad, is how one resolves that pro
blem. There are at least three approaches to the problem
(apart from trying to avoid those conflicts that should be
avoided).
Escape
One approach to the problem posed by a conflict of
interest is escape. One way to escape a conflict of interest
is to redefine the underlying relationship. Thus, for exam
ple, a prosecutor foreseeing certain conflicts of interest
might ‘recuse’ himself – that is, establish procedures so
that all litigation involving his assets, family, or the like
that pass through his office bypass him. Another way to
escape a conflict of interest is to divest oneself of the
interest creating the conflict. If, for example, the conflict
is created by ownership of stock in a certain corporation,
one can sell the stock before making any official decision
affecting it (and have nothing to do with the stock for a
decent interval thereafter).
Escape can be costly. Thus, to continue our example,
recusing gives up the public advantage of having the
prosecutor contribute to certain official decisions. The
prosecutor will not even hear of matters he would ordi
narily decide. Divesting avoids that cost, but perhaps only
by imposing a substantial personal loss (because, for
example, the prosecutor would have to sell a stock when
its price was depressed). If the prosecutor cannot afford
divestment, and recusal is impractical, he may have to
choose a third way of escape – withdrawal from the
underlying relationship: He may have to resign his office.
Disclosure
Another approach to resolving the moral problem posed
by a conflict of interest is to disclose the conflict to those
relying on one’s judgment. Disclosure, if sufficiently com
plete (and understood), prevents deception. Often,
disclosure also allows those relying on one to adjust
their reliance accordingly (e.g., by seeking a ‘second opi
nion’) or to change the relationship (e.g., by requiring
recusal for a certain range of decisions). However, unlike
escape, disclosure as such does not end the conflict of
interest; at best it avoids negligence and betrayal of trust.
Disclosure does not even do that unless (1) the person
disclosed to is in a position to respond effectively to the
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conflict of interest disclosed, (2) he is competent to under
stand the threat to judgment the conflict poses, and (3) the
disclosure is in a form likely to alert him to the serious
ness of the conflict. An inadequate disclosure may be no
better than none. For example, a physician who discloses
her interest in a treatment she is recommending with the
words, ‘‘This is so good that I have invested my own
money in the company,’’ has not properly disclosed the
conflict of interest.
Procedures for disclosure can be quite elaborate. For
example, the City of Chicago requires every employee of
the executive branch with significant responsibilities to
fill out annually a 2-page form disclosing close relatives,
business partners, and sources of outside income. The
forms are open to public inspection.
Disclosure may itself generate problems of privacy and
confidentiality. For example, if a condition of holding a
certain public office is that the official list everyone with
whom she has a business relation, she may have to provide
significant information about people who, having nothing
to do with government, thought they could avoid having
their business relations put into a public record.
Managing
Managing is a third approach to conflict of interest.
Although managing is often the resolution reached after
disclosure, it need not be. Where disclosure is improper
(because it would violate some rule of confidentiality) or
impossible (because the person to whom disclosure
should be made is absent, incompetent, or unable to
respond in time), managing may still be a legitimate
option. Suppose, for example, that the only surgeon in a
hospital is called to the emergency room to operate on
(what turns out to be) his former wife who, unconscious
and near death, stands little chance of surviving unless he
works quickly. Withdrawing would mean her death – and
the end of large alimony payments. Disclosing the conflict
of interest to her is impossible (because she is uncon
scious) and would, in any case, be unnecessary (because
if she were conscious, she would already know what he
would disclose). Disclosing to the surgical team her rela
tionship to him (including the alimony) would invade her
privacy while making absolutely no contribution to get
ting her informed consent. Perhaps the best the surgeon
can do is to ask his team to watch him carefully, to keep an
especially good record, and to call his attention immedi
ately to anything that seems amiss, hoping his awareness
of their watchfulness will curb any tendency in him to be
careless with her. The best he can do is manage the
conflict of interest. Managing is a partial realigning of
interests, not enough to eliminate the conflict of interest
but enough to make it seem likely that benefits will
exceed the costs.
inger, P. (Eds.). (2011). Encyclopedia of applied ethics. Retrieved from http://ebookcentral.pr
on 2020-01-06 21:42:15.
Disclosure is often the prelude to management – that
is, the attempt to contain or channel the conflict of inter
est so that allowing it is, all things considered, better than
escaping it. Management has its costs – for example, the
cost of a second opinion. Management also has its advan
tages, especially where an expert, although admittedly
less reliable than usual, would be difficult to replace (or
actually irreplaceable), as in the case of the surgeon dis
cussed previously. These costs and benefits will vary with
circumstances. One cost does not. Tolerating a certain
sort of conflict of interest tends to make it seem normal.
What was an obvious conflict of interest today may soon
come to seem a mere technical conflict and then nothing
to worry about. The border between tolerable and intol
erable conflicts of interest slowly moves until almost any
conflict of interest seems manageable. Unique conflicts of
interest may be managed, but reoccurring conflict should
be avoided.
The Best Approach
What should be done about a conflict of interest depends
on all the circumstances, including the relative impor
tance of the decision in question; the alternatives
available; the wishes of the principal, client, employer,
or the like; the law; and any relevant code of ethics,
professional or institutional. Some conflicts should be
avoided, some should be escaped, others should be dis
closed, and a few should be managed.
Generally, conflicts of interest are easier to tolerate
when they are ‘potential’ rather than ‘actual.’ A conflict of
interest is potential if and only if P has a conflict of
interest with respect to a certain judgment but is not yet
in a situation in which he must make that judgment.
Potential conflicts of interest, like time bombs, may or
may not go off. A conflict of interest is actual if and only if
P has a conflict of interest with respect to a certain
judgment and is in a situation in which he must make
that judgment.
In a friendly divorce, for example, the parties may
prefer a less expensive proceeding, in which they share
a lawyer, to a more expensive one in which each party has
its own. The lawyer who undertakes to represent both
parties in such a divorce can, of course, foresee that a
dispute about the house, car, savings account, or dog may
become difficult. From the beginning, the lawyer would
be risking a moment when trying to put her professional
judgment at the disposal of one party while trying to do
the same for the other would affect the judgment in ways
difficult to predict. That is, she would have a potential
conflict of interest as soon as she agreed to represent both
parties. However, while the divorce remained friendly,
she would have no actual conflict of interest.
The lawyer should, of course, be sure that the parties
understand the risks, as well as the benefits, of sharing a
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lawyer before she agrees to such an arrangement. Among
the risks is her precipitous withdrawal from the proceed
ing should the divorce become difficult. She would have
to withdraw if the divorce became difficult because an
actual conflict of interest would make it impossible for her
to serve her clients as her profession wants lawyers to
serve clients. Professional standards take precedence over
the clients’ wishes.
Appearances, Loyalties, Gifts, and Bribes
The Appearance of Conflict of Interest
Many potential or actual conflicts of interests are, out of a
politeness or timidity, misdescribed as ‘apparent conflicts
of interest’ or ‘merely apparent conflicts of interest.’ The
term ‘apparent conflict of interest’ should not be wasted in
this way. A conflict of interest is (merely) apparent if and
only if P does not have the conflict of interest (actual or
potential), but someone other than P, not knowing what P
knows, would be justified in concluding (however tenta
tively) that P does have the conflict. Apparent conflicts of
interest (strictly so-called) are no more conflicts of inter
est than counterfeit money is money.
An apparent conflict of interest is nonetheless objec
tionable – for the same reason that any merely apparent
wrongdoing is objectionable. It misleads people about
their security, inviting unnecessary anxiety and precau
tion. Apparent conflicts should be resolved as soon as
possible. An apparent conflict of interest is resolved by
making available enough information to show that there is
no actual or potential conflict. One might, for example,
answer a charge of financial interest by showing that one
does not own the property in question. Where one cannot
make such a showing, the conflict of interest is actual or
potential, not (merely) apparent.
Disloyalty
Disloyalty is neither necessary nor sufficient for conflict
of interest. Disloyalty and conflict of interest are only
loosely connected.
One can be loyal and have a conflict of interest. A loyal
agent who cannot reasonably avoid or escape a conflict of
interest respecting some affair on which her judgment is
to be deployed would disclose the conflict to her princi
pal. Having fully disclosed it and received the principal’s
informed consent to continue as before, she may continue,
even though her judgment remains less reliable than it
would otherwise be. There is no disloyalty in that; how
ever, the conflict of interest remains.
One can also be disloyal without having a conflict of
interest. For example, if, being too greedy, you embezzled
money from your employer, you are disloyal. You con
sciously failed to act as a faithful agent of your employer.
er, P. (Eds.). (2011). Encyclopedia of applied ethics. Retrieved from http://ebookcentral.proq
n 2020-01-06 21:42:15.
Although your greed is certainly an interest conflicting
with your employer’s interests, conflict of interest does
not explain why you took the money or what was wrong
with taking it. You did not need to exercise judgment on
your employer’s behalf to know that you should not
embezzle your employer’s money. There is a conflict of
interests here – that is, a conflict between one of your
interests and one of your employer’s – but no conflict of
interest.
Gifts and Bribes
Gifts are an important subject in any discussion of conflict
of interest. Gifts are a way of recognizing and reinforcing
friendship. Because gifts have this function, they can also
establish bonds of interest where none should exist – for
example, between a judge and a litigant, or between a
company’s head of purchasing and the company’s most
ambitious supplier. For that reason, many governments,
businesses, and other institutions have policies limiting
business gifts to mere tokens. Some forbid such gifts
altogether (because even tokens can affect judgment).
A ‘gift’ unlawfully demanded is a bribe (or ‘grease
payment’), not a gift (strictly speaking). Bribes as such
do not create a conflict of interest in the taker. A bribe is a
payment (or promise of payment) in return for doing (or
promising to do) something one should not do (or, at least,
should not do for that reason). Where bribes affect judg
ment (as they often do), they affect it in a definite way –
that is, in the direction promised. Affecting judgment in a
definite direction creates a bias, not a conflict of interest.
Bribe offers, however, often do create a conflict of
interest. I may, for example, be so enraged by your offer
of a bribe that I can no longer reliably judge your skill.
History of Conflict of Interest
Discussions of conflict of interest too frequently begin
with the biblical quotation, ‘Can a man have two masters?
Can a man serve both God and Mammon?’ This is the
wrong way to begin. The reason one cannot have two
masters is that a master is someone to whom one owes
complete loyalty, and complete loyalty to one excludes
any loyalty to another. Having only one master is a
strategy for avoiding all conflict of interest, but it is a
strategy making the concept of conflict of interest unin
teresting (i.e., a term another might conveniently replace).
We must worry about conflict of interest as such only
when having two or more masters – or, to say it without
paradox, having none – is normal. Conflict of interest is an
interesting concept only where loyalties are regularly and
legitimately divided – for example, where individuals
typically have a family, relatives, partners in business,
many clients, and the like independent relationships.
uest.com
Conflict of Interest 577
Callahan, D., & S
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Beginning a discussion of conflict of interest with that
biblical quotation makes conflict of interest seem a con
cept at least two millennia old. In fact, the term and,
apparently, the concept are barely half a century old.
The first court case to use the term in something like
our sense was decided in 1949 (In re Equitable Office
Bldg. Corp., D.C.N.Y., 83 F. Supp. 531). The Index of
Legal Periodicals had no heading for ‘conflict of interest’
until 1967; Black’s Law Dictionary had none until 1979. No
ordinary dictionary of English seems to have had an entry
for ‘conflict of interest’ before 1971. The first
philosophical discussions of the term also date from
approximately that time.
‘Conflict of interest’ seems to have begun as a mere
synonym for ‘conflicting interests.’ This older term desig
nated a clash between a public interest (e.g., impartiality
in a receiver or trustee) and some private ‘beneficial’ or
‘pecuniary’ interest (e.g., a receiver’s hope of buying
property at a bankruptcy sale he administers). The private
interest was often said to be ‘adverse’ (i.e., opposed) to the
public interest. Only in the late 1960s did lawyers begin
explicitly to connect the term conflict of interest with
judgment. This adverse-interest way of understanding
conflict of interest can still be found, especially in medical
ethics. Its disadvantage is that it tends to obscure conflict
of interest arising from loss of professional distance – for
example, where a physician is overly attached to a patient
because the physician is the patient’s parent.
The term conflict of interest began to appear in codes
of ethics in the 1970s. Today, the term is so common that
we would find doing without it difficult. However, if both
the term and the concept of conflict of interest are as new
as they seem to be, we are bound to ask, ‘Why now?’ So
far, we have no authoritative answer. The history of
‘conflict of interest’ has yet to be written.
See also: Confidentiality, General issues of;
Confidentiality of Sources in Social Research; Homicide,
Criminal; Loyalty; Trust.
Further Reading
Adair R and Holmgren L (2005) Do drug samples influence resident
prescribing behavior? A randomized trial. American Journal of
Medicine 118: 881–884.
inger, P. (Eds.). (2011). Encyclopedia of applied ethics. Retrieved from http://ebookcentral.pr
on 2020-01-06 21:42:15.
Carson Thomas L (1994) Conflict of interest. Journal of Business Ethics
13: 387–404.
Davis M and Stark A (eds.) (2001) Conflict of Interest in the Professions.
New York: Oxford University Press.
Donaldson MS and Capron AM (eds.) (1991) Patient Outcomes
Research Teams: Managing Conflicts of Interest. Washington, DC:
National Academy Press.
Luebke NR (1987) Conflict of interest as a moral category. Business and
Professional Ethics Journal 6(Spring): 66–81.
McMunigal K (1992) Rethinking attorney conflict of interest doctrine.
Georgetown Journal of Legal Ethics 5(Spring): 823–877.
Parley L (1995) The Ethical Family Lawyer: A Practical Guide to Avoiding
Professional Dilemmas. Chicago: American Bar Association, Family
Law Section.
Porter RJ and Malone TE (eds.) (1992) Biomedical Research:
Collaboration and Conflict of Interest. Baltimore: Johns Hopkins
University Press.
Rodwin MA (1993) Medicine, Money, and Morals: Physicians’ Conflicts
of Interest. New York: Oxford University Press.
Spece RG, Shimm DS, and Buchanan AE (eds.) (1996). Conflicts of
Interest in Clinical Practice and Research. New York: Oxford
University Press.
Stark A (1995) The appearance of official impropriety and the concept of
political crime. Ethics 105(January): 326–351.
Thompson D (1993) Understanding financial conflicts of interest. New
England Journal of Medicine 329: 573–576.
Wells P, Jones H, and Davis M (1986) Conflicts of Interest in
Engineering. Dubuque, IA: Kendall/Hunt.
Biographical Sketch
Michael Davis is Senior Fellow at the Center for the Study of
Ethics in the Professions and Professor of Philosophy, Illinois
Institute of Technology, Chicago. Before coming to IIT in 1986,
he taught at Case Western Reserve, Ohio, Illinois State, and the
University of Illinois at Chicago. During 1985–86, he held a
National Endowment for the Humanities fellowship. Since 1991,
he has held – among others – four grants from the National
Science Foundation to integrate ethics into technical courses.
Davis has published more than 160 articles (and chapters);
authored seven books: To Make the Punishment Fit the Crime
(Westview, 1992), Justice in the Shadow of Death (Rowman &
Littlefield, 1996), Thinking Like an Engineer (Oxford, 1998),
Ethics and the University (Routledge, 1999), Profession, Code, and
Ethics (Ashgate, 2002), Actual Social Contract and Political Obligation
(Mellen, 2002), Code Writing: How Software Engineering Became a
Profession (Center for the Study of Ethics in the Professions:
Chicago, 2007); co-edited four anthologies: Ethics and the Legal
Professions (Prometheus, 1986) and its second edition
(Prometheus, 2009), AIDS: Crisis in Professional Ethics (Temple,
1994), and Conflict of Interest in the Professions (Oxford, 2001); and
edited one other: Engineering Ethics (Ashgate, 2005). He received
his Ph.D. (Philosophy) from the University of Michigan in 1972.
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C O M P A R I N G C O N F L I C T O F
I N T E R E S T A C R O S S T H E
P R O F E S S I O N S
Andrew Stark
Consider the following two situations. In the first, a govern-ment bureaucrat’s decision to support a high-tech subsidy
program is affected by her part ownership of—or her spouse’s employ-
ment with—a software venture that would benefit from the program: a
set of interests she possesses outside her role as an officeholder. In the
other, her decision to support the high-tech subsidy program is affected
by her desire to advance through the ranks bureaucratically, shift her
career path within the department, and increase her official salary: a set
of interests she possesses within her role as an officeholder. Both kinds
of interest compromise her professional judgment. And yet, for a long
time, scholars of conflict of interest typically have concerned themselves
only with the first type, when the encumbering interest arises outside of
role. For if the second type—when the impairing interest arises within
role—were treated as actionable conflict of interest, all professionals
would be in conflict of interest all the time.
It is also the case, however, that if the first kind of situation—when
the impairing interest arises out of role—exhausts what we mean by
conflict of interest, as it typically seems to have, then every profession
faces exactly the same kinds of conflict of interest. There is little to say,
335
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little grist for the mill, if our purpose is to compare conflicts across
professions and our focus remains confined to out-of-role interests.
A personal gift from an individual external to the professional-principal
relationship—a pharmaceutical manufacturer in the case of the
physician-patient relationship, a mutual fund salesman in the case of the
broker-client relationship, an art dealer in the case of the critic-reader
relationship—impairs the professional’s judgment in all three pursuits in
exactly identical ways. A judge’s decision-making capacity is threatened
in precisely the same fashion as a journalist’s—or a corporate director’s—
by her capacity to affect an out-of-role financial holding through her in-
role decision making. It is only when we turn to conflict of interests that
arise within role, to conflicts not extrinsic but intrinsic to the profes-
sional’s relationship with her principal, that revealing differences emerge
across the professions. Here, as we shall see, the resulting conflicts fall
into two main categories: Some arise because the professional occupies
more than one role with respect to the same principal, such that the
existence of the second role impairs her capacity to exercise the first.
Others occur because the professional must exercise the same role with
respect to more than one principal, such that the presence of a second
principal impairs her capacity to exercise her role on behalf of the first.1
It is not surprising that one gets greater traction for cross-professional
comparisons from in-role rather than out-of-role conflict of interest. After
all, whereas judges and journalists and directors can all have the same
kinds of external interests—stocks, bonds, fees, gifts—the internal struc-
tures of their roles each differ. In Tolstoyan fashion, conflicts of interest
arising from out-of-role sources are all alike, but every profession expe-
riences in-role conflicts in its own way. And, without in any way being
orchestrated, the chapters in this volume confirm this fact. Almost every
contributor, perhaps led by an innate sense of where the really interesting
issues reside in his or her topic profession, spends as much time on in-
role or “professional” as on out-of-role or “personal” conflicts of interest;
sometimes more. As a result, this volume can be seen as a turning of
the page in the exploration of conflict of interest in the professions, a
turning from outside to inside. And, as we shall see, some striking pat-
terns emerge from the book as a whole.
Many Roles, One Principal
There are, as I noted, two basic kinds of in-role conflict, one that arises
when a professional occupies more than one role with respect to any
given principal; the other, when the professional occupies the same role
with respect to many principals. Consider, to begin with, the first type,
which—to judge from the contributors’ chapters—is itself amenable to
being divided into two classes. On the one hand, there are professions in
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which such multiple-role conflicts emerge because the professional si-
multaneously occupies a judging and an advocating role—an impartial
and a partial role—in the work he does for the principal. On the other
hand, conflicts inhere in a tension between the professional’s diagnostic
and service-provision roles, his roles as both a buyer of services for and
a seller of services to the principal.
Consider first the professions that fuse a judging with an advocacy
role. Many officials fall into this class. Think, for example, of legislators
whose role it is to advocate aggressively for various interests held by
different sections of the public while, in the final analysis, judging leg-
islation impartially in the interest of the public as a whole. Or think of
agency officials who help prepare cases which they ultimately have to
participate in deciding. Primary-market financial services underwriters,
too, find themselves riven between judging and advocacy roles when they
assess the merits of a client I.P.O. (initial public offering) which they are,
at the same time, promoting. Likewise journalists, who often combine
reportorial with commentative work, or who wrestle with the need to be
“objective”—to judge the hard truth of a story—and yet at the same time
display “balance,” by rendering “all sides of the story.” Literary critics,
too, find the distinction between judging and advocacy, between being an
arbiter and a tribune of public taste, extremely fuzzy. The same with
university teachers, who, as Jane Gallop shows, must confront a conflict
posed by their having to judge their graduate students—grade and assess
them—while at the same time advocating for them in the professional
marketplace. Show-business agents, too, can fall into an advocacy/judg-
ing form of conflict. On the one hand, the agent is obliged to represent
his client—say the star of a TV show—by energetically advocating for
her interests. On the other, he might also produce the show, and in that
role his obligation is to judge what is best for the program and its inves-
tors, whose interests could easily diverge from the star’s.2
Even with judges themselves, whose roles are more obviously “judg-
mental,” if they ever find themselves in a multiple-role sort of conflict, it
is because they are tugged by a competing obligation to advocate. They
might, for example, find themselves torn between an obligation to assess
a case “on the merits” and an obligation to advance a broader legal
doctrine or “legal agenda,” as David Luban puts it. Or judges might find
themselves sundered by a role requirement to rule exclusively on the
“legal issues” in a case and a competing imperative to show “compassion”
for particular parties before them: to pursue “impartiality and universal-
ity” at the same time, as Robin West says.
True, some of these professionals—in particular, journalists, financial
underwriters, show-business agents, and officials—work in organizations
which, if they are suitably structured, can largely segregate those occu-
pying judging from those occupying advocacy roles. Commentators need
not be reporters, financial analysts need not also be salespeople, show-
C O N F L I C T O F I N T E R E S T A C R O S S P R O F E S S I O N S 3 3 7
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business agents need not double as producers, and decision-making of-
ficials—administrative judges, for example—need not at the same time
fill the roles of preliminary investigators. But in the remaining three pro-
fessions—judging, criticism, and university teaching—the professional
operates with far greater independence from whatever organizational
structure surrounds her. In these three venues, whatever fusion of judg-
ing and advocacy roles arises is thus more likely to be inveterately inter-
nal to the individual and less amenable to resolution through organiza-
tional manipulation.
It is true that Jane Gallop describes a situation, at her university, where
the “freshman composition course is organized to isolate evaluation from
all other aspects of the student-teacher relation”; where, specifically, “[a]t
the end of the semester, the student’s writing is evaluated by other [fresh-
man composition] instructors,” and the “actual teacher functions only
as a coach”—and “possibly as an advocate”—”preparing [her students]
for evaluation by someone else.” The very exceptionalism of this arrange-
ment, however, proves the rule that judging and advocacy combine in-
extricably within most university teachers. More to the point, Gallop her-
self uses the very incorrigibility of the professor’s impartiality-partiality
role conflict in the area of academic judging (evaluation) and advocacy
(coaching, recommending, instructing) to say, in effect, that if we are
going to allow such conflicts there, we should allow them anywhere,
including situations in which the professor is both evaluator and lover.
But whether or not judging and a professional advocacy roles are ulti-
mately segregable, these are the professionals—journalists, financial un-
derwriters, show-business agents, officials, judges, critics, and professors—
who are peculiarly prey to it.
The second kind of intraprincipal role conflict arises when the profes-
sional occupies both a diagnostic and a service-providing role with re-
spect to the same principal. Consider the accountant who provides an
audit and then offers comptrolling or forensic services to deal with any
shortcomings she discovers. Or the consulting engineer who recommends
structural work which his firm can then supply as a contractor. Or the
lawyer who reviews a client’s estate and then suggests a complex series
of trust arrangements. Or the corporate director whose engagement in a
proxy fight involves, essentially, a conflict between her fiduciary obligation
to ascertain a course of action that will best cure the company’s ills and
her position as someone who might be able to offer such a course of
action. Or the broker who “churns,” recommending “frequent trading of
(possibly) unsuitable securities” on the secondary stock market in a sit-
uation where he is “compensated only for executing trades.” Or, too, the
official who identifies a social problem and then seeks the budget and
staff to deal with it: the kind of conflict of interest public-choice scholars
study. Or the physician who diagnoses a particular ailment and then
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prescribes a battery of tests to confirm, or who refers the patient to a
specialist facility she co-owns for treatment.
In each of these cases, the professional is conflicted between a diag-
nostic and a service-provision role. As Stephen Latham puts it in dis-
cussing the physician in particular, in all such situations, the professional
occupies the role of both buyer—the principal’s agent for the purchase
of services—and seller, the supplier of those services. What Latham says
about the doctor is the case for each of these other professionals: “His
conflict of interest is this: as [the principal’s] purchasing agent, he has a
duty to assist her in making prudent choices among [relevant profes-
sional] services; but as a purveyor of those services, he has a pecuniary
interest in advising her to make rather more extravagant purchases than
a disinterested person would counsel.”
For some of these professionals—in particular, accountants, doctors,
secondary-market financial brokers, and lawyers, who operate according
to traditional fee-for-service principles—the fusion of diagnostic and
service-providing roles will, at some level, become inveterate and incor-
rigible, unamenable to any kind of organizational remedy. Latham, for
example, notes the impracticality of a world in which a “patient visits
one physician for diagnosis, paying her a simple hourly rate, and is given
a sheet of paper [which she takes] to another physician of her choice,
who implements that treatment for a fee.” Indeed, some physicians cite
the very irremediability of the fee-for-service conflict to say, in effect, that
if we are going to allow diagnostic/service-provision conflicts there, we
should allow them anywhere, including situations in which “a physician
refers a patient for testing to a lab that he or she owns.” As Bradford H.
Gray puts it:
Because [such] conflicts of interest are so similar to the conflicts of
interest that inhere in fee-for-service, criticisms of the new arrange-
ments [such as a physician referring a patient who needs tests to a
laboratory she co-owns] can be seen as criticisms of arrangements to
which organized medicine is wedded. If the physician who invests in
facilities to which he refers cannot be trusted to resist economic temp-
tation and to put the patient’s interest first, then why should fee-for-
service physicians—who are faced with analogous decisions daily—be
trusted? This logic makes the profession reluctant to condemn any eco-
nomic arrangement on the basis of the temptation to which it exposes
physicians.3
Of course, the same could be said of accounting, law, and secondary-
market financial services which, like medicine, are traditionally fee-for-
service professions.
By contrast, engineering, corporate directorships, and government—
while they, too, risk diagnostic/service provision conflicts—are not fee-
C O N F L I C T O F I N T E R E S T A C R O S S P R O F E S S I O N S 5 3 9
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for-service professions in the same way, and hence any such conflicts are
less inveterate, more amenable to organizational remediation through the
segregation of those occupying diagnostic from those occupying service-
provision roles. It is frequent practice, for example, for engineering clients
to use separate firms, one firm as a consultant to study needs, design
specifications, review proposals, and monitor performance and another
as the actual contractor. Indeed, only a handful over the past thirty years
of National Society of Professional Engineers Board of Ethical Review
(NSPE BER) conflict-of-interest cases deal with “diagnostic-service provi-
sion” conflicts, and all find them relatively amenable to remediation
through a combination of recusal, where the diagnosing firm takes itself
out of the running for service-provider, and pluralism, where the diag-
nosing firm recommends a number of competing alternatives as service
providers. As for corporate directors, there also exists the possibility of
considerable daylight between diagnosis and service provision: If a direc-
tor is in a position to provide services to the company, then disinterested
directors, shareholders, or potential buyers of the company are available
to verify the diagnosis that those services are indeed needed.4 Govern-
ment, too, has available an innumerable number of arrangements
whereby it can segregate officials charged with diagnosing the need for
a program or monitoring it from those developing and executing it. Fi-
nally, although primary-market financial brokers can also fall into a di-
agnostic/service-provision conflict, such conflict—by comparison with
fee-for-service secondary brokers—is amenable to organizational
resolution, to a structural segregation of those occupying diagnostic
roles, determining the best stocks for a client’s portfolio, from those filling
service-provision roles, trying to sell a particular stock or bond that the
company underwrites.s
In sum, when it comes to conflicts of interest that arise when the
professional occupies more than one role with respect to a particular
principal, the professions fall neatly into two categories: those that feature
a conflict between judging and advocacy roles and those that exhibit a
conflict between diagnostic and service-provision roles. And, within each
category, the conflict can be more or less inveterate and incorrigible.
Thus, when the conflict conflates a judging with an advocacy role, the
two roles may in some situations be amenable to organizational segre-
gation, as with journalists, primary-market financial underwriters, show-
business agents, and officials. But in other circumstances—when the pro-
fessional operates with some quasi-independence from the surrounding
organizational structure, and hence remains beyond the reach of orga-
nizational manipulation—the judging-advocacy conflict, where it arises,
may be more entrenched within the individual practitioner, as it is with
judges, critics, and university teachers. Likewise, when the conflict in
question fuses a diagnostic with a service-provision role, it may lend itself
to resolution through organizational ecology or maneuvering—as with
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Account: s8434881
engineers, corporate directors, and primary-market financial underwrit-
ers—or there may come a point where such conflicts are ingrained and
irremediable, as with the traditional fee-for-service professions of law,
accounting, medicine, and secondary-market brokerage.
Many Principals, One Role
“Internal” conflicts of interest—those intrinsic to the professional-prin-
cipal relationship—can also arise not when the professional occupies
more than one role with respect to any given principal but when he or
she must deal with more than one principal within the ambit of any
given professional role. If, for example, the central problem with fee-for-
service medicine is that it creates conflicts between the various roles (di-
agnostic vs. service-provision) that the physician occupies with respect
to a particular patient, the central problem with its alternative—capita-
tion—is that it fosters conflicts between the various patients whom the
doctor services in any given medical role. Capitation forces doctors to
choose between allocating their limited time and resources to different
principals, some of whose needs pose a far greater threat to that time
and those resources than do others.
But medicine is not the only profession that features conflicts between
various principals on matters that come under the rubric of the profes-
sional’s role. Corporate directors must deal with competing majorities and
minorities among shareholders. Lawyers often face the problem of either
concurrent or serial representation of adversarial clients. As Eric Hayot
and Jeff King note, graduate students such as themselves fall into com-
petition for the university teacher’s attention and assistance in much the
same way as patients do for their doctor’s under capitation. In financial
services, as Boatright says, a “broker who manages accounts for multiple
clients may be forced to choose among the interests of these different
parties when he or she decides how to allocate a security in short supply”;
also, interprincipal conflicts arise because the broker represents both the
buyer and the seller in many transactions. In fact, as far as interprincipal
conflicts go, brokerage is unique. Whereas the interests of various prin-
cipals might possibly come into conflict in medicine, law, corporate direc-
torship, and university professorship, in brokerage, they necessarily fall
into conflict, because they involve buyers and sellers, principals on either
side of a market exchange.
But there is another set of professions which do not seem quite so
afflicted by interprincipal conflicts of this sort. Perhaps that is because in
their case—journalism, literary criticism, government, judging, account-
ing, and engineering—the public as a whole is either the principal whom
the professional is obligated to serve or else is coequal to other principals.
Engineers and accountants, as Neil Luebke and Len Brooks show, fall into
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Account: s8434881
this latter category. One analyst, Paul L. Busch, even explicitly couples
the two professions by noting that in both, the professional bears an
obligation to the “public interest” and not just the “client’s interest.”
‘Axiomatically,” Busch writes, “engineers are expected to design for earth-
quake protection whether or not it is requested by the client, [while]
public accountants’ audits are expected to disclose what the public needs
to know about their clients, whether or not the client is happy about it.”6
As for the accountant’s or engineer’s private clients, certainly they might
fall into competition in the broader marketplace: A single engineering
firm can construct stadiums for both the Chicago Bears and the San Diego
Chargers; a single accounting firm can keep books for both Christie’s and
Sotheby’s. But engineering and accounting clients are rarely adversaries—
as can be doctors’ patients under capitation, lawyers’ clients, professors’
students, and directors’ shareholders—on any matter in which the en-
gineer or accountant is responsible for serving them as a professional. 7
When it comes to the remaining four professions for which the public
is a principal—government, journalism, judging, and criticism—the pub-
lic is in fact the only principal. Unlike with accounting or engineering,
these four professions do not embrace private-party principals as well.
That is not to say that, for example, journalists, in serving the public,
owe no obligations to various private parties, such as their sources or
subjects, or that those obligations will never trump the one owed to the
public to report the news. But the obligations a journalist bears to those
she interviews or covers are not ones of professional to principal; they
are not, as Alan Goldman puts it, role-moral obligations—heightened
fiduciary duties of singular commitment and devotion—but rather
“ordinary-moral” obligations—minimalist or baseline duties to be fair and
decent of the kind we bear toward anyone, including those with whom
we have no special relationship.8 Likewise, critics write for their public,
not for the artists they analyze, which is not to say that they bear those
artists no obligations of baseline fairness. As for officials, they, too, direct
their professional or role-moral obligations to the public; toward partic-
ular agency clients or groups, they hold only ordinary moral obligations.9
In the same vein, judges bear a primary obligation to the public for
whom they work to do justice; to faithfully interpret, clarify, improve, and
rationalize the law. And yet, as Luban notes, they certainly have other
kinds of obligations to the private litigants before them, obligations that
might compete with their duties to the public, such as settling a case
quickly without addressing the broader public values it implicates, pre-
serving secrecy, or delving into the complexities of the case at the cost
of omitting to create simple legal rules of broad application. Of course,
those litigants themselves—though they do not constitute the judge’s
principal—not only might be, they necessarily are, in competition on mat-
ters that fall squarely within the judge’s role responsibility. Judges share
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this quality with brokers, which is perhaps why David Luban even de-
scribes litigant-centered judges as “brokers.”
As with the multiple-role/one-principal variety of conflict, then, so
with the one-role/multiple-principal type: The professions divide them-
selves into two basic categories. On the one hand are those—medicine,
corporate directorships, financial services, law, and university teaching—
in which the private-party principals may well come into competition or
conflict within the domain in which the professional is responsible. On
the other hand are professions in which many individual private-party
principals are replaced either wholly or partially by the public. Thus,
journalists, critics, judges, and officials owe their professional responsi-
bilities only to the public—which is not to deny that the public might
sometimes fall into internal conflict on matters for which the official or
judge, say, is responsible in role. And although engineers and accountants
bear professional obligations to individual clients, those interests are un-
likely to fall into conflict on any matter for which engineers or account-
ants are professionally responsible; moreover, accountants and engineers
bear a coequal fiduciary obligation to the public as a whole. There is, of
course, some argument to be made that physicians, especially those work-
ing in public settings or being paid through public funds, and corporate
directors, laboring as they do under corporate constituency statutes, are
moving toward a point at which the public will assume coequal status
as a principal, along with the patient or the shareholder. Conversely, Lu-
ban suggests, judges may be moving toward a point at which litigants
assume coequal status as principals along with the public. But we have
not yet actually reached any of these points.10
Cross-Professional Patterns
There is, then, a pattern—depicted in table 17.1—to the kinds of conflicts
that arise from sources internal if not external to the professional-
principal relationship. It is a pattern, or more exactly a four-quadrant
matrix, born of the different structures each profession displays. In the
first quadrant are professions in which the professional occupies the dual
roles of judge and advocate (some more integrally and others less) and
the principal is the public itself: journalism, criticism, government, and
the judiciary. Second come professions—accounting, engineering, govern-
ment—where this time the professional occupies the dual roles of diag-
nostician and service provider (again, the one more integrally than the
others), while the principal continues to include the public. Third, there
are professions—medicine, law, corporate directorships, and financial
services—in which the professional continues to occupy the dual roles
of diagnostician and service provider, but in which it is only private par-
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Table 17.1 Conflicts, Roles, and Principals
ROLES
Judging/Advocacy
PRINCIPALS
Public Only or
Included
Private
Only
ROLES
Diagnosis/Service-Provision
Conflicts
Less Integral
Conflicts
More Integral
Conflicts
Less Integral
Journalism Criticism
Government Judging
Financial
Services
University
Teaching
Show Business
Government
Accounting
Engineering
Medicine Corporate
Boards
Law Financial
Services
ties, and no longer the public itself, who number among the principals.11
Finally, there come the professions—university teaching, financial serv-
ices again, and show business—in which the professional’s dual roles are
once again those of judge and advocate but the principals continue to
include only private parties, not the public. This last category, I note,
seems to contain a bit of an odd triumvirate: What has university teach-
ing got to do with financial services got to do with show business? The
answer is that in these professions, unique among the ones considered
here, the principal is actually the product being sold by the professional.
University teachers judge and advocate for their students as they propel
them into the academic job market. Brokers judge and advocate for their
client company as they propel its IPO into the primary stock market.
Show-business agents judge and advocate for their stable of stars as they
propel them into the casting market. No other profession markets its
principals in the same way, which is why the three belong together.
Ex Post Decisions and
Ex Ante Impairment
Overlaying this pattern is one other set of distinctions that emerges from
the book’s various chapters. The question which any conflict-of-interest
situation raises, of course, is whether a professional’s judgment has been
impaired or compromised. In exactly half of the professions under dis-
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cussion, we have available (at least in principle) a way of answering this
question by looking at the decision the impaired principal actually makes
and comparing it with an independent standard of correctness. So, for
example, for both journalists and judges—at least in respect of part of
what they do—there is an empirical reality, a fact of the matter, against
which their reporting or judging can be measured to see whether it
moved off course.12 For both doctors, concerned as they are with health,
and engineers, focused as they must be on safety, certain physical realities
can be used to check a particular medical or engineering decision; peers
can ascertain, in many cases, whether it was faulty or not. Finally, in
both accounting—with its Generally Accepted Accounting Principles—
and corporate directorships—where in a transaction involving a self-
interested director, “unfairness of price . . . after the fact” can “be evi-
dence of unfairness of process”—certain numerical realities exist against
which any putatively impaired decision can be measured.13
None of this is to say that empirical reality for journalists and judges,
or physical reality for doctors and engineers, or numerical reality for
accountants and corporate directors, is always knowable, accessible, or
beyond contestation. But because it exists in principle, and in some cases
it provides an added means of assessing the existence of impaired judg-
ment: by looking at the actual judgment ex post instead of examining
only the extent of the impairment ex ante. And this is so whether the
impairment originates in external interests such as stockholdings or fees
or in internal interests such as a conflicting role or principal. The avail-
ability of such a supplementary measure distinguishes these professions
in a key way. After all, just because her judgment was impaired ex ante,
it does not follow that any professional—no matter what his or her field—
was unable to rise above the impairment and produce a good judgment
anyway ex post. In these six professions, there may be means of assessing
whether this in fact happened.
Such extrinsic standards are, however, unavailable for the remaining
professions. In the political world of the official, the partisan world of the
lawyer, the academic world of university teaching (as distinct from uni-
versity research, especially in the physical sciences), in the aesthetic (or
what Tyler Cowen calls the “ambiguous”) world of the critic, in the spec-
ulative world of the broker bringing a stock to market for the very first
time—and in the political, partisan, aesthetic, and speculative world of
the show-business agent—there are generally no independent empirical,
physical or numerical standards against which to assess a professional’s
decision. Instead, these are realms of great and inveterate contestation.
Absent such standards for assessing or second-guessing the professional’s
judgment ex post, it is not surprising that these professions (or, at least,
those among them that have conflict-of-interest strictures) rely not just
partially but wholly on prophylactic conflict-of-interest standards, stan-
dards which control impairments ex ante.
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Loose Ends:
Teaching—Counseling and Anthropology
I have thus far omitted discussion of two of the chapters in the book,
those on teaching-counseling and anthropology. The reason is that they
are literally off the charts—or, more exactly, off Table 17.1—but in an
intriguing and mutually inverse way. One breaks the mold in its treatment
of roles, the other in its orientation to principals.
Teacher–counselors take the kind of intrarole conflict that inheres
within other professions—between various kinds of judging-advocacy
roles, say, or between diagnostic-service provision functions—and makes
it an interrole conflict, a conflict better understood as one between two
distinct professions, teaching and counseling. Indeed, in Elliott Cohen’s
example, the conflicted professional is not just any teacher, he is “a pro-
fessor of counselor education”; hence, he is compromised in his teaching
role when, in the presence of a student he also counsels, he instructs on
the topic of professors who also counsel. Likewise, he is not just any
psychological counselor; he is a counselor who is helping the student
deal with her educational experiences, including experiences she has had
in his class. His role as a teacher is thus one that leads him to pass
judgment on what he does as a counselor; as a counselor, he must com-
ment on his behavior as a teacher. Clearly, he is uniquely compromised
in both roles. If, however, as a teacher he taught the student computer
science, while as a counselor he was treating her for the psychological
effects of a motorcycle accident, the same sorts of conflicts would not
arise. Yes, he might be tempted to favor her in class in order to keep her
business as a counselor. But that would be a conflict external not internal
to the teaching role, one identical to the situation of an official who favors
a businessperson who pays her a consulting fee.
If teaching—counseling externalizes a kind of conflict other professions
experience intrarole, then anthropology internalizes a kind of obligation
other professions leave out of role—obligations to nonprincipals—by
making it an in-role obligation. As Merrilee Salmon notes, the anthro-
pologist (as does any other professional) bears a fiduciary or role-moral
duty to her principal, in this case the public for whom she writes, to
positively promote its interest in gaining knowledge. And, as do all other
professionals, she has the negative “duty not to harm” others—in par-
ticular, the group about whom she writes. But, unlike other professionals,
for whom this duty to nonprincipals is a common moral or nonfiduciary
one, for the anthropologist, the duty “not to harm the people he or she
studies or works with is a fiduciary duty.” Thus, anthropology varies the
theme of multiple principal conflict—by internalizing, as well, competing
obligations to nonprincipals—just as teaching–counseling varies the
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themes of multiple role conflict by externalizing conflicting obligations
between roles.
But the possibilities for deepening cross-professional comparisons and
contrasts—for going further and further “off the chart”—does not end
with teaching-counseling or anthropology. Consider, just as one illustra-
tive example, corporate directors and public officials. Both share certain
off-chart characteristics that add texture to their respective conflict situ-
ations and distinguish them from other professions. First, within certain
closely guarded limits, directors and officials are both able to draw on
resources of the principal to combat any attempt to replace them with
competing professionals: Think of the use of corporate resources by in-
cumbent directors in proxy fights and the use of public resources by
incumbent officials in political campaigns. Second, both are elected.
Third, both are the only professions whose principals divide themselves
into majorities and minorities: After all, whereas all of the director’s or
official’s principals might find themselves interested in the same partic-
ular matter—a stock split, a budget resolution—this never happens with
medical patients or engineering clients. Fourth, both are professions in
which the professionals themselves might number among the principals
whom they are obligated to fiduciarily serve: Officials are also citizens of
the jurisdiction; directors can also be shareholders in the company.
Fifth, and finally, in directorship and officialdom the diagnostic/
service-provision conflict uniquely spills out of the professional role. Con-
sider that in other professions—accounting, engineering, medicine, or
financial services—professionals, in their role as diagnosticians, might
recommend services that they themselves can provide in their profes-
sional capacity. True, the official, too, might diagnose a social ill for which
he then develops a service as an official, thus expanding his department.
The director, likewise, might diagnose a corporate malfunction which she
believes she and her incumbent colleagues are uniquely equipped—by
contrast with members of a competing slate of candidates—to cure as
directors. But in government and corporate directorship, alone among
the professions, the professional is also regularly in a position to diagnose
needs that themselves would not necessarily be served in-role—whether
by herself or a fellow professional—but rather by out-of-role service pro-
viders of almost any shape, among whom she might also number. Thus,
an official might use his role to diagnose a social need which nonofficial
entities, among them a private company he owns, might meet, as when
an agriculture department supervisor diagnoses a departmental need for
warehouse space and, in his out-of-role position as a warehouse owner,
supplies it.14 Similarly, the director might use her role to diagnose a cor-
porate need for a new office building and, happening to own one out of
her directorial role—as a real estate investor—supplies it.15 Hence, among
directors and officials alone, the in-role diagnostician/service-provision
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conflict can spill over into a kind of out-of-role self-dealing.16 For all these
reasons, government and directorship offer but one illustration of the
ways in which the structure of conflict of interest can reveal deep, and
perhaps hidden, structural affinities (and, presumably, also distinctions)
between professions.
Conclusion
Does a professional occupy multiple roles with respect to the same prin-
cipal? Are these judging and advocacy roles? Diagnostic and service-
provision roles? Are such role fusions integral to the individual profes-
sional, or are they amenable to organizational remediation? Does the
professional exercise his or her role with respect to more than one com-
peting principal? Are such interprincipal conflicts necessary or simply
possible? Do her principals include the public or not? And are there ex-
ternal empirical, physical, or numerical standards available against which
to assess the ex post results of any ex ante impaired judgment? These are
the questions that separate the professions, that array them in a rich
diversity—indeed, a patterned diversity—insofar as conflicts arising from
within the professional-principal relationship are concerned. Conflicts
arising from without that relationship, by contrast, show no such rich or
patterned set of distinctions at all.
It is our hope, as editors and authors, that scholars and practitioners
will build on the research reported in this volume and on the opportunities
for cross-professional comparisons it affords; that they will find its analyses
fruitful and informative. And plausible. In witness whereof, let me just
pluck out one observation from the preceding discussion. Of all the pro-
fessions, two in particular emerge from the volume as being polar opposites
if we judge them by their conflict-of-interest structures. In the one—lit-
erary criticism—conflicts arise from a fusion of judging and advocacy
roles, they are integral and inveterate, they involve the public as principal,
and they are bereft of any established external means of assessing the out-
come of a judgment ex post. In the other—corporate directorships—con-
flicts emerge from a combination of diagnostic and service-provision roles,
they are frequently remediable and corrigible, they involve only private
parties as principals, and external standards are often available for assess-
ing the ex post quality of any decision made under some form of ex ante
impairment. Literary critics and corporate board members, according to
this analysis, could not be more dissimilar. If that does not conform to our
“pretheoretical intuitions,” it is hard to say what would.
Notes
1. There is, perhaps, a third kind of nonexternal conflict of interest that
hovers above the other two, not so much internal as “meta.” Consider Michael
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Pritchard’s example of ‘Adams,” a professional of undesignated profession,
who “is invited to play golf with some friends on a particularly beautiful day”
at a time when he has “an appointment with a client.” Pritchard believes
that Adams’s circumstance does not even rise to a “potential conflict of in-
terest.” But perhaps another way of understanding it is this: Adams’s situa-
tion may not impair any decision he takes in role, but it does encumber his
decision as to whether to enter his role in the first place—a meta-conflict of
interest. See Michael Pritchard, Conflict of Interest: Conceptual and Normative
Issues, 71 Acad. Med. 1308 (1996).
2. Eben Shapiro, Hollywood abuzz over Shandling lawsuit, San Diego Trib-
une, March 13, 1998, at E10. The core of the Garry Shandling lawsuit—
perhaps the most famous to emerge in the arena of show-business agency—
had to do with the internal conflicts of interest that allegedly arose because
Shandling’s agent, Brad Grey, “serv[ed] as both Shandling’s manager and the
executive producer of his show.” As well, Shandling alleged several other
purely “external” conflicts of interest on Grey’s part, claiming that Grey had
traded on Shandling’s name in order to advance his own extra-professional
commercial interests. See also Lynn Elber, Shandling’s suit puts managers in
spotlight, Tulsa World, July 1, 1999, at 5.
3. Bradford H. Gray, The Profit Motive and Patient Care 198 (Cambridge,
MA: Harvard University Press, 1991).
4. See Norwood P. Beveridge, Jr., The Corporate Director’s Fiduciary Duty of
Loyalty: Understanding the Self-interested Director Transaction, 41 De Paul L.
Rev. 677 (1992).
5. I had earlier described this same financial-services role fusion as one
of judging and advocacy, not of diagnostics and service provision. And so it
is, from a different perspective. For what is of note here is the existence of
two vantage points from which one can view the primary-market broker’s
role—that of the company whose stock the broker underwrites and that of
the client whose portfolio the broker manages, both of whom number among
the broker’s principals. From the point of view of the company whose shares
are being underwritten for an IPO, the broker may be conflicted as both an
advocate for the stock and a judge who must execute due diligence—who
must pass on it objectively in the same way a university professor must with
respect to the students for whom he or she also advocates subjectively in the
job market. But from the perspective of the individual client whose account
the broker manages, the conflict is one between diagnostician—someone who
must determine what financial services the client needs—and potential sup-
plier of those services (“have I got an IPO for you!”), in much the same way
as a physician—someone who must ascertain the medical needs of a client—
might also be a potential supplier of those services (“I know of a nice MRI
facility . ..”). Primary-market financial services thus fall into both classes of
multiple-role conflict, judging/advocacy and diagnostic/service provision, pre-
cisely because it is the only professional activity in which the principals rou-
tinely fall on both sides of a market transaction, and who thus bear the two
perspectives. I say this notwithstanding that government, too, can experience
both judging/advocacy and diagnostic/service-provision conflicts, because in
its case, it is usually different officials—or, at least, different official activities—
that fall into one or the other kind of multiple-role conflict, not (as with
primary-market financial brokerage) the same official undertaking the same
official activity. Finally, although it is true that an accountant, too, can act
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as a judge—in her public auditing capacity—and also advocate before the
tax authorities on behalf of a client whose affairs she has audited, the ac-
countant rarely executes both roles with respect to the same particular mat-
ter; (i.e., she rarely advocates with respect to the audit itself). Role conflicts
for accountants are typically those of diagnosis and service provision.
6. Paul L. Busch, Time for Another Look at Conflict of Interest, http://
www.nspe.org/ ethics/eh1-tim.asp.
7. I must qualify this comment. Sometimes, as NSPE ethics cases reveal,
engineers do appear to fall into conflicts because they must serve different
principals with competing interests on matters that fall within their profes-
sional role. But closer scrutiny shows this to happen only when they have,
in essence, left the engineering and entered the legal sphere: when they find
themselves acting as expert witnesses for both the plaintiff and the defendant
in a particular case (see, e.g., Case 95-7). It is equally noteworthy that the
only time engineers seem to fall into conflicts because of the competing (di-
agnostic/service provision) roles they occupy with respect to the same prin-
cipal is when, in essence, they have left the engineering and entered the
governmental profession. Almost all such cases involve consulting engineers
brought in by government to design specifications for a project which they
are then in a position to build; they involve engineers occupying, as one case
(92-5) put it, a “quasi-governmental” role with whatever added obligations
to the public trust such a role represents. It seems, then, that engineers fall
into either type of conflict only when they assume the mantles of other
professions, specifically law (more than one principal, but one role) and gov-
ernment (more than one role, but one principal); when they shuck those
mantles, few engineering conflicts of interest seem to arise. (These National
Society of Professional Engineers ethics cases can be found at http://
www.niee.org/cases.)
8. Alan H. Goldman, The Moral Foundations of Professional Ethics (Totowa,
NJ: Rowman & Littlefield, 1980); see also Everette E. Dennis, The Press and the
Public Interest: A Definitional Dilemma, 23 De Paul L. Rev. 945 (1974).
9. See Andrew Stark, Beyond Quid Pro Quo: What’s Wrong with Private Gain
from Public Office? 91 Am. Pol. Sci. Rev. 115-116 (1997).
10. Prison medicine, as Kenneth Kipnis describes it, seems to differ from
general medical practice in this way: The principals involved, the patients, are
not individual private parties who come to the doctor willy-nilly from the gen-
eral population; rather, they themselves constitute a population within a con-
fined space. Hence, the interprincipal conflicts the prison doctor faces are
heightened. Indeed, three of Kipnis’s four examples place prison doctors in the
kind of conflict that arises when their obligations as a physician to one of
their principals—one prisoner patient—conflict with their obligations to oth-
ers. If, for example, the physician tests an inmate who is potentially infected
with hepatitis B against his will, she violates her obligation to him. If she does
not, she violates her obligations to other inmate patients who might get in-
fected as a result. If a diabetic inmate continues to ingest candy bars at the
prison canteen, making himself ill and “draw[ing] staff and resources away
from the needs of other inmate/patients,” the physician could continue to as-
sist him each time he harms himself—thus hurting other patients. Or she
could initiate disciplinary procedures that would result in the inmate’s loss of
canteen privileges, thus partly transgressing her role obligation to the diabetic
patient himself. If the prison physician is faced with the question whether she
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http://www.nspe.org/ethics/eh1-tim.asp
http://www.nspe.org/ethics/eh1-tim.asp
http://www.niee.org/cases
http://www.niee.org/cases
should violate prison policy and distribute condoms in order to combat HIV,
“it could be argued that in failing to assist in the inexpensive prevention of
HIV infection where the ensuing disease can result in costly drains to scarce
medical resources, [she is] allocating scarce resources unwisely and therefore
failing to honor [her] public-health obligations to respect the claims of other
non-HIV positive inmates with health problems of their own.” All are conflicts
not between the professional’s roles but between her principals. And, Kipnis
notes pointedly in concluding, as individual patients outside prison coalesce
into “populations” in the way inmates do—as fee for service, in other words,
is replaced by capitation—the heightened interprincipal problems of prison
medicine will come to beset more and more physicians.
11. It would seem, from Donald Gabard and Mike Martin’s thorough treat-
ment, that the physical therapist is in much the same position as the physi-
cian. Physical therapists find themselves afflicted with diagnostic/service-
provision role conflict with respect to any individual patient, as well as—at
the level of resource allocation and devotion of attention—conflicts between
the obligations they bear to many patients within any individual therapeutic
role. Thus, for medicine, read, “medicine and physical therapy.”
12. John Rawls distinguishes the archetypal judging situation—the “crim-
inal trial,” in which there exists an “independent criterion of a correct result”
even if our means of reaching it are imperfect—from political debates over
“distributive shares,” in which “there is no independent criterion for the right
result.” For judges, in other words, there exists in principle an extrinsic stan-
dard against which to test the fruits of impaired judgment, whereas for offi-
cials, say, there often is not. See A Theory of Justice 85, 86 (Cambridge, MA:
Harvard University Press, 1971).
13. Melvin Aron Eisenberg, Self-Interested Transactions in Corporate Law, 13
J. Corp. L. 1005 (1988).
14. I base this example on Smith v. United States, 305 F.2d 197 (9th Cir.
1962).
15. Supra note 13 at 999.
16. Of course, there are some gray areas here. As we have seen, physi-
cians can under certain circumstances diagnose a need, and then refer the
patient concerned to a testing lab they co-own. Here, the services provided
remain medical ones—that is, they are offered as professional in-role services
by medical personnel, and certainly doctors—but they are rendered outside
of the doctor’s own office, by another entity she owns, and hence begin
provoking a debate as to whether they constitute self-dealing. By contrast,
lawyers who get into “ancillary businesses”—referring clients to insurance,
lobbying, mediation, financial planning, trust, real-estate development or in-
vestment banking services they provide—often find themselves in the reverse
situation. Here, the services provided are not legal ones—they exist outside
the profession of law—but they often are offered inside the lawyer’s own firm;
indeed, this is the idea of such “one-stop” shopping or “multi-disciplinary law
firms.” And, again, unease arises as lawyers debate whether or not such
ancillary businesses fall into the class of normal, in-role professional con-
flicts—conflicts between a diagnostic and service-provision role of a sort in-
herent in fee-for-service business—or whether they cross a line into self-
dealing. For some good discussion, see James Fitzpatrick, Legal Future Shock:
The Role of Large Law Firms by the End of the Century, 64 Indiana Law Journal
467 (1989).
C O N F L I C T O F I N T E R E S T A C R O S S P R O F E S S I O N S 3 5 1
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Review: Conflicts of Interest and Self-Dealing in the Professions: A Review Essay
Reviewed Work(s): Conflict of Interest in the Professions by Michael Davis and Andrew
Stark
Review by:
Thomas L. Carson
Source: Business Ethics Quarterly, Vol. 14, No. 1 (Jan., 2004), pp. 161-182
Published by: Cambridge University Press
Stable URL: https://www.jstor.org/stable/3857777
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REVIEW ARTICLE
CONFLICTS OF INTEREST AND SELF-DEALING IN THE
PROFESSIONS: A REVIEW ESSAY
Thomas L. Carson
Conflict of Interest in the Professions
Michael Davis and Andrew Stark
New York: Oxford University Press, 2001; ISBN 0-19512863-X
This anthology begins with an excellent introduction by Michael Davis. Davis
1 identifies three overarching questions addressed in the book: 1. What is,
and is not, a conflict of interest? 2. What is morally wrong with conflicts of
interest? and 3. What should be done to handle or address conflicts of interest?
The papers included in this volume address conflicts of interest in a very
wide range of professions including the judiciary, the bar, government service,
journalism, accounting, engineering, corporate boards teaching, counseling,
anthropology, financial services, criticism, the film industry, medicine, and physi-
cal therapy. The great range of professions discussed allows for illuminating
comparisons between the issues faced by members of different professions. Most,
but not all, of the papers are of high quality and well worth reading. The papers
present a dizzying array of examples of conflicts of interests, some familiar,
others not. The book as a whole demonstrates the pervasiveness of conflicts of
interest in professional life and the centrality and importance of moral ques-
tions about conflicts of interest in professional ethics. I will not attempt to
summarize or describe all, or even most, of the papers included in this volume.
Instead, I will focus on a relatively small number of the papers those that ad-
dress the definition of conflicts of interest and conflicts of interest in business
and medicine. When appropriate, I discuss and refer to other important contri-
butions to the literature on conflicts of interests. I also venture an account of the
badly neglected concept of ‘;self-dealing’8 and explain the relationship between
self-dealing and conflicts
of interest.
C) 2004. Business Ethics Quarterly, Volume 14 Issue 1. ISSN 1052-1SOX. pp. 161-182
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162 BUSINESS ETHICS QUARTERLY
Conceptual Issues
In his introduction, Davis offers the following definition of a conflict of in-
terest which he calls the “standard view”:
A conflict of interest is a situation in which some person P (whether an
individual or corporate body) stands in a certain relation to one or more
decisions. On the standard view, P has a conflict of interest if, and only if,
(1) P is in a relationship with another requiring P to exercise judgment in
the other’s behalf, and (2) P has a (special) interest tending to interfere
with the proper exercise of judgment in that relationship.l
According to Davis, the relationship required for a conflict of interest “must
. . . be fiduciary; that is, it must involve one person trusting (or, at least, being
entitled to trust) another to do something for her exercise judgment in her
service.”2 The kind of exercise of judgment required for a conflict of interest
must involve P’s having considerable latitude and discretion in acting on behalf
of the other party. The kind of “interest” that satisfies condition 2 is “any influ-
ence, loyalty, concern, emotion, or other feature of a situation tending to make
P’s judgment (in that situation) less reliable than it would normally be, without
rendering P incompetent.”3 In this and other writings on conflicts of interest,
Davis4 has identified one of the central moral issues involved in conflicts of
interest. Conflicts of interest often, or perhaps generally, involve compromising
the judgment of someone who is supposed to act on behalf of another party.
However, not every conflict of interest involves the impairment of someone’s
judgment (or making someone’s judgment “less reliable than it would normally
be”). There might be cases in which it is perfectly clear to P what she should do
on behalf of the other party, but she fails to do what she ought to do for the other
party because of some special interest that tempts or induces her not to do what
she judges to be right. For example, suppose that in my role as a stock broker
and financial advisor I advise my clients to purchase the stock of a company
that I know will soon be facing bankruptcy, because offering this advice will
promote my own financial interests or the interests of a close personal friend.
Surely this is a conflict of interest, even though my judgment about the wisdom
of this investment for my clients is not in any way impaired or made “less reli-
able.” In some cases, conflicts of interest create temptations to do what we know
will violate our duties to other parties.5
Kevin McNunigal’s “Conflict of Interest and Risk Analysis,” is an outstand-
ing paper that illuminates many issues and points to deElciencies in standard
treatments of the topic. McNunigal addresses conflicts of interest that attorneys
face in the practice of the law. McNunigal suggests that we view conflicts of
interest as a species of perverse incentives that create substantial and unjusti-
fied risk of harm to those to whom one owes fiduciary duties. McNunigal draws
a sharp distinction between things an attorney does that are harmful to a client’s
interests and things that risk causing harm to clients.
McNunigal argues that, in cases in which attorneys risk harm to clients, the
likelihood and magnitude of the harm being risked are not the only morally
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REVIEW OF CONFLICT OF INTEREST IN THE PROFESSIONS 163
relevant factors. The attorney’s reasons for taking the risk are also relevant.
Consider the risks drivers create when they exceed speed limits. In order to
assess the morality of imposing these risks on others, we need to know why the
person does this. Driving fast for the thrill of it is ordinarily impermissible when
it imposes risks on others, but it might be permissible to drive in the same way
and impose the same risks on others in order to take a critically injured person
to the emergency room of a hospital. McNunigal claims that we need to employ
the notion of an “unjustified risk” as part of the definition of a conflict of inter-
est. He says that a conflict of interest for an attorney “would exist if there is ‘a
substantial and unjustifiable risk’ that the representation will be impaired.”6
Although McNunigal’s definition is ably motivated and defended, it is open
to a serious objection. The problem is that his definition builds controversial
moral notions into the concept of a conflict of interest. Given his definition, we
can’t wield the term “conflict of interest” without giving answers to controver-
sial moral questions. Pragmatic considerations weigh against this feature of
McNunigal’s definition. His definition makes it impossible for us to determine
whether or not certain cases are conflicts of interest until we have first resolved
difficult and controversial moral questions about whether or not it is justifiable
to impose certain kinds of risks on others. It is a matter of controversy exactly
when it is and is not justifiable to impose risks on other people. If we accept
McNunigal’s definition (or any similar definition), then we can’t call a situation
a conflict of interest unless we have reason to think that someone is unjustifi-
ably risking harm to others. There are good pragmatic reasons for us to use the
concept of a conflict of interest to help point out and distinguish between salient
features of actions and thereby assist us in making moral judgments. In order to
serve this purpose, the concept of a conflict of interest must be defined indepen-
dently of controversial moral assumptions.
Stephen Latham’s paper, “Conflict of interest in Medical Practice,” nicely
makes the distinction between having interests that conflict and having a con-
flict of interest. The interests of the buyer and seller of a commodity typically
conflict, but this is not a conflict of interest. A person who desires to pursue
both leisure and wealth has conflicting interests but not necessarily a conflict of
interest. To count as a conflict of interest, my interests must conflict with my
duty to advance your interests. Latham proposes the following definition of a
conflict of interest:
A person has a conflict of interest when, in the presence of some duty to
pursue the interests of another, she is motivated by self-interest to do some-
thing inconsistent with that duty.7
Latham’s definition is too narrow. Not all cases of conflicts of interest involve
self-interested motives. The desire to promote the interests of friends or family
can create conflicts of interest. For example, it is a conflict of interest if I am
motivated to do something inconsistent with my duties to my employer or client
because I want to help a friend. There is also a way in which Latham’s definition
is too broad. The kind duty to pursue the interests of another person necessary
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164 BUSINESS ETHICS QUARTERLY
for a conflict of interest must be a duty one has in virtue of occupying an office
or position. I have a moral duty to help starving people in distant lands that is
independent of any offices or positions that I hold. I also have self-interested
motives not to fulfill these duties, but this situation does not constitute a conflict
of interest.
John Boatright defends the following definition of a conflict of interest:
A conflict of interest occurs when a personal or institutional interest inter-
feres with the ability of an individual or institution to act in the interest of
another party, when the individual or institution has an ethical or legal ob-
ligation to act in that other party’s interest.8
According to Boatright, conflicts of interest occur when individuals or institu-
tions have personal or institutional interests that interfere with their fiduciary or
agency duties to other parties. His stress on the centrality of fiduciary duties
and agency duties to the concept of a conflict of interest is helpful and illumi-
nating. Boatright explains the nature of fiduciary obligations and the obligations
of agents. He writes:
A fiduciary is a person who is entrusted to act in the interest of another.
Fiduciary duties are the duties of a fiduciary to act in that other person’s
interest without gaining any material benefit except with the consent of the
person. The concepts of Elduciary and fiduciary duty originated in common
law for cases in which one person entrusts property to another, but these
concepts have been expanded over time to other trust-like situations in which
one person relies on another’s superior knowledge or skill.9
The fiduciary relation closely resembles the relation of agent and principal,
in which one person (the agent) has been engaged to act on behalf of an-
other (the principal). Whereas fiduciary relations arise when something of
value is entrusted to another person, agency relations are due to the need to
rely on others for their specialized knowledge and skills.l°
Boatright is mistaken in claiming that a conflict of interest requires that the
person has an ethical or legal obligation to act on another person’s behalf. Inter-
ests I have that conflict with the duties attaching to an office or position I hold
can generate conflicts of interest, even if the duties in question are neither legal
nor ethical obligations. Suppose that, in his capacity as Public Relations direc-
tor of a Klu Klux Klan Klavern, Bob has an official duty to represent the Klan at
a public meeting in which his Klavern is requesting to be allowed to “adopt” a
stretch of the local highway. However, Bob is reluctant to do this because he
thinks that it is likely to damage or destroy his academic career at a local univer-
sity if he publicly identifies himself as a member of the Klan. This is a conflict
of interest, even though Bob has neither a legal nor an ethical obligation to
represent the Klan. This is not to deny that we typically do have at least a prima
facie ethical obligation to fulfill the duties of the offices we hold (see below,
including endnote #18, for more on this).
Without pretending to defend it adequately, let me briefly sketch my own
analysis of the concept of a conflict of interest. In order for there to be a conflict
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REVIEW OF CONFLICT OF INTEKEST IN THE PROFESSIONS 165
of interest, the following conditions must be met: 1. There must be an individual
(I) who has duties to another party (P) in virtue of holding an office or a posi-
tion, 2. I must be impeded or compromised in fulfilling her duties to P, 3. the
reason for I’s being impeded or compromised in fulfilling her duties to P must
be that she has interests that are incompatible (or seem to her to be incompat-
ible) with fulfilling her duties to P. Conditions 2 and 3 should be broadly
construed. Anything that makes it difficult for I to fulfill her duties to P or that
compromises her duties to P satisfies condition 2. The kinds of interests that
satisfy condition 3 can be either self-regarding interests, e.g., making money,
enhancing one’s reputation, or winning the esteem of others, or other-regarding
interests, e.g., desiring to promote or harm the interests of other individuals.
Some Features of My Proposed Definition
1. My definition follows most other definitions of conflicts of interest in that
it holds that the individual need not fail to perform her official duties in order
for there to be a conflict of interest. My definition only requires that the situa-
tion make it diff cult for I to perform her official duties.
2. On my definition, it is not necessary that there be an actual conflict be-
tween the interests of the relevant parties. It is sufficient that I believe that there
is an actual or potential conflict between the interests of the relevant parties. A
person might be hindered in the performance of the duties of her position be-
cause she mistakenly believes that her doing so is contrary to her own interests
(or the interests of others whose interests she is concerned to advance). Con-
sider the following case:
A lawyer works for a client. Her fiduciary obligations include protecting
the Elnancial interests of the client. The lawyer incorrectly perceives a con-
flict between her own financial interests and those of the client. As a result,
she is sorely tempted to act in ways that are harmful to her client.
This case constitutes a conflict of interest, even though there is no actual
incompatibility between the lawyer’s interests and those of her client. The justi-
fication for calling this a conflict of interest is that the lawyer’s perception of a
clash between her interests and her duties to her client can create just as great a
hindrance to her successful performance of her official duties as an actual clash.
An actual clash between I’s interests and I’s duties to P (or a clash between
I’s desire to promote or harm the interests of some third party and I’s duties to
P) is not sufficient to create a conflict of interest. This clash must somehow
hinder I in the performance of her official duties.l2 Suppose that my financial
interests objectively clash with my fulfilling the duties of my office, but this is
so only in virtue of some unlikely and improbable circumstance of which I am
completely unaware, e.g., the fact that a distant relative whom I have never heard
of has made me a beneficiary of her will. Nothing in this situation consciously
or unconsciously affects my actions or hinders me in doing my official duties.
According to my definition, this is not a conflict of interest.
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166 BUSINESS ETHICS QUARTERLY
3. Bribery is a special case of a conflict of interest.l3 To be bribed is to be paid
to do things that are incompatible with the duties of one’s office, position, or
role.l4 The recipient’s personal financial interest in accepting the bribery pay-
ments can create a conflict of interest. For example, when a policeman is bribed to
ignore a traffic ticket, he is being paid to ignore his ofElcial duties. His official
duties require him to issue traffic tickets to all who violate trafElc laws. In order
for the bribery offer to create a conflict of interest, the offer must be sufficiently
large to tempt the officer to ignore his duties. An offer of ten cents would not
make it difficult for the officer to fulE1ll his official duties and, therefore, would
not create a conflict of interest. Bribery offers can create conflicts of interest,
even if the offers are refused. A bribery offer that tempts me to violate the duties
of my ofElce creates a conflict of interest, even if I refuse the bribe.
4. My definition implies that a person can be involved in a conflict of interest
only if he has duties in virtue of occupying an office or position. Those who
have no official duties as employees, professionals in private practice, or mem-
bers of organizations cannot have conflicts of interest. Consideration of nepotistic
employment practices supports this feature of my analysis. Such practices clearly
constitute conflicts of interest when the person who hires his friends or relatives
is himself an employee or officer of an organization. For example, a conflict of
interest exists if I am a personnel officer in a corporation and hire a close per-
sonal friend for a job with the corporation. By contrast, it is not a conflict of
interest if my uncle hires me to work for a business of which he is the sole
owner, because he has no duties attaching to his job or position that conflict (or
might conflict) with my interest in being hired.ls His position as (sole) owner of
the business carries with it no obligation to hire the best people for positions
within the business. To take another example, it would not be a conflict of inter-
est if I were to hire my brother to paint my house, but it would be a conflict of
interest if I were to hire him to do painting for my employer.
5. Almost everyone agrees that conflicts of interest can be created by one’s
desire to promote one’s own interests or the interests of others. Conflicts of
interest can also be created by one’s desire to harm others. (This is overlooked
in all other analyses I am aware of.) Suppose that a personal enemy is among
those bidding on a contract with my company and I have the authority to deter-
mine who is given the contract. Or suppose that I review a book written by
someone I intensely dislike. These cases constitute conflicts of interest, pro-
vided that my desire to harm the individuals in question makes it difficult for me
to perform my official duties.l6
6. My definition requires that the conflicting interest make difficult the per-
formance of a duty. On examination, this feature of my definition will strike
many people as counterintuitive. In any given situation, the nature and strength
of a person’s character largely determines whether or not it is difficult for her to
fulfill her duties. According to my definition, a conflicting interest or objective
situation that creates a conflict of interest for one person might not create a
conflict of interest for another person who has a stronger character and is less
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REVIEW OF CONFLICT OF INTEREST IN THE PROFESSIONS 167
prone to temptation. My definition gives people a basis to deny that they have
conflicts of interest in cases we would regard as paradigms of conflicts of inter-
est. Whatever the case, a person can claim that he has no conflict of interest
because he had (or will have) no difficulty fulfilling his duties in spite of having
interests that conflict with performing his ofElcial duties. My reply is that a per-
son can claim this, but whether such a claim is plausible is quite another matter.
Since people are often mistaken and self-deceived about such matters, we have
reason to be very skeptical of any such claims. I am reluctant to concede this
objection because my definition has the virtue of identifying a salient feature of
conflicts of interests that explains why they are generally morally problematic.
Conflicts of interest involve some kind of difficulty in discharging one’s official
duties and (except in unusual cases such as my Klan example) violating those
duties is prima facie wrong (I defend the latter claim below). It is because of
this feature of conflicts of interest that they are important from the moral point
of view. My definition has the virtue of identifying the most morally salient
feature of conflicts of interest.
I can avoid this objection by revising my definition and defining a conflict of
interest in terms of what an ordinary person (a person of ordinary moral virtue)
woald find diJficult. Someone has a conflict of interest when he has interests
that conflict with fulfilling his duties in such a way that an average person in his
objective circumstances would have difficulty doing his official duties. I sus-
pect that most readers will find this revised version of my definition more
plausible and much easier to apply to actual cases. If my foregoing reply to the
objection is inadequate, then I can fall back on this revised version. The revised
definition is preferable for the purposes of framing rules policies, or laws to
discourage conflicts of interest. Rules and policies might reasonably aim at dis-
couraging the existence of situations in which an average person would have
difficulty discharging his official duties. However, rules and policies cannot be
effectively implemented if they require us to make judgements about the sub-
jective states of individuals and the degree of difficulty those individuals would
have in discharging their ofElcial duties.
What’s Wrong With Conflicts z?f Interest? Conflicts of interest are morally
problematic almost by definition. A persons official duties aren’t necessarily
moral duties, even prima facie moral duties. However, ordinarily, one has a con-
tractual or promissory (moral) duty to fulfill the duties of one’s office or position.
Offices within organizations and relationships between professionals and their
clients carry with them special duties. A person who voluntarily assumes an
office within an organization (or a professional who voluntarily takes on a cli-
ent) tacitly agrees or promises to fulfill those duties.l7 Ordinarily, these
agreements create at least a prima facie moral obligation to fulfill the duties in
question. If, however, the aims of the organization or office themselves are im-
moral, e.g., the aims of the Nazi party, then the agreement doesn’t create even a
prima facie moral obligation to fulfill the duties. Bob has agreed to fulfill the
official duties of his position, but, given the immoral aims of the Klan, this
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168 BUSINESS ETHICS QUARTERLY
doesn’t give him even a prima facie moral duty to do this. (More generally, one
can’t create a prima facie moral duty to do something that is immoral by prom-
ising to do it.l8)
Morally speaking, the position of a person who occupies an office or position
he has not freely chosen to accept, e.g., a conscripted soldier, is very different
from the position of someone who freely assumes an office or position on the
understanding that it carries with it certain duties or responsibilities. Ordinarily,
the prima facie wrongness of breaking a promise or agreement when others are
relying on one to keep it partly accounts for the wrongness of conflicts of interest.
As McNunigal’s paper so ably shows, conflicts of interests are also wrong on
account of the harm to others that they cause and risk. I also conjecture the fol-
lowing. In most cases in which individuals consciously pursue personal interests
that conflict with their official duties they need to deceive others in order to suc-
ceed in this. Often, the wrongness of conflicts of interest consists largely in the
extensive dishonesty and deception practiced by the individuals who have them.
Self-Dealing. Let me propose a rough account of the concept of ‘self-dealing”
and its relation to the concept of a conflict of interest. As a first approximation, let
us say that a person, S, is involved in self-dealing when he pursues his own inter-
ests to the neglect or detriment of his duties to another party (P) while acting in
his capacity as an official, agent, or employee of P. Self-dealing involves pursuing
one’s own interests when one is supposed to be serving the interests of others.
This definition will strike some people as too broad. Suppose that a person ne-
glects his official duties because he goofs off on the job or wants to have more
leisure time, e.g., a lawyer who plays golf instead of preparing to serve a client.
Some will regard it as objectionable to count this as a case of self-dealing. They
would contend that self-dealing requires taking advantage of opportunities cre-
ated by one’s role or office to pursue personal (self) interests other than leisure.
An alternative definition of self-dealing is the following:
A person, S, is involved in self-dealing if, and only if, he has official duties
to another party, P, in virtue of occupying an office or role and takes advan-
tage of opportunities created by this role or ofElce to actively pursue personal
(self) interests (other than leisure or rest) to the neglect or detriment of his
duties to (P). [I am not sure whether or not I should prefer this definition to
the earlier definition.]’9
A paradigmatic example of self-dealing would be the case of the member of a
corporate board who uses his position as a member of the board to make per-
sonal business contacts and does this to the neglect of his official duties as a
member of the board.
What is the relationship between self-dealing and conflicts of interest? All
cases of self-dealing involve conflicts of interest (all cases of self-dealing are
conflicts of interest in which the conflict is created by the individual’s desire to
promote her own personal interests), but not all conflicts of interest involve
self-dealing. Conflicts of interests created by one’s concern to promote or harm
the interests of third parties are not cases of self-dealing. Further, cases in which
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REVIEW OF CONFLICT OF INTEREST IN THE PROFESSIONS 169
one is tempted to pursue one’s own personal interests to the detriment of one’s
official duties can be conflicts of interest, even if one doesn’t give in to the
temptation to pursue one’s own interests. Self-dealing occurs only when one
neglects or ignores one’s duties to the other party.
Conflicts of Interest in Accounting and Financial Services
Conflicts of interest in accounting played a central role in the recent account-
ing scandals. The Arthur Andersen accountants who looked the other way when
Enron doctored its books facilitated the massive fraud perpetrated by Enron’s
management. This and other similar instances of fraud and deception in account-
ing have seriously undermined public trust in financial markets and are important
causes of the disastrous downturn of the US stock market at the beginning of the
twenty-first Century.
Leonard Brooks’s paper, “Conflict of Interest in the Accounting Profession,”
discusses the Code of Conduct of the American Institute of Certified Public
Accountants and the Rules of Conduct of the Institute of Chartered Accountants
of Ontario. Brooks summarizes these codes in the following passage:
The code of conduct of the American Institute of Certified Public Accoun-
tants and the Rules of Conduct of the Institute of Chartered Accountants of
Ontario apply directly and indirectly to the largest number of professional
accountants in the United States and Canada. They provide representative
guidance sources in which fundamental ethical principles are developed.
Both the Code and Rules also extend these principles to provide general
and specific rules. The Codes of Conduct for professional accountants in-
dicate that members should ( 1) at all times maintain the good reputation of
the profession and its ability to serve the public interest, (2) perform with
integrity, due care, professional competence, independence, and confiden-
tiality, and (3) not be associated with any misleading information or
misrepresentation . 20
Brooks quotes an explicit prohibition on conflicts of interest in the Ontario code;
an accountant should:
hold himself or herself free from any influence, interest or relationship in
respect of his or her client’s affairs, which impairs his or her professional
judgment or objectivity or which, in the view of a reasonable observer would
impair the member’s professional judgment or objectivity.2l
Codes of ethics for accountants prohibit them from being party to deception,
tax evasion, or other illegal activities, but these codes do not require accoun-
tants to report illegal activity to government authorities.
If a professional accountant finds that a client has misrepresented or ille-
gally evaded tax, he or she must counsel corrective action, and if no such
action is forthcoming, the accountant must resign. At present, professional
accountants are not required to report the evasion or illegality to taxation
authorities.22
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170 BUSINESS ETHICS QUARTERLY
Brooks devotes a short section of his paper to describing common or “fre-
quent” kinds of conflicts of interest in accounting. He states that “Many of the
conflicts professional accountants face involve favoring their own interest at the
expense of others.”23 An accountant who accepts substantial favors from clients
could be put “in the position to be asked for a favor in return that would erode
his or her independence and perhaps cause harm to other investors or govern-
ment that represents the public interest.”24 Conflicts of interest can also arise
when accountants use confidential information for their own benefit. Such use
might constitute “insider trading” or “improperly signaling the marketplace about
their client’s affairs.”25 Brooks discusses problems that can arise when accoun-
tants represent clients who are in competition with each other or have conflicting
interests. He argues plausibly that such cases are not necessarily conflicts of
interest and are generally much less problematic than analogous cases in the
law when attorneys represent clients with competing interests.
Brooks’s paper is helpful and well worth reading. However, he spends so
much time discussing issues other than conflicts of interest, that he doesn’t do
enough to identify and discuss the kinds of systemic conflicts of interest that are
pervasive in accounting and played such a central role in recent events.
These kinds of systemic conflicts of interest in accounting are ably identified
and analyzed in a recent paper by Mary Armstrong not included in the present
volume.26 Armstrong notes two kinds of systemic conflicts of interest in ac-
counting common today. The first kind of conflict of interest is created by the
fact that although CPA firms are hired and paid by the firms they audit, CPAs
have obligations to the users of financial statements, e.g., investors and govern-
ment tax officials. Armstrong writes:
The auditee’s management hires, pays, and fires the auditor, yet the auditor is
essentially attesting to the fairness of management’s representations about
its own stewardship. All the while, the auditor’s primary responsibility is
toward the users of the financial information being audited. It is somewhat
analogous to butchers hiring their own meat inspectors, with the power to set
their prices and Elre them if they do not like the inspection reports issued.27
A second and closely related common type of conflict of interest arises in cases
in which financial service companies provide both auditing and other financial
services to customers. It is common for firms such as Andersen to provide both
auditing and other financial services such as management consulting to their
clients. This creates conflicts of interest because the firm being audited is an
important customer for financial services firms and the desire not to displease
one’s customers and lose business often affects the work of their auditors. The
managers of corporations being audited typically want to receive favorable au-
dits. They are in a position to dismiss financial service providers whose auditors
make them unhappy. The executives of financial services providers and the au-
ditors who work for them understand this, and the auditors’ objectivity and
independence are thereby compromised. The auditors face a conflict of interest in
that they are under pressure to give favorable audits to please valued customers.
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REVIEW OF CONFLICT OF INTEREST IN THE PROFESSIONS 171
Armstrong also notes that conflicts of interest are created when auditors audit
their own past work or the past work of members of their own firms.
Armstrong makes some very interesting suggestions about how to avoid “struc-
tural” conflicts of interest in accounting. Her suggestions include the following:
governmental audits, an audit “tax” to fund audits, audits bought by large
institutional investors instead of the companies themselves, a “tenure” sys-
tem for auditors, mandatory periodic rotation of auditors, and others.28
All of these proposals merit careful consideration. The suggestion that audits be
done by the government or by large institutional investors is particularly promis-
ing. This would insure that the company being audited is not a valued customer of
the Elrm auditing it. This proposal would also insure that corporate managers would
not have the power to dismiss external auditors whose work displeases them.
John Boatright’s paper on conflicts of interest in financial services identifies
a very large number of examples of conflicts of interest. Some of those I found
most noteworthy are the following. To the extent that financial advisors are of-
ten also financial managers who receive commissions on trades, advisors often
have an incentive to engage in excessive trading in discretionary accounts and
recommend more buying and selling than is in the interests of clients. This all-
too-common practice is known as “churning.”
Similar practices occur in banking, when loan customers are urged to replace
one loan with another, and in insurance, when agents persuade customers to
replace one policy with another, in order to generate extra fees and commis-
sions. These abuses are called 4’flipping” and “twisting” respectively.29
Another common conflict of interest is involved in cases of “personal trading.”
investment company personnel . . . who have access to proprietary research
and information about pending transactions . . . are in a position to use this
information to trade ahead of a fund’s purchase (called frontrunning) and
benefit from any upward price movement. If frontrunning raises the price
of a stock, then the fund pays more for a security than it would otherwise.
Similarly, an access person with advance knowledge of a stock sale could
capitalize on the information by selling short.30
In both cases, personal trading is likely to harm the interests of clients by rais-
ing the price of the securities they buy or lowering the price of the securities
they sell.
Boatright claims that conflicts of interest in Elnance can’t be eliminated, but
can only be managed.
Conflicts of interest are built into the structure of our financial institutions
and could be avoided only with great difficulty. As one person has noted,
“The biblical observation that no man can serve two masters, if strictly
followed, would make many of Wall Street’s present activities impossible.”
In addition, the inhabitants of Wall Street are motivated primarily by self-
interest and can be induced to serve any master only within limits. The
challenge, therefore, is not to prevent conflicts of interest in financial ser-
vices but to manage them in a workable financial system.3′
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172 BUSINESS ETHICS QUARTERLY
How are conflicts of interest in financial services to be managed? Boatright
surveys a number of suggestions about how to manage conflicts of interest.
Competition. Competitive pressures limit the adverse consequences of con-
flicts of interest. Financial service providers which act contrary to their clients’
interests and thereby reduce returns to them will have difficulty attracting cli-
ents in a very competitive marketplace.
Disclosure. This involves the requirement to disclose all adverse interests to
clients. Further,
disclosure of performance data of all kinds, including levels of risk, facili-
tates competition, which in turn reduces conflicts of interest. In addition,
conflicts of interest can be avoided by making known a firm’s policies and
procedures for dealing with conflicts.32
Rules and Policies. Specific rules requiring people to avoid conflicts of inter-
est or prohibiting actions that constitute conflicts of interest can be created by
the legislation, regulatory agencies, industry associations and exchanges, and
financial service firms themselves. Boatright mentions several examples including
prohibitions against personal trading on stock before and after the fund pur-
chase and prohibitions “on all short-term selling (generally a security must be
held for more than ninety days).”33
Structural Changes Since many conflicts of interest result from combining
different services in one firm, the strongest remedy for conflicts of interest is to
“institute structural changes that separate these functions.”
Many conflicts could be eliminated by separating the functions of trust man-
agement and commercial banking, of underwriting and investment advising,
of retail brokerage and principal trading, and so on.34
Boatright argues that, on balance, this remedy is not desirable because of the
costs and the inefficiencies it would involve.
Addressing the problem of conflict of interest by such radical structural
changes is probably unwarranted, however, because of the many advan-
tages of such combinations. For example, underwriting a corporation’s
securities requires an investment bank with substantial sales capability as
well as personnel with analytic skills.35
Boatright proposes, instead, that conflicts of interest should be managed by struc-
tural changes within existing multifunction institutions. He recommends
measures to strengthen the autonomy of different divisions in multifunction Elrms
and restricting the flow of information between different divisions of firms (“Chi-
nese walls”). Boatright observes:
There are some drawbacks to Chinese walls, however. They take away some
of the gains from integrating different functions in one firm, and firms may
lose the confidence of customers, who fear, for example, that investment ad-
vice does not represent all the information possessed by a firm. However, a
customer may also benefit, by being assured that a broker’s investment ad-
vice is not biased by the need to place unsold stocks in an underwriting.36
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REVIEW OF CONFLICT OF INTEREST IN THE PROFESSIONS 173
Conflicts of Interest on Corporate Boards
Eric Orts’s paper “Conflict of Interest on Corporate Boards” discusses con-
flicts of interest in corporate governance. He focuses on conflicts of interest
involving members of corporate boards of directors. Orts devotes considerable
attention to the law and his article is the source of much useful information on
legal issues. Orts observes that conflicts of interest arise for members of corpo-
rate boards, because directors have the duty to promote and safeguard the interests
of the firm and at the same time have personal interests and opportunities for
self-dealing that may conflict with their duties as directors. He divides these
conflicts of interest into two broad categories: 1. conflicts of interest that arise
when directors have financial interests that diverge from the interests of the
firm, and 2. conflicts of interest that arise when corporations do things that af-
fect family members or friends.
Orts says that the “most fundamental” conflict of interests for corporate di-
rectors involve issues of compensation for executives.
In the corporate law of conflicts of interest, the most signiElcant difficulty
arises in the payment of executive compensation . . . The problem with re-
spect to executive compensation is that corporate ofElcers, especially CEOs,
often exercise extraordinary defacto power over the corporate boards which
are supposed to oversee them. To the extent the real power of CEOs over-
comes formal board structures that are answerable to shareholders, the
problem of excessive payment of executive compensation may arise. Some
empirical evidence supports the claim that levels of executive compensa-
tion have become problematic from a social perspective, at least in the United
States. In 1996, for example, the CEOs of the largest thirty corporations
made more than 200 times more in compensation than did the average U.S.
employee, almost a fivefold increase in this ratio since 1965.37
Not only do executives often use their indirect influence over boards to in-
crease their compensation, they often sit on boards that set their own
compensation. [The conflict of interest isn’t avoided if they recuse themselves
from the committees that determine their compensation. The other members of
the board will face a conflict of interest in virtue of their personal relationships
with the executives who are on the board and their decisions about executive
compensation will be known to the executives who are members of the board.]
A similar conflict of interest is constituted by the fact that board members are
sometimes in a position to determine their own compensations and vote them-
selves stock options, etc. For example, The Public Company Oversight Board
was created by Congress in 2002 to oversee the auditors of publicly traded com-
panies. On January 9, 2003 the members of the Oversight Board met and voted
themselves salaries of $452,000 per year.38
A different kind of conflict of interest involving the financial interests of
directors arises from the business opportunities that directors learn of in their
. . . .
Ottlcla. , capacltles.
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174 BUSINESS ETHICS QUARTERLY
The general rule is that if a corporate director or executive hears about an
opportunity for an investment that is characterized as ;’an interest or ex-
pectancyS’ or “in the line of business” of the corporation, then the opportunity
must first be offered to disinterested representatives of the corporation (usu-
ally disinterested board members or the shareholders) and the interested
director of executive may then pursue the opportunity only if the corpora-
tion declines it.39
Christopher Stone’s landmark book Where the Law Ends offers a powerful
critique of corporate boards as they are presently constituted in the US. Stone
decries the increasing presence of “insideS’ directors,” i.e., “men serving as di-
rectors of the very companies that employ them as managers.”40 This arrangement
itself constitutes a conflict of interest. Managers’ own personal interestsn e.g.,
interests in retaining their jobs, increasing their income, securing promotion,
and maintaining amicable relations with other managers, etc., prevent them from
impartially and effectively serving the function of overseeing management and
protecting shareholders from abuses by management. Conflicts of interest are
also created by the fact that directors are typically placed on boards by manage-
ment (rather than the other way around.)4l Conflicts of interest arise when board
members develop personal relationships and friendships with management, which
make them reluctant or unwilling to criticize or remove managers. Stone pro-
vides some indirect evidence for this claim in the following passage:
Myles Mace . . . points out that the typical outside director, having been
placed on the board by management . . . is particularly reluctant to rock the
boat by asking discerning questions. It is “plain bad manners,n’ one com-
pany president chided, in private and after the meeting, an aberrationally
inquisitive director who had done nothing more rude than to ask what was
being done to correct steadily declining earnings.42
Stone goes on to note the failure of the members of Penn Central’s Board of
Directors to question the actions of Penn Central’s egregiously corrupt and in-
competent management which drove the huge corporation into bankruptcy shortly
after the merger which founded it.
Many board members lack adequate incentive to be diligent and careful in
promoting the interests of the corporation; often they are indemnified or insured
against law suits for damages due to negligence.43 Another serious and systemic
problem is that management is in a position to manipulate boards to do their
bidding by selectively determining what sort of information reaches the board.
Boards often lack adequate information to perform their roles adequately. Stone
makes a number of proposals to remedy or ameliorate these problems with cor-
porate governance. Among his proposals are the following: remove inside
directors from corporate boards, limit the indemnification and insurance of di-
rectors against suits for negligence, and give directors staff and resources so
that management can’t control and limit the information directors receive.44
Another proposal that has been made in light of recent events is to give boards
of directors their own independent auditors who report only to the boards.
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REVIEW OF CONFLICT OF INTEREST IN THE PROFESSIONS 175
Conflicts of Interest in Medicine
Stephen Latham’s paper “Conflict of Interest in Medical Practice” focuses
on conflicts of interest that arise from methods of paying physicians. It is well-
known that traditional “fee for services” payment creates a financial incentive
for physicians to prescribe more treatment and services than patients need. Phy-
sicians make recommendations about the kinds of medical services patients need
and then often provide those services themselves.
The physician is thus her [the patient’s] agent for the purchase of medical
services as well as purveyor of those services. His conflict of interest lies
in this: As her purchasing agent, he has a duty to assist her in making pru-
dent choices among medically relevant health care services, but as a purveyor
of services, he has a pecuniary interest in advising her to make rather more
extravagant purchases than a disinterested prudence would counsel.45
Latham’s observations have much wider application. Plumbers, dentists, exter-
minators, auto mechanics, electricians, psychologists, appliance repairmen, and
many others professionals also occupy the dual roles of diagnosing problems
and providing services. Self-employed members of these professions all have
exactly the same kind of conflict of interest as physicians under fee for service;
professionals employed by others also have conflicts of interest to the extent
that their employers reward them for generating revenue. This problem is par-
ticularly worrisome because most lay people are unable to assess the honesty
and accuracy of the diagnoses and the quality of the care that they receive.46
Physicians and other professionals are in a position to take advantage of mem-
bers of the public and run very little risk of being caught when they do.47 We are
all at the mercy of professionals whose knowledge of their fields greatly ex-
ceeds our own. We need them to refrain from deceiving and manipulating us for
their own benefit.
Certain alternative methods of paying physicians also create conflicts of in-
terest. In many HMOs physicians are paid on a “capitation” basis; physicians or
medical groups are paid a fixed amount for each patient enrolled and in return
the physician or group provides complete health care services for those patients.
Primary care physicians are gate keepers for more expensive specialists, tests,
and treatments. Most HMOs give physicians strong financial incentives to keep
costs down. It is common to set a maximum amount of money that can be spent
treating a physician’s patients. In some HMOs, physicians receive a bonus if the
total costs of their patients are below the maximum. Alternatively, physicians
may have their salaries reduced if the costs incurred by their patients exceed the
maximum permitted. This creates very serious conflicts of interest in that the
quality of the care and treatment physicians give their patients is often compro-
mised by their concern for their own financial interests. In his book Medicine
and Morals: Physicians’ Conflicts of Interest, Marc Rodwin claims that eighty-
five percent of HMOs use these kinds of financial incentives to insure that
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176 BUSINESS ETHICS QUARTERLY
physicians keep costs down. Physicians can lose twenty to thirty percent of sala-
ries if they exceed the cost guidelines set by their HMOs.48
Latham offers a very helpful consideration of possible remedies for the prob-
lems created by conflicts of interest in the payment of physicians. He says that
we can minimize risk of adverse impact on particular clinical decisions
by making sure that financial rewards are given piecemeal, on a sliding
scale basis, rather than in large blocks upon the attainment of fixed target
numbers. A physician who earns a large bonus upon the attainment of a
certain level of cost savings, but who gets nothing short of that attainment,
will be under extreme financial pressure whenever he or she is near the
borderline of attaining the goal. A better plan would give the physician
financial rewards proportional to whatever level of savings he or she in fact
attains. Under the latter plan, every cost saving would be rewarded, but no
one clinical decision or patient would be a “bonus breaker.”49
In the case of the conflicts of interest generated by methods of paying physi-
cians, the most obvious remedy would seem to be to separate diagnosis from
treatment. A person would go to a diagnostic physician who would then refer
the patient to someone else for treatment. Latham notes that this kind of remedy
is employed by laws that forbid physicians to sell the drugs they prescribe, but
he dismisses the proposal to separate diagnosis and treatment because of the
expense and inconvenience it would create for patients.
Are there other ways of paying physicians that avoid conflicts of interest and
do not create other equally serious problems? Latham notes that “physicians on
salary have no pecuniary interest in offering more or fewer services than the
patient requires.”50 He seems to think that, nonetheless, a physician’s interest in
leisure creates a conflict of interest for salaried physicians. He goes on to sug-
gest that, unlike fee for service and capitation, this conflict of interest is not
worrisome; “this interest [in leisure] is easily outweighed by the non-pecuniary
interest in reputation and by the pecuniary interest in not being fired.”5l This is
plausible and interesting, but Latham’s very brief discussion of paying physi-
cians salaries ends here. One wishes that he had more to say about this.52
Latham discusses one other kind of conflict of interest at length the con-
flicts of interest created by the gifts and other inducements pharmaceutical
companies give to physicians to prescribe their drugs. Pharmaceutical compa-
nies often give gifts to physicians. These gifts can vary from keychains, pens,
and free samples for personal and family use to lavish travel and entertainment
sometimes disguised as educational seminars. Latham does not think that a phy-
sician having goodwill or gratitude toward a pharmaceutical company is enough
to create a conflict of interest.
For example, a physician may, without losing anything, harbor warm feel-
ings toward a firm that entertained her and still prescribe a competitor firm’s
product when she feels it medically appropriate.53
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REVIEW OF CONFLICT OF INTEREST IN THE PROFESSIONS 177
It is possible, of course, that one could feel gratitude without this affecting one’s
judgment and actions. It is also possible that a physician’s gratitude toward a
pharmaceutical company might make it difficult for her to make the right deci-
sions for her patients and such cases are conflicts of interests. Latham is very
troubled about cases in which pharmaceutical companies give physicians finan-
cial rewards for prescribing their products.
Most troubling, however, are marketing practices that offer physicians fi-
nancial rewards, either concurrently or retrospectively, for their actual
prescribing practices. Some firms have offered vacations and expensive gifts
as rewards to their “high prescribers.”54
AMA guidelines strictly prohibit physicians from receiving gifts with strings
attached. Latham observes, however, that
The AMA guidelines are essentially voluntary; there is no meaningful en-
forcement mechanism for their violation, and no means even of detecting
violations dependably . . . numerous physicians violate them annually.55
Latham quotes from the AMA code of ethics, which says that
[i]f a conflict develops between the physician’s financial interest and the
physician’s responsibilities to the patient, the conflict must be resolved to
the patient’s benefit.56
He continues with the following observation with which I strongly concur.
Yet the skeptic might be forgiven for wondering whether, assuming the ad-
monition was sincerely meant by its draftsman, the laudable attitude it preaches
can seriously be cultivated by a professional organization that spends so much
of its time in the ardent pursuit of physicians’ Elnancial interests.57
Referral fees or “kickbacks” for physicians (fees or payments for physicians
to refer patients to other physicians, usually specialists) also create conflicts of
interest, since they create a financial incentive for physicians to give unneeded
referrals. Latham notes that the practice of fee-splitting has long been prohib-
ited by both the law and medical codes of ethics. However, Marc Rodwin argues
that these prohibitions have been ineffective in deterring fee splitting and have
led to the development of dishonest means of evading the law (instead of paying
a referral fee, specialists often hire referring physicians as “assistants”).58
Another serious conflict of interest noted by Rodwin is that often physicians
refer patients for tests to facilities that they own or partly own. Rodwin reports
a Florida study that found that patients of physicians who owned labs received
twice as many tests as other patients. Further these labs charged twice as much
as other labs.59 AMA guidelines permit this provided that the physician dis-
closes ownership to the patient. Rodwin argues that the requirement of disclosure
does not remove the conflict of interest. He also claims that the disclosure re-
quirement is ineffective and widely ignored by physicians.60
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178 BUSINESS ETHICS QUARTERLY
Lessons From Comparisons Between DiJjrerent Professions
The book ends with Andrew Stark’s paper “Comparing Conflict of Interest
Across the Professions.” This is an outstanding paper that draws some interest-
ing and important lessons from the papers in the anthology. It probably could
not have been written had he and Davis not assembled a collection of discus-
sions of conflicts of interest from so many different professions. Stark lays out
a very useful and perspicuous typology of different kinds of conflicts of inter-
est. He distinguishes between two general types of conflict of interest: 1. those
that result from external relationships, e.g., a government official offering a sub-
sidy to a company in which his wife owns stock and 2. those internal to one’s
job or profession, e.g., cases in which one’s professional judgment is adversely
affected by one’s desire to advance in the ranks of a bureaucracy. That cases of
the second type are genuine conflicts of interest is not adequately appreciated.
Stark contends that the first type of conflict of interest is exactly the same in
every profession. Everyone has friends and family ties that can create conflicts
of interest. Stark writes:
A personal gift from an individual external to the professional-principal
relationship a pharmaceutical manufacturer in the case of a physician-
patient relationship, a mutual fund salesman in the case of a broker-client
relationship, an art dealer in the case of a critic reader relationship im-
pairs the professional’s judgment in all three pursuits in exactly identical
ways. A judge’s decision making capacity is threatened in precisely the
same fashion as a journalist’s or a corporate director’s by her capacity
to affect an out-of-role financial holding through her role in decision mak-
ing. It is only when we turn to conflicts of interests that arise within role, to
conflicts not extrinsic but intrinsic to the professional’s relationship with
her principal, that revealing differences emerge across professions.61
Stark claims that conflicts of interest that arise within professional roles fall
into two broad categories: 1. “many roles one principal” and 2. “many princi-
pals one role.” Conflicts of interest in the first category arise because professionals
serve different and, to some extent, incompatible, roles for clients. Conflicts of
interest involving many principals and one role are created by the conflicting
interests of different clients. For example, “Capitation forces doctors to choose
between allocating their limited time and resources to different principals….”62
Brokers who manage the accounts for multiple clients are sometimes forced to
choose between different clients when they decide how to allocate a security in
short supply.
Stark claims that conflicts of interest involving many roles and one principal
tend to fall into one of the following two categories: 1. the conflict between the
roles of diagnosing problems and providing services, e.g., churning and fee for
service, and 2. conflicts between the roles of being a judge and being an advo-
cate teachers judge their students and are also expected to provide
recommendations for them. Brokers sometimes judge securities that they then
are expected to sell and endorse.
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REVIEW OF CONFLICT OF INTEREST IN THE PROFESSIONS 179
Moralsfor Business Ethics
Work in business ethics should pay more attention conflicts of interest, espe-
cially the ways in which conflicts of interest are “internal” to professional roles
and pervade business and professional life. Self-dealing is one of the most fun-
damental and pervasive moral problems in business, but it is largely overlooked
in the literature on business ethics. The literature in our field is too consumed by
debates about the social responsibilities of business and debates about whether
business executives should or should not pursue the interests of shareholders
alone (within limits). Moral problems arise in business not so much when busi-
ness executives promote (or fail to promote) the interests of shareholders over
the interests of other stakeholders, but rather when business people engage in
self-dealing and promote their own personal interests to the detriment of every-
one else. Questions about the social responsibilities of business are practical
questions only for high ranking business executives. Most business people have
little power or authority to make decisions about the policy issues that are dis-
cussed in the literature on the social responsibilities of business, e.g., corporate
contributions to charity and corporate environmental policy. The literature on
the social responsibilities of business sheds very little light on the moral obliga-
tions of most business people. By contrast, conflicts of interest and temptations
to engage in self-dealing are practical moral problems for almost all business
people. The recent corporate accounting scandals all involved conflicts of inter-
est and self-dealing; the Eleld of business ethics needs to put the issues of conflicts
of interest and self-dealing front and center.
Notes
Thanks to John Boatright, Ian Maitland, Joe Mendola, Jean Tan and Moshe Adler for many
helpful criticisms and suggestions.
‘ Davis and Stark, eds., Conflict of Interest in the Professions, p. 8.
2 ConJ7ict of Interest in the Professions, p. 8.
3 Conflict of Interest in the Professions, p. 9.
4 Michael Davis, “Conflict of Interest,” Business and Professional Ethics Journal 1 (1982):
17-27 and “Conflict of Interest Revisited,” Business and Professional Ethics Journal 12
(1993): 2141.
5 In his paper, “Conflicts of Interest: An Agency Analysis,” in Norman E. Bowie and R.
Edward Freeman, eds., (New York: Oxford University Press, 1992), pp. 187-203, John
Boatright also presents counterexamples to Davis’s definition. If I understand them correctly,
Boatright’s examples are different from the ones I have offered here. They are presented as
examples of conflicts of interest that don’t interfere with any actions (requiring judgment)
that P takes on behalf of the other party. Based on his reply to Boatright, I suspect that Davis
might reply that my example is a case of a “breach of loyalty” rather than a conflict of
interest (“Conflict of Interest Revisited,” pp. 21-41). To this, I would reply that my case is a
breach of loyalty and that, in this case, I am disloyal because of a conflict of interest which
consists in my being tempted by conflicting financial interests to violate my official duties.
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BUSINESS ETHICS QUARTERLY 180
6 ConfZict of lnterest in the Professions, p. 69.
7 Conflict of Interest in the Professions, p. 283.
8 Conflict of Interest in the Professions, p. 219.
9 Conflict of Interest in the Professions, p. 219.
10 Conflict of Interest in the Professions, pp. 219-220.
1 l This is a revised and simplified version of the following definition which I defended in
my paper, “Conflicts of Interest,” Journal of Business Ethics, 13 (1994): 387404.
A conflict of interest exists in any situation in which an individual (I) has
difficulty discharging the official (conventional/fiduciary) duties attaching to
a position or office she holds because either: i) there is (or I believes that there
is) an actual or potential conflict between her own personal interests and the
interests of the party (P) to whom she owes those duties, or ii) I has a desire to
promote (or thwart) the interests of (X) (where X is an entity which has inter-
ests) and there is (or I believes that there is) an actual or potential conflict
between promoting (or thwarting) X’s interests and the interests of P.
The section immediately below, “Some Features of My Proposed Definition,” closely fol-
lows pp. 388-389 of my “Conflicts of Interest.”
12 In order for the conflict between the interests of one’s employer or organization (etc.)
and the interests of one’s friends or family (etc.) to make it difficult for one to fulfill one’s
official duties, one must have some desire or preference to the effect that the interests of
one’s family or associates be advanced. Consider the following case: a person has no special
interest in or attachment to her cousin. Her official duties conflict with the interests of the
cousin. The conflict between the interests of her cousin and her official duties will not create
any difficulty for her in fulfilling her official duties. On my view, such a case would not
constitute a genuine conflict of interest. Less probably, suppose that I is completely indiffer-
ent to the welfare of his own daughter. Cases in which his daughter’s best interests conflict
with those of P would not constitute conflicts of interest, because they would not make it
difficult for him to discharge his duties to P. I would describe such cases as apparent, but not
actual, conflicts of interest.
13 Cf. Joseph Margolis, “Conflicts of Interest and Conflicting Interests,” in Ethical Theory
and Business, ed. Tom Beauchamp and Norman Bowie, first edition, (Englewood Cliffs,
N.J.: Prentice Hall, 1979), p. 364; Neil Luebke, “Conflicts of Interest as a Moral Category,”
Business and Professional Ethics Journal 6 (1987): 70; and John Boatright, “Conflict of
Interest: An Agency Analysis,” p. 189. Davis claims that:
Bribes as such do not create conflicts of interest; generally, what they create
is something more serious: disloyalty at least; at worst, a crime…. Bribe
offers, however, can create a conflict of interest” (Conflict of Interest in The
Professions, p. 18).
14 I defend this analysis in “Bribery, Extortion, and ‘The Foreign Corrupt Practices Act,”‘
Philosophy & Public Aff^airs 14 (1985): 66-90.
15 It is permissible for my uncle to engage in nepotistic hiring. However, if he does, he
should not advertise the position or interview other people for the job, since that would give
others the false impression that they are competing with others and that they will be judged
on their merits.
16 One might object that, inasmuch as I desire to harm someone (or promote someone’s
welfare), it is in my own self-interest to harm (benefit) her. But the ill-fare (or welfare of
others) does not by itself (apart from its consequences such as giving me pleasure) contrib-
ute to my own welfare. It is not analytic that (other things equal) my welfare is enhanced
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REVIEW OF CONFLICT OF INTEREST IN THE PROFESSIONS 181
whenever a state of affairs that I desire obtains. Among other things, this would make it
logically impossible for one to desire or prefer actions which are contrary to one’s self-
interest and thus logically impossible for there to be genuine acts of self-sacrifice. (See Mark
Overvold, “Self-Interest and the Concept of Self-Sacrifice,” Canadian Journal of Philoso-
phy 10 (1980): 105-118.) The satisfaction of other-regarding desires does not necessarily
contribute to one’s own personal welfare.
17 See my papers 4’Bribery, Extortion, and sThe Foreign Corrupt Practices Act,”‘ Philoso-
phy & Public AJfairs 14 (1985): 66-90 and “Bribery and Implicit Agreements: A Reply to
Philips,” Journal of Business Ethics, 6 (1987): 123-125 for a defense of this.
18 This point is crucial for my objection to Boatright’s defiIlition. Boatright and I dis-
agree about whether Bob’s agreement with the Klan generates a prima facie moral duty for
him to fulfill his official duties. For a very good discussion of this issue (one that doesn’t
clearly side either with me or with Boatright) see Shelly Kagan, Normative Ethics, (Boulder,
Colorado: Westview, 1998), pp. 124-125.
9 See Andrew Stark, Conflict of Interest in American Public Life, (Cambridge, Mass.:
Harvard University Press, 20000), Chapter 3, for discussion of self-dealing that I cannot
begin to summarize here.
20 Conf ict of Interest in the Professions, p. 95.
21 Conflict of Interest in the Professions, p. 93.
22 Conflict of Interest in the Professions, p. 97.
23 Conflict of Interest in the Professions, p. 98.
24 Cony?ict of Interest in the Professions, p. 99.
25 Conflict of Interest in the Professions, p. 99.
26 “Ethical Issues in Accounting” in The Blackwell Gaide to Business Ethics, Norman
Bowie, editor, (Oxford: Blackwell’s, 2002), pp. 145-164.
27 “Ethical Issues in Accounting,” p. 155.
28 “Ethical Issues in Accounting,” p. 156.
29 Conflict of Interest in the Professions, pp. 228-229.
30 Conflict of Interest in the Professions, p. 229.
31 Conftict of Interest in the Professions, p. 217.
32 Confliet of Interest in the Professions, p. 232.
33 Conflict of Interest in the Professions, p. 234.
34 Conflict of Interest in the Professions, p. 234.
35 Confiict of Interest in the Professions, p. 234.
36 Conflict of Interest in the Professions, p. 235.
37 Conflict of Interest in the Professions, p. 138.
38 New York Times, January 10, 2003.
39 Conflict of Interest in the Professions, p. 140.
40 Christopher Stone, Where the Law Ends (New York: tIarper and Row, 1976), p. 128.
41 Where the Law Ends, p. 128.
42 Where the Law Ends, p. 128.
43 Where the Law Ends, pp. 144-147,
44 Where the Law Ends, pp. 139-150.
45 ConJlict of Interest in the Professions, p. 285.
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182 BUSINESS ETHICS QUARTERLY
46 Cf. E. Haasi Morreim, Balancing Act: The New Medical Ethics of Medicine’s New
Economics, (Washington, D.C.: Georgetown University Press, 1995), p 106.
47 Many of the same issues about conflicts of interest in the payment of physicians and
other professionals are considered in “Conflict of Interest in Physical Therapy” by Mike
Martin and Donald Gabard (Conflict of Interest in the Professions, pp. 314-332.) Martin and
Gabard claim that all professions are involved systemic conflicts of interest in that members
of all professionals are subject to the temptation “to provide unnecessary services to clients
in order to increase profits” (p. 318). This conflict is created by their dual roles as advisors
and provider of services.
48 (Oxford: Oxford University Press, 1993), pp. 139-140.
49 Conf ict of Interest in the Professions, p. 292.
50 Conflict of Interest in the Professions, p. 290.
S] Conflict of Interest in the Professions, p. 290.
52 Michael Bayles argues that there exists a “fundamental conflict of interest” in any
relationship between a client and a professional person. This conflict of interest is created by
the professional person’s interest in income and leisure. When professionals are paid on a fee
for service basis they have an interest in providing more services than are either necessary or
desirable for their clients. For example, when physicians are paid according to how much
work they do for their patients, many physicians succumb to the temptation to provide their
patients with unnecessary, even dangerous treatments. Bayles continues:
Alternative systems of paying professionals do not remove this conflict but
merely reverse the effect on the client. In a capitation payment system, profes-
sionals have an interest in having as many clients as possible to maximize their
income and in performing as few services as possible to minimize their costs.
On a salary system or flat fee for a case, professionals receive the same income
no matter the number of clients or services performed, so they have an interest
in minimizing clients or services. These payment systems thus encourage pro-
fessionals not to perform useful services…. This fundamental conflict of
interest between professional and client cannot be removed. It is inherent in
the professional-client relationship. Michael Bayles, Professional Ethics, sec-
ond edition, (Belmont, Calif.: Wadsworth, 1989), p. 89.
Another noteworthy feature of Bayles’s discussion of conflicts of interest that is not ad-
dressed in the Davis and Stark anthology is his claim that the self-regulation of profession
involves systematic conflicts of interest. On conflicts of interests in self-regulation also see
my paper “Conflicts of Interest,” p. 394. Haavi Morreim also argues the conflicts of interest
arising out the payment of physicians are “inescapable,” Balancing Act: The New Medical
Ethics of Medicine’s New Economics, pp. 61-62.
53 ConJ7ict of Interest in the Professions, p. 295.
54 Conflict of Interest in the Professions, p. 295.
55 Conflict of Interest in the Professions, p. 296.
56 Conflict of Interest in the Professions, p. 297.
57 Conflict of Interest in the Professions, p. 297.
58 Marc Rodwin, Medicine and Moral: Physicians’ Conflicts of Interest, (New York: Ox-
ford, 1993), pp. l9-52.
59 Medicine and Moral: Physicians’ Conflicts of Interest, p. 72.
60 Medicine and Moral: Physicians’ Conflicts of Interest, p. 42.
61 Conflict of Interest in the Professions, p. 336.
62 Cony?ict of Interest in the Professions, p. 341.
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- Contents
- Issue Table of Contents
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Business Ethics Quarterly, Vol. 14, No. 1 (Jan., 2004), pp. 1-196
Front Matter
Employee Governance and the Ownership of the Firm [pp. 1-21]
The Fragile Structure of Free-Market Society: The Radical Implications of Corporate Social Responsibility [pp. 23-46]
Future Generations and Business Ethics [pp. 47-69]
Is There a Special E-Commerce Ethics? [pp. 71-94]
The Ethics of Mentoring [pp. 95-122]
Information Requirements and the Characteristics of Sales Situations [pp. 123-139]
The Effects of Context on Trust in Firm-Stakeholder Relationships: The Institutional Environment, Trust Creation, and Firm Performance [pp. 141-160]
Review Articles
Review: Conflicts of Interest and Self-Dealing in the Professions: A Review Essay [pp. 161-182]
Review: Peter Singer on Global Ethics [pp. 183-196]
Back Matter