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Conflict of interest - Wikipedia, the free encyclopedia

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Conflict of interest
For Wikipedia's rules against editing with ulterior motives, see Wikipedia:Conflict of
interest.
For other uses, see Conflict of Interest (disambiguation).
A conflict of interest (COI) is a situation in which a person or organization is involved
in multiple interests (financial, emotional, or otherwise), one of which could possibly
corrupt the motivation of the individual or organization.
The presence of a conflict of interest is independent of the occurrence of impropriety.
Therefore, a conflict of interest can be discovered and voluntarily defused before any
corruption occurs. A widely used definition is: "A conflict of interest is a set of
circumstances that creates a risk that professional judgement or actions regarding a
primary interest will be unduly influenced by a secondary interest."[1] Primary interest
refers to the principal goals of the profession or activity, such as the protection of clients,
the health of patients, the integrity of research, and the duties of public office. Secondary
interest includes not only financial gain but also such motives as the desire for professional
advancement and the wish to do favours for family and friends, but conflict of interest
rules usually focus on financial relationships because they are relatively more objective,
fungible, and quantifiable. The secondary interests are not treated as wrong in themselves,
but become objectionable when they are believed to have greater weight than the primary
interests. The conflict in a conflict of interest exists whether or not a particular individual
is actually influenced by the secondary interest. It exists if the circumstances are
reasonably believed (on the basis of past experience and objective evidence) to create a risk
that decisions may be unduly influenced by secondary interests.

Related to the practice of law


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

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


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

Generally (unrelated to the practice of law)


More generally, conflicts of interest can be defined as any situation in which an individual
or corporation (either private or governmental) is in a position to exploit a professional or
official capacity in some way for their personal or corporate benefit.
Depending upon the law or rules related to a particular organization, the existence of a
conflict of interest may not, in and of itself, be evidence of wrongdoing. In fact, for many
professionals, it is virtually impossible to avoid having conflicts of interest from time to
time. A conflict of interest can, however, become a legal matter, for example, when an
individual tries (and/or succeeds in) influencing the outcome of a decision, for personal
benefit. A director or executive of a corporation will be subject to legal liability if a conflict
of interest breaches his/her duty of loyalty.
There often is confusion over these two situations. Someone accused of a conflict of
interest may deny that a conflict exists because he/she did not act improperly. In fact, a
conflict of interest can exist even if there are no improper acts as a result of it. (One way to
understand this is to use the term "conflict of roles". A person with two rolesan
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individual who owns stock and is also a government official, for examplemay experience
situations where those two roles conflict. The conflict can be mitigatedsee belowbut it
still exists. In and of itself, having two roles is not illegal, but the differing roles will
certainly provide an incentive for improper acts in some circumstances.)
As an example, in the sphere of business and control, according to the Institute of Internal
Auditors:
conflict of interest is a situation in which an internal auditor, who is in a
position of trust, has a competing professional or personal interest. Such
competing interests can make it difficult to fulfill his or her duties impartially. A
conflict of interest exists even if no unethical or improper act results. A conflict of
interest can create an appearance of impropriety that can undermine confidence in
the internal auditor, the internal audit activity, and the profession. A conflict of
interest could impair an individual's ability to perform his or her duties and
responsibilities objectively.[3][4]

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

Conflict of interest in the health care industry


Main article: Conflict of interest in the health care industry
The influence of the pharmaceutical industry on medical research has been a major cause
for concern. In 2009 a study found that "a number of academic institutions" do not have
clear guidelines for relationships between Institutional Review Boards and industry.[5]

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In contrast to this viewpoint, an article and associated editorial in the New England
Journal of Medicine in May 2015 emphasized the importance of pharmaceutical industryphysician interactions for the development of novel treatments, and argued that moral
outrage over industry malfeasance had unjustifiably led many to overemphasize the
problems created by financial conflicts of interest. The article noted that major healthcare
organizations such as National Center for Advancing Translational Sciences of the
National Institutes of Health, the Presidents Council of Advisors on Science and
Technology, the World Economic Forum, the Gates Foundation, the Wellcome Trust, and
the Food and Drug Administration had encouraged greater interactions between
physicians and industry in order to bring greater benefits to patients.[6][7]

Types
The following are the most common forms of conflicts of interests:
Self-dealing, in which an official who controls an organization causes it to enter into a
transaction with the official, or with another organization that benefits the official
only. The official is on both sides of the "deal."
Outside employment, in which the interests of one job conflict with another.
Nepotism, in which a spouse, child, or other close relative is employed (or applies for
employment) by an individual, or where goods or services are purchased from a
relative or from a firm controlled by a relative. To avoid nepotism in hiring, many
employment applications ask if the applicant is related to a current employee of the
company. This allows recusal if the employed relative has a role in the hiring process.
If this is the case, the relative could then recuse from any hiring decisions.
Gifts from friends who also do business with the person receiving the gifts or from
individuals or corporations who do business with the organization in which the gift
recipient is employed. Such gifts may include non-tangible things of value such as
transportation and lodging.
Pump and dump, in which a stock broker who owns a security artificially inflates the
price by "upgrading" it or spreading rumors, sells the security and adds short
position, then "downgrades" the security or spreads negative rumors to push the
price down.
Other improper acts that are sometimes classified as conflicts of interests are probably
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better classified elsewhere. Accepting bribes can be classified as corruption. Use of


government or corporate property or assets for personal use is fraud. Nor should
unauthorized distribution of confidential information, in itself, be considered a conflict of
interest. For these improper acts, there is no inherent conflict of roles (see above).
COI is sometimes termed competition of interest rather than "conflict", emphasizing a
connotation of natural competition between valid interests rather than violent conflict with
its connotation of victimhood and unfair aggression. Nevertheless, denotatively, there is
too much overlap between the terms to make any objective differentiation.

Examples
Environmental hazards and human health
Baker[8] summarized 176 studies of the potential impact of Bisphenol A on human health
as follows:[9]
Funding

Harm

No Harm

Industry

13 (100%)

Independent (e.g., government)

152 (86%)

11 (14%)

Lessig[10] noted that this does not mean that the funding source influenced the results.
However, it does raise questions about the validity of the industry-funded studies
specifically, because the researchers conducting those studies have a conflict of interest;
they are subject at minimum to a natural human inclination to please the people who paid
for their work. Lessig provided a similar summary of 326 studies of the potential harm
from cell phone usage with results that were similar but not as stark.[11]

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

Insurance claims adjusters


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

Purchasing agents and sales personnel


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

Government officials
Regulating conflict of interest in government is one of the aims of political ethics. Public
officials are expected to put service to the public and their constituents ahead of their
personal interests. Conflict of interest rules are intended to prevent officials from making
decisions in circumstances that could reasonably be perceived as violating this duty of
office. Rules in the executive branch tend to be stricter and easier to enforce than in the
legislative branch.[12] Two problems make legislative ethics of conflicts difficult and
distinctive.[13] First, as James Madison wrote, legislators should share a "communion of
interests" with their constituents. Legislators cannot adequately represent the interests of
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constituents without also representing some of their own. As Senator Robert S. Kerr once
said, "I represent the farmers of Oklahoma, although I have large farm interests. I
represent the oil business in Oklahoma...and I am in the oil business...They don't want to
send a man here who has no community of interest with them, because he wouldn't be
worth a nickel to them."[14] The problem is to distinguish special interests from the general
interests of all constituents. Second, the "political interests" of legislatures include
campaign contributions which they need to get elected, and which are generally not illegal
and not the same as a bribe. But under many circumstances they can have the same effect.
The problem here is how to keep the secondary interest in raising campaign funds from
overwhelming what should be their primary interestfulfilling the duties of office.
Politics in the United States is dominated in many ways by political campaign
contributions.[2] Candidates are often not considered "credible" unless they have a
campaign budget far beyond what could reasonably be raised from citizens of ordinary
means. The impact of this money can be found in many places, most notably in studies of
how campaign contributions affect legislative behavior. For example, the price of sugar in
the United States has been roughly double the international price for over half a century.
In the 1980s, this added $3 billion to the annual budget of U.S. consumers, according to
Stern,[15] who provided the following summary of one part of how this happens:
Contributions from the sugar
lobby, 19831986

Percent voting in 1985 against gradually


reducing sugar subsidies

> $5,000

100%

$2,5005,000

97%

$1,0002,500

68%

$11,000

45%

$0

20%

This $3 billion translates into $41 per household per year. This is in essence a tax collected
by a nongovernmental agency: It is a cost imposed on consumers by governmental
decisions, but never considered in any of the standard data on tax collections.
Stern notes that sugar interests contributed $2.6 million to political campaigns,
representing well over $1,000 return for each $1 contributed to political campaigns. This,
however, does not include the cost of lobbying. Lessig cites six different studies that

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consider the cost of lobbying with campaign contributions on a variety of issues considered
in Washington, D.C.[16] These studies produced estimates of the anticipated return on each
$1 invested in lobbying and political campaigns that ranged from $6 to $220. Lessig notes
that clients who pay tens of millions of dollars to lobbyists typically receive billions.
Lessig insists that this does not mean that any legislator has sold his or her vote.[10] One of
several possible explanations Lessig gives for this phenomenon is that the money helped
elect candidates more supportive of the issues pushed by the big money spent on lobbying
and political campaigns. He notes that if any money perverts democracy, it is the large
contributions beyond the budgets of citizens of ordinary means; small contributions from
common citizens have long been considered supporting of democracy.[17]
When such large sums become virtually essential to a politician's future, it generates a
substantive conflict of interest contributing to a fairly well documented distortion on the
nation's priorities and policies.
Beyond this, governmental officials, whether elected or not, often leave public service to
work for companies affected by legislation they helped enact or companies they used to
regulate or companies affected by legislation they helped enact. This practice is called the
"revolving door". Former legislators and regulators are accused of (a) using inside
information for their new employers or (b) compromising laws and regulations in hopes of
securing lucrative employment in the private sector. This possibility creates a conflict of
interest for all public officials whose future may depend on the Revolving door.

Finance industry and elected officials


Conflicts of interest among elected officials is part of the story behind the increase in the
percent of US corporate domestic profits captured by the finance industry depicted in that
accompanying figure.
From 1934 through 1985, the finance industry averaged 13.8% of U.S. domestic corporate
profit. Between 1986 and 1999, it averaged 23.5%. From 2000 through 2010, it averaged
32.6%. Some of this increase is doubtless due to increased efficiency from banking
consolidation and innovations in new financial products that benefit consumers. However,
if most consumers had refused to accept financial products they did not understand, e.g.,
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negative amortization loans, the finance industry would


not have been as profitable as it has been, and the Late2000s recession might have been avoided or postponed.
Stiglitz[19] noted that the Late-2000s recession was
created in part because, "Bankers acted greedily because
they had incentives and opportunities to do so". They did
this in part by innovating to make consumer financial
products like retail banking services and home mortgages
as complicated as possible to make it easy for them to
charge higher fees. Consumers who shop carefully for
financial services typically find better options than the
primary offerings of the major banks. However, few
consumers think to do that. This explains part of this
increase in financial industry profits.
However, a major portion of this increase and a driving

Finance as a percent of US
Domestic Corporate Profits Finance
includes banks, securities and
insurance. In 1932-1933, the total
U.S. domestic corporate profit was
negative. However, the financial
sector made a profit in those years,
which made its percentage negative,
below 0 and o the scale in this plot.
[18]

force behind Late-2000s recession has been the corrosive effect of money in politics,
giving legislators and the President of the U.S. a conflict of interest, because if they protect
the public, they will offend the finance industry, which contributed $1.7 billion to political
campaigns and spent $3.4 billion ($5.1 billion total) on lobbying from 1998 to 2008.[20][21]
[22]

To be conservative, suppose we attribute only the increase from 23.5% of 1986 through
1999 to the recent 32.6% average to governmental actions subject to conflicts of interest
created by the $1.7 billion in campaign contributions. That's 9% of the $3 trillion in profits
claimed by the finance industry during that period or $270 billion. This represents a return
of over $50 for each $1 invested in political campaigns and lobbying for that industry.
(This $270 billion represents almost $1,000 for every man, woman and child in the United
States.) There is hardly any place outside of politics with such a high return on investment
in such a short time.

Finance industry and economists


Economists (unlike other professions such as sociologists) do not formally subscribe to a
professional ethical code. Close to 300 economists have signed a letter urging the
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American Economic Association (the disciplines foremost professional body), to adopt


such a code. The signatories include George Akerlof, a Nobel laureate, and Christina
Romer, who headed Barack Obamas Council of Economic Advisers.[23]
This call for a code of ethics was supported by the public attention the documentary Inside
Job (winner of an Academy Award) drew to the consulting relationships of several
influential economists.[24] This documentary focused on conflicts that may arise when
economists publish results or provide public recommendation on topics that affect
industries or companies with which they have financial links. Critics of the profession
argue, for example, that it is no coincidence that financial economists, many of whom were
engaged as consultants by Wall Street firms, were opposed to regulating the financial
sector.[25]
In response to criticism that the profession not only failed to predict the 2007-2008
financial crisis but may actually have helped create it, the American Economic Association
has adopted new rules in 2012: economists will have to disclose financial ties and other
potential conflicts of interest in papers published in academic journals. Backers argue such
disclosures will help restore faith in the profession by increasing transparency which will
help in assessing economists' advice.[26]

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

There are many types of conflicts of interest such as a "pump and dump" by stockbrokers.
This is when a stockbroker who owns a security artificially inflates the price by upgrading
it or spreading rumors, and then sells the security and adds short position. They will then
downgrade the security or spread negative rumors to push the price back down. This is an
example of stock fraud. It is a conflict of interest because the stockbrokers are concealing
and manipulating information to make it misleading for the buyers. The broker may claim
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to have the "inside" information about impeding news and will urge buyers to buy the
stock quickly. Investors will buy the stock, which creates a high demand and raises the
prices.
This rise in prices can entice more people to believe the hype and then buy shares as well.
The stockbrokers will then sell their shares and stop promoting, the price will drop, and
other investors are left holding stock that is worth nothing compared to what they paid for
it. The brokers are using their knowledge and position in a way to influence and control
others and gain personally, which is morally wrong.
The Enron scandal is a major example of pump and dump. Executives participated in an
elaborate scheme, falsely reporting profits, thus inflating its stock prices, and covered up
the real numbers with questionable accounting; 29 executives sold overvalued stock for
more than a billion dollars before the company went bankrupt.[citation needed]

Media
Any media organization has a conflict of interest in discussing anything that may impact
its ability to communicate as it wants with its audience. For example, the Wikimedia
Foundation has a conflict of interest in discussing the Stop Online Piracy Act or any other
legislation or governmental action that could impact its ability to deliver content to its
intended audience.
The business model of commercial media organizations (i.e., any that accept advertising) is
selling behavior change in their audience to advertisers.[28][29][30] However, few in their
audience are aware of the conflict of interest between the profit motive and the altruistic
desire to serve the public and "give the audience what it wants".
Many major advertisers test their ads in various ways to measure the return on investment
in advertising. Advertising rates are set as a function of the size and spending habits of the
audience as measured by the Nielsen Ratings. Media action expressing this conflict of
interest is evident in the reaction of Rupert Murdoch, Chairman of News Corporation,
owner of Fox, to changes in data collection methodology adopted in 2004 by the Nielsen
Company to more accurately measure viewing habits. The results corrected a previous
overestimate of the market share of Fox. Murdoch reacted by getting leading politicians to
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denounce the Nielsen Ratings as racists. Susan Whiting, president and CEO of Nielsen
Media Research, responded by quietly sharing Nielsen's data with her leading critics. The
criticism disappeared, and Fox paid Nielsen's fees.[31] Murdoch had a conflict of interest
between the reality of his market and his finances.
Commercial media organizations lose money if they provide content that offends either
their audience or their advertisers. The substantial media consolidation that occurred since
the 1980s has reduced the alternatives available to the audience, thereby making it easier
for the ever larger companies in this increasingly oligopolistic industry to hide news and
entertainment potentially offensive to advertisers without losing audience. If the media
provide too much information on how congress spends its time, a major advertiser could
be offended and could reduce their advertising expenditures with the offending media
company; indeed, this is one of the ways the market system has determined which
companies won and which either went out of business or were purchased by others in this
media consolidation. (Advertisers don't like to feed the mouth that bites them, and often
don't. Similarly, commercial media organizations are not eager to bite the hand that feeds
them.) Advertisers have been known to fund media organizations with editorial policies
they find offensive if that media outlet provides access to a sufficiently attractive audience
segment they cannot efficiently reach otherwise.
Election years are a major boon to commercial broadcasters, because virtually all political
advertising is purchased with minimal advance planning, paying therefore the highest
rates. The commercial media have a conflict of interest in anything that could make it
easier for candidates to get elected with less money.[29]
Accompanying this trend in media consolidation has been a substantial reduction in
investigative journalism,[29] reflecting this conflict of interest between the business
objectives of the commercial media and the public's need to know what government is
doing in their name. This change has been tied to substantial changes in law and culture in
the United States. To cite only one example, researchers have tied this decline in
investigative journalism to an increased coverage of the "police blotter".[32] This has
further been tied to the fact that the United States has the highest incarceration rate in the
world.

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Beyond this, virtually all commercial media companies own substantial quantities of
copyrighted material. This gives them an inherent conflict of interest in any public policy
issue affecting copyrights. McChesney noted that the commercial media have lobbied
successfully for changes in copyright law that have led "to higher prices and a shrinking of
the marketplace of ideas", increasing the power and profits of the large media corporations
at public expense. One result of this is that "the people cease to have a means of clarifying
social priorities and organizing social reform".[33] A free market has a mechanism for
controlling abuses of power by media corporations: If their censorship becomes too
egregious, they lose audience, which in turn reduces their advertising rates. However, the
effectiveness of this mechanism has been substantially reduced over the past quarter
century by "the changes in the concentration and integration of the media."[34] Would the
Anti-Counterfeiting Trade Agreement have advanced to the point of generating substantial
protests without the secrecy behind which that agreement was negotiatedand would the
government attempts to sustain that secrecy have been as successful if the commercial
media had not been a primary beneficiary and had not had a conflict of interest in
suppressing discussion thereof?

Mitigation
Removal
Sometimes, people who may be perceived to have a conflict of interest resign from a
position or sell a shareholding in a venture, to eliminate the conflict of interest going
forward. For example, Lord Evans of Weardale resigned as a non-executive director of the
UK National Crime Agency after a tax-avoidance-related controversy about HSBC, where
Lord Evans was also a non-executive director. This resignation was stated to have taken
place in order to avoid the appearance of conflict of interest.[35]

"Blind trust"
A politician who owns shares in a company that may be affected by government policy may
put those shares in a blind trust with themselves or their family as the beneficiary. It is
disputed whether this really removes the conflict of interest, however.
Blind trusts may in fact obscure conflicts of interest, and for this reason it is illegal to fund
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political parties in the UK via a blind trust if the identity of the real donor is concealed.

Disclosure
Commonly, politicians and high-ranking government officials are required to disclose
financial informationassets such as stock, debts such as loans, and/or corporate
positions held, typically annually. To protect privacy (to some extent), financial figures are
often disclosed in ranges such as "$100,000 to $500,000" and "over $2,000,000". Certain
professionals are required either by rules related to their professional organization, or by
statute, to disclose any actual or potential conflicts of interest. In some instances, the
failure to provide full disclosure is a crime.
However, there is limited evidence regarding the effect of conflict of interest disclosure
despite its widespread acceptance.[36] A 2012 study published in the Journal of the
American Medical Association showed that routine disclosure of conflicts of interest by
American medical school educators to pre-clinical medical students were associated with
an increased desire among students for limitations in some industry relationships.[37]
However, there were no changes in the perceptions of students about the value of
disclosure, the influence of industry relationships on educational content, or the
instruction by faculty with relevant conflicts of interest.[38]
And, an increasing line of research suggests that disclosure can have "perverse effects" or,
at least, is not the panacea regulators often take it to be.[39]

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

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

Third-party evaluations
Consider a situation where the owner of a majority of a public companies decides to buy
out the minority shareholders and take the corporation private. What is a fair price?
Obviously it is improper (and, typically, illegal) for the majority owner to simply state a
price and then have the (majority-controlled) board of directors approve that price. What
is typically done is to hire an independent firm (a third party), well-qualified to evaluate
such matters, to calculate a "fair price", which is then voted on by the minority
shareholders.
Third-party evaluations may also be used as proof that transactions were, in fact, fair
("arm's-length"). For example, a corporation that leases an office building that is owned by
the CEO might get an independent evaluation showing what the market rate is for such
leases in the locale, to address the conflict of interest that exists between the fiduciary duty
of the CEO (to the stockholders, by getting the lowest rent possible) and the personal
interest of that CEO (to maximize the income that the CEO gets from owning that office
building by getting the highest rent possible).

Conclusion
Generally, conflicts of interests should be eliminated. Often, however, the specifics can be
controversial. Should therapists, such as psychiatrists, be allowed to have extraprofessional relations with patients, or ex-patients? Should a faculty member be allowed to
have an extra-professional relationship with a student, and should that depend on whether
the student is in a class of, or being advised by, the faculty member?
Codes of ethics help to minimize problems with conflicts of interests because they can spell
out the extent to which such conflicts should be avoided, and what the parties should do
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where such conflicts are permitted by a code of ethics (disclosure, recusal, etc.). Thus,
professionals cannot claim that they were unaware that their improper behavior was
unethical. As importantly, the threat of disciplinary action (for example, a lawyer being
disbarred) helps to minimize unacceptable conflicts or improper acts when a conflict is
unavoidable.
Since codes of ethics cannot cover all situations, some governments have established an
office of the ethics commissioner, who can be appointed by the legislature and report to the
legislature.

See also
Arm's length principle
Chinese wall
Insider trading
Judicial disqualification
Jury nullification
Moral hazard
Perverse incentive
Revolving door (politics)

References
1. ^ Lo and Field (2009). The definition originally appeared in Thompson (1993).
2. ^ a b Lessig 2011, pp. 29-32
3. ^ "1120-Individual Objectivity". Institute of Internal Auditors. Retrieved July 7, 2011.
4. ^ "Policies & Procedures of the Internal Audit Activity". City College of San
Francisco. Retrieved July 7, 2011.
5. ^ Policies regarding IRB members' industry relationships often lacking.
6. ^ "Revisiting the CommercialAcademic Interface NEJM".
7. ^ "Reconnecting the Dots Reinterpreting IndustryPhysician Relations NEJM".
8. ^ Baker, Nena (2008). The Body Toxic. North Point Press. p. 142. "cited from Lessig
2011, p. 25"
9. ^ Fisher's exact test computed using the fisher.test function in R (programming
language) returned a significance probability of 2e-13, i.e., there are 200 chances in a
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million billion of getting a table as extreme as this with the given marginals by chance
alone. In other words, it is not credible to claim that the funding source has no impact
on the outcome of this many independent studies.
10. ^ a b Lessig 2011
11. ^ Lessig 2011, pp. 2628
12. ^ Painter, Richard (2009), Getting the Government America Deserves: How Ethics
Reform Can Make a Difference, Oxford University Press 978-0-19-537871-9
13. ^ Thompson (1995)
14. ^ Kerr, Robert S. "Senator Kerr Talks about Conflict of Interest", U.S. News & World
Report, September 3, 1962, p. 86.
15. ^ Stern, Philip M. (1992). Still the Best Congress Money Can Buy. Regnery
Gatgeway. pp. 168176.
16. ^ Lessig 2011, pp. 4352, 117
17. ^ Lessig 2011, pp. 120121
18. ^ From Table 6.16 of the National Income and Product Accounts (NIPA) compiled by
the Bureau of Economic Analysis of the federal government of the United States. For
more information, see the USFinanceIndusty data set in the Ecdat package for R
(programming language) available from R-Forge.
19. ^ Stiglitz, Joseph E. (2010). Freefall: America, Free Markets, and the Shrinking of
the World Economy. Norton. pp. 56.
20. ^ Lessig 2011, p. 83
21. ^ Sachs, Jeffrey D. (2011). The Price of Civilization: Reawakening American Virtue
and Prosperity. Random House. ISBN 978-0-679-60502-7.
22. ^ Reinhart, Carmen M.; Rogoff, Kenneth S. (2009). This Time Is Different: Eight
Centuries of Financial Folly. Princeton University Press. ISBN 978-0-691-15264-6.
23. ^ Letters from 300 economists to the American Economic Association, 3 January
2011.
24. ^ "Stung by 'Inside Job,' economists pen a code of ethics", Wall Street Journal, 12
October 2011.
25. ^ "Dismal ethics, An intensifying debate about the case for a professional code of
ethics for economists", The Economist, 6 January 2011.
26. ^ "Economists set rules on ethics", Wall Street Journal, 9 January 2012.
27. ^ Mehran, Hamid. "Economics of Conflicts of Interest in Financial Institutions".

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SSRN Electronic Journal. doi:10.2139/ssrn.943447.


28. ^ Herman, Edward S.; Chomsky, Noam (1988). Manufacturing Consent: The
Political Economy of the Mass Media. Pantheon. ISBN 0-394-54926-0.
29. ^ a b c McChesney, Robert W. (2004). The Problem of the Media: U.S.
Communication Politics in the 21st Century. Monthly Review Press. ISBN 1-58367105-6.
30. ^ McCheney, Robert W. (2008). The Political Economy of the Media: Enduring
Issues, Emerging Dilemmas. Monthly Review Press. ISBN 978-1-58367-161-0.
31. ^ Bianco, Anthony; Grover, Ronald (September 20, 2004). "How Nielsen Stood Up to
Murdoch". Business Week.
32. ^ Potter, Gary W.; Kappeler, Victor E., eds. (1998). Constructing Crime: Perspectives
on Making News and Social Problems. Waveland Press. ISBN 0-88133-984-9.
Retrieved 2012-02-09.
33. ^ McChesney, Robert W. (2008). The Political Economy of the Media: Enduring
Issues, Emerging Dilemas. Monthly Review Pr. pp. 335337. ISBN 978-1-58367-1610.
34. ^ Lessig, Lawrence (2004). Free Culture. pp. 162ff. ISBN 978-1-59420-006-9.
35. ^ "Resignation of non-executive director". National Crime Agency. Retrieved 26 April
2015.
36. ^ Institute of Medicine (2009). "Conflict of Interest in Research, Education and
Practice". National Academies Press.
37. ^ "Article", Journal of the American Medical Association, 2012.
38. ^ Kim, Azalea; Lawrence Mumm; Deborah Korenstein (12/5/2012). "Routine
Conflict of Interest Disclosure by Preclinical Lecturers and Medical Students'
Attitudes Toward the Pharmaceutical and Device Industries". Journal of the
American Medical Association 308 (21): 21872189. doi:10.1001/jama.2012.25315.
Check date values in: |date=, |accessdate= (help);
39. ^ Cain, D. M.; Destksy, A. (2008). "Everyone's a little bit biased (even physicians)".
Journal of the American Medical Association 299 (24): 28932895.
doi:10.1001/jama.299.24.2893.

Further reading
Acocella, N. and Di Bartolomeo, G. and Piacquadio, P.G. [2009], Conflict of interest,
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(implicit) coalitions and Nash policy games, in: Economics Letters, 105: 303-305.
Black, William K. (2005). The Best Way to Rob a Bank Is to Own One. Austin, TX:
University of Texas Press. ISBN 0-292-72139-0.
Davis, Michael; Andrew Stark (2001). Conflict of interest in the professions. Oxford:
Oxford University Press. ISBN 0-19-512863-X.
Lessig, Lawrence (2011). Republic, Lost: How Money Corrupts Congress -- and a
Plan to Stop It. Twelve. ISBN 978-0-446-57643-7.
Lo, Bernard; Marilyn J. Field (2009). Conflict of Interest in Medical Research,
Education, and Practice. Washington DC: National Academies Press. ISBN 978-0309-13188-9.
Porter, Roger J.; Thomas E. Malone (1992). Biomedical research: collaboration and
conflict of interest. Baltimore: Johns Hopkins University Press. ISBN 0-8018-4400-2.
Thompson, Dennis (1995). Ethics in Congress: From Individual to Institutional
Corruption. Washington DC: Brookings Institution Press. ISBN 0-8157-8423-6.
Thompson, Dennis (1993). "Understanding financial conflicts of interest". New
England Journal of Medicine 329 (8): 57376.
doi:10.1056/NEJM199308193290812.

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

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