INTRODUCTION

Image: Giotto di Bondone, "Kiss of Judas," via Wikimedia Commons

Bribery, kickbacks, and other clear-cut forms of corruption are serious problems for
genuine bad apples; however, much of the problem with conflicts of interest is not
intentional corruption but unintentional bias. Bias is widespread and is a problem even
for well-meaning professionals (Cain & Detsky, 2008; Moore, Tanlu, & Bazerman,
2010). Human reasoning is easily pressed into the service of ones own interests. For
example, and as a general matter, whenever a person can reap rewards for
recommending a particular course of action, he or she is more likely to recommend that
action, even while honestly (but incorrectly) believing that he or she has acted
objectively.
Disclosure is often proposed as a solution to conflicts of interest, but research finds that
disclosure is often ineffective. Years of research on the anchoring bias (Tversky &
Kahneman, 1974) suggest that once bad advice is let out of the bag, its impact on
judgment is difficult to undo. Indeed, disclosure may even have perverse effects and can
sometimes make matters worse. For example, disclosure can make advisors feel free to
give worse (i.e., more biased) advice because advisees have been warned (Cain,
Loewenstein, & Moore, 2011). Also, disclosure can pressure advisees into satisfying
the advisors disclosed interests, because these interests are now common knowledge
and are begging to be satisfied, just as a panhandler puts pressure on passersby to
donate (Sah, Loewenstein, & Cain, 2013).
No one is arguing against transparency, but why does disclosure remain so popular as
the primary remedy for conflicts of interest? One reason is that disclosure is cheap. It

requires little substantive change. For those with financial conflicts of interest, disclosing
that they are on the gravy train is preferable to getting off the train.
Often, the only reliable way to remove the pernicious effects of conflicts of interest is to
remove the conflicts (although, in some instances, the costs of removing the COI may
outweigh the pernicious effect of allowing it to continue). The New Yorkers James
Surowiecki (2005) put it this way, Transparency is well and good, but accuracy and
objectivity are even better. Wall Street doesnt have to keep confessing its sins. It just
has to stop committing them.