Conflict of Interest
CONFLICT OF INTEREST•••
In a conflict of interest, one's obligations to a particular person or group conflict with one's self-interest. A physician, for example, is ordinarily obligated to provide his or her patients with only the care that is reasonable and medically necessary, even if the physician may earn more money through unnecessary interventions. Conflicts of interest should be distinguished from conflicts of obligation, in which one's obligations to one person or group conflict with one's obligations to some other person or group. The latter need not necessarily involve any threat to the agent's own interests. For example, a physician is normally obligated to keep patients' medical problems confidential; however, when a patient poses a danger to others (by transmitting AIDS to a spouse, for example) the physician may have an obligation to protect that third party by violating the confidentiality that would otherwise be owed to the patient. In a healthcare context, conflicts of interest can arise for individual providers, such as physicians, dentists, nurses, or physical therapists, or for institutions, such as hospitals, health maintenance organizations (HMOs), insurers, or pharmaceutical companies.
Conflicts of interest can be found in any human endeavor; indeed, the clash between self-interest and altruism lies at the heart of morality. However, conflicts of interest in healthcare are especially serious because of the patient's vulnerability. Illness can impair a patient physically, emotionally, and rationally. To secure treatment, patients must expose physical and emotional intimacies normally reserved for loved ones, and they frequently face further risks from invasive diagnostic and therapeutic technologies. Patients usually have no choice but to submit to such exposure and risk, because typically they lack the knowledge and skill to identify and treat the illness or to ascertain whether care is being rendered appropriately. This vulnerability creates ample opportunities for providers to exploit patients for personal gain. Physicians or dentists might recommend costly, unnecessary care, or an insurer or an HMO might attempt to lure subscribers by promising more than it can deliver.
Accordingly, providers such as physicians and dentists are often regarded as fiduciaries, in both a moral and a legal sense. Fiduciaries hold beneficiaries' (the patients') interests in trust and are obligated to promote the latter's interests, even above their own hospitals, insurance companies and HMOs. Nursing and allied health professions are not ordinarily considered fiduciaries in the legal sense, but they do share a strong ethic of dedication to patients' interests.
For many years, a serious commitment to professionalism and an effacement of self-interest seemed sufficient to manage conflicts of interest. The traditional fee-for-service system admittedly encouraged unnecessary services, but prior to the mid-twentieth century providers had relatively few interventions to offer, beyond their own care and concern. As technologies emerged, a relative shortage of providers meant that each had more than enough to do. Furthermore, in the long-term relationships that characterized most healthcare, providers had to live with the consequences of their decisions, right alongside their patients. Exploitive or abusive practices thus carried strong disincentives.
Since about the mid-1960s, however, healthcare has become high cost and big business. Providers now face a plethora of conflicts of interest, ranging from the traditional but much-exacerbated conflicts implicit in fee-for-service to powerful pressures to cut the cost of care by doing less for patients.
Conflicts of Interest for Physicians
For physicians, conflicts of interest can arise in two distinct realms: the clinical setting, where medical care is primarily designed to help the patient, and the research setting, where physicians seek scientific knowledge that will only sometimes benefit the patient or research subject.
THE CLINICAL SETTING. In the clinical setting, a number of factors could encourage a physician to alter a patient's optimal care, whether it be to secure a personal gain or to avoid a loss. Conflicts can be posed by third-party payers, institutional healthcare providers, private industry, the legal system, and physician investment.
Third-party payers. Traditional fee-for-service reimbursement encourages physicians to deliver as many services as possible and, in a maneuver called "unbundling, " to break down each service into as many separately billable small interventions as possible. Maximizing income may thus mean excessive care, which in turn threatens needless inconvenience, expense, and iatrogenic injury for patients.
Partly because fee-for-service is an inflationary reimbursement system, healthcare costs grew at an alarming rate from the mid-1960s through the early 1990s. In response, those who pay directly for healthcare—government, businesses, and insurers—placed powerful pressures on physicians to do less for their patients. Payers sometimes offered bonuses to physicians to discharge patients earlier than normal, and they often refused to pay for various tests and treatments unless they were performed in an outpatient setting. Through extensive utilization review (UR), many payers reimbursed only hospitalizations or medical interventions that met their criteria of medical necessity. Physicians therefore spent large amounts of time (usually uncompensated) justifying their plans of care to payers in order to secure reimbursement.
As a supplement, or sometimes an alternative, to such controls, many health plans instituted financial incentives. Capitation systems, for instance, attempt to save money by paying a single fee for a large unit of care, thereby creating an incentive to avoid rendering care beyond the budgeted fee. Medicare inaugurated its diagnosis related group (DRG) system in the early 1980s, paying hospitals a set amount for a specific episode of illness, based on such factors as the patient's diagnosis, age, and coexisting illnesses.
HMOs, in a broader capitation concept, began to provide all necessary healthcare for each subscriber in exchange for a single annual premium. In order to ensure that their physicians delivered services within the year's budget, most HMOs, in turn, applied downstream financial incentives to their physicians, often withholding 20 percent or more of the physician's salary or fees until the end of the year, when they would be paid (or not) depending on the HMO's financial health. HMOs also have commonly set aside a special fund for diagnostic tests, consultants, and hospitalization. Primary-care physicians, acting as gatekeepers whose permission is required for the patient to gain access to these services, would share any surplus funds (or debts) remaining at the end of the year. Other HMOs placed physicians under subcapitation systems in which the physician provided a range of services for a set fee per patient. These arrangements could make a substantial difference in a physician's year-end income, thereby providing a powerful incentive for physicians to economize on the level of care they provide or authorize for patients.
The mid-1990s saw a brief reprieve from healthcare cost inflation, which, combined with a booming economy and widespread horror stories about the abuses of managed care, prompted most health plans to scale back these cost controls and incentive arrangements. However, as healthcare costs began rising rapidly again in the early twenty-first century, health plans and providers again struggled to keep them in check through a variety of mechanisms.
Although these mechanisms have evolved, certain features have remained constant. Ultimately, all payment systems create conflicts of interest by creating an incentive to provide more of the services that are most profitably reimbursed, and less of those that generate less income. However, the challenge is markedly exacerbated in the healthcare setting. Every medical decision is a spending decision, yet payers ordinarily cannot control their costs by directly dictating what care the physician will and will not provide. To do so would be to practice medicine in the physician's stead. Rather, payers attempt to influence physicians, who control up to 80 percent of healthcare costs through their power of prescription and their professional influence over patients. That influence is almost always gained by placing physicians' personal interests in peril as they are rewarded or penalized for fiscally (im)prudent healthcare decisions.
Institutional providers. Institutional healthcare providers, such as hospitals and clinics, can establish incentives to encourage physicians to do more (or less), depending on the institution's economic status (proprietary or charitable) and the patient's financial status (well-insured or not). A for-profit walk-in clinic, for instance, makes its money through the tests and treatments its physician-employees order. Hence, high-profit physicians may be praised and invited to share profits, or even to own a share of the business, while low-profit physicians may receive administrative warnings or lose their jobs if they do not improve. In other cases, physicians and proprietary hospitals may enter into joint ventures to share both the profits and risks of running the facility.
Whether proprietary or charitable, all institutional providers need to contain costs. Monthly printouts comparing the costs of each physician's care may be shared with medical staff in an attempt to shame the high spenders into delivering more conservative care. And those whose patients consistently leave too many unpaid bills may lose their staff privileges in a strategy called economic credentialing.
Such incentives systematically place physicians in conflicts of interest. The potential loss of income, peer esteem, staff privileges, or even one's job creates powerful pressures to align one's judgment with the institution's interests, even at some cost to patients' interests.
Private industry. Many medical drugs and devices are sold only with the prescription of a licensed physician and, notwithstanding some notable exceptions, are often not readily advertised to the general public. Therefore, manufacturers' marketing typically targets physicians. Because physicians tend to be busy people with substantial incomes, pharmaceutical companies can go to great lengths to get their attention. Promotions over the years have included allexpense-paid trips to exotic locations, ostensibly to hear a lecture on a new product; cash payments to physicians who agree to read literature describing nonapproved uses of a drug; "frequent prescriber" programs that award frequent-flyer points with the physician's preferred airline for every prescription of the company's drug; lavish parties and tickets to entertainment events; costly gifts such as luggage and decorative arts; inexpensive gifts such as pens and notepads; and subsidies for local educational colloquiums and travel to professional meetings.
The conflicts of interest are obvious. Such gifts reward physicians for prescribing drugs and devices whether or not they are necessary, and whether or not that particular product choice is most appropriate and least costly for the patient. Acceptance of gifts can engender a sense of personal gratitude and indebtedness that can put corporate loyalty above patients' interests. Furthermore, patients ultimately bear the costs of such promotions and gifts, whether through higher costs of the drugs and devices, higher costs for health insurance, or by forgoing higher salaries or fringe benefits because their employers are paying higher insurance premiums.
Legal system. Parallel to the escalation of healthcare costs, both the frequency and cost of medical malpractice litigation have increased. Physicians fearful of lawsuits may order extra diagnostic tests and more potent therapies to ensure that no one can accuse them of missing a diagnosis or doing too little for their patients. The cost of such "defensive medicine" has been estimated at up to 15 percent of the total cost of physicians' services. When physicians order procedures that are not medically necessary in order to protect their actual or imagined legal interests, they expose patients to extra inconvenience and iatrogenesis—at the patient's expense and usually without the patient's knowledge. It is a clear conflict of interest.
Physician investment. In some cases physicians create their own conflicts of interest by investing in facilities to which they refer their patients. Examples include freestanding diagnostic imaging centers, home health services, clinical laboratories, and physical therapy services. Although such investments can enhance the availability and quality of healthcare facilities in a particular locale, the physician owners of such facilities nevertheless have an incentive to refer patients there, even when the care is unnecessary, costly, or of poor quality. In the 1990s a series of federal laws and administrative regulations forbade many, but not all, of these arrangements.
The conflicts embedded in investments are not limited to freestanding facilities. One study found that physicians who owned radiographic equipment in their own offices tended to use it four times more often (generating costs seven times higher) than physicians who referred patients to independent radiologists for those services.
THE RESEARCH SETTING. The research context sometimes involves testing new treatments on ill patients, but it can also involve healthy volunteers when researchers look for toxicities of the very newest drugs. In many instances there is no expectation that participation in research will benefit the patient at all, whether because the subject is a normal control subject, because many people in the study will receive a placebo instead of active medication, or because the patient is too hopelessly ill to benefit from any treatment. Whatever the research protocol, however, the physician must respect the research subject's rights and interests.
Physicians can enjoy many personal rewards for successful research. Private companies such as drug manufacturers commonly sponsor research, in some cases paying the physician-investigator a fixed fee of several thousand dollars per person enrolled. The sum is intended to cover the costs of each subject's participation in the study, but in fact can result in a considerable surplus of money pocketed by the investigator. The more patients one enters in a study, the higher one's rewards, and an overzealous recruiter may be tempted to understate the inconvenience, discomfort, or risk that research participation may present for the patient, or to compromise the integrity of the study by signing up patients who are not truly eligible for the protocol.
Research that is funded by the government or other nonprofit sources can mitigate some, but not all, of the conflicts of privately sponsored research. Physician researchers still have strong incentives to gain the prestige, larger laboratory, increased technical support, academic promotion, science awards, and institutional power that come with securing grants and producing publishable research. In addition, some research projects have paid finders' fees to those who recruit patients for studies. As a result, investigators have powerful incentives to recruit patients into studies without necessarily taking full account of the patients' best interests.
Physicians can also create their own conflicts of interest. Sometimes physicians invest in corporations that are sponsoring their research, or they may serve as the corporations' paid spokespersons when research is completed. They may earn money from producing a valuable commodity, such as a cell line, by using tissues that patients either knowingly or unwittingly donate (see Moore v. Regents of the University of California ). In a few cases physicians performing for-profit scientific research have charged subjects a fee to participate. Although such entrepreneurial research is controversial, the con.icts embedded in for-pro.t research are not necessarily worse than those found throughout the high-pressure world of medical research.
Other Health Professionals
Whereas physicians and dentists often are private practitioners or independent contractors, nurses, physical therapists, dietitians, and allied health professionals usually are employees of hospitals, HMOs, clinics, home health services, or public health agencies. These professionals' conflicts of interest most often arise where their contractual duty to administer the therapies ordered by a physician or to follow established institutional rules clash with their own beliefs about what is best for a patient. Such health professionals may suffer personal retaliation if they violate institutional mandates in order to do what they deem best for the patient.
In these cases the problem begins with a conflict of obligation in which one's obligations to the institution do not match one's obligations to the patient. The conflict of interest arises as one faces a personal price, perhaps in the form of retaliation, for favoring the patient over the institution. Thus, though conflicts of obligation are not the same thing as conflicts of interest, in these cases they are connected. For example, in one instance a nurse was fired for informing a patient about alternative cancer treatments (the dismissal was later vacated on procedural grounds (see Tumav. Board of Nursing ). In another case a nurse was discharged for refusing to dialyse a patient for whom she believed the treatment was pointless and inhumane (see Warthen v. Toms River Community Memorial Hospital ) . Such clashes between administrative requirements and one's professional judgment are probably the greatest, though not the sole, source of conflicts for allied health professions.
The interests of institutions and their administrators, like those of individual professionals, often mesh with patients' best interests. Ideally, in a competitive market where consumers seek quality and value for their dollars, a healthcare institution will prosper by serving patients well. However, such a happy match does not always occur, partly because ill patients are often not equipped to appraise and challenge the quality of their care, and because generous insurance policies insulate many patients from caring about the costs of care. Accordingly, the financial best interests of a hospital might prompt excessive charges, inadequate staffing and equipment, bloated advertising, or the premature "dumping" of uninsured patients into public institutions. Similarly, a pharmaceutical company may be financially rewarded for producing and marketing new drugs as early and as vigorously as possible, even if the drugs and their production methods are not as refined as they could be. As a result, some drugs may have more side effects, or cost more, than is necessary.
Managing Conflicts of Interest
The existence of a conflict of interest does not mean that a provider has done anything wrong, or has mistreated or will mistreat any patient. It means only that while there is a mandate to promote the patient's (or someone else's) best interest, there are self-interested reasons to do otherwise. To be tempted is not necessarily to succumb.
Providers cannot escape conflicts of interest. If they are paid according to how many services they provide, their interest is to provide more services, with the concomitant dangers of excessive interventions, costs, and risks of iatrogenesis. If they are paid according to how many patients they care for, their financial advantage lies in taking on too many patients. Physicians who are strictly on a salary have an adverse incentive to minimize their own labor, even if they cannot increase their income, by seeing fewer and less-needy patients.
Formal protections can help. Regulatory agencies, such as state boards of medicine, nursing, and dentistry and the Joint Commission on Accreditation of Healthcare Organizations, can establish standards of performance for individuals and institutions, and the legal system can redress individual cases where providers' self-interest injures patients. Fiduciary law, for example, requires a fiduciary in a conflict of interest to disclose that conflict fully to the beneficiary (here, the patient) and also empowers the latter to determine how the conflict should be resolved (see Fulton National Bank v. Tate ). Patients thus can have common-law remedies for breach of fiduciary duty, lack of informed consent, and other causes.
Although regulation and litigation can thus provide important protections, they cannot supplant personal integrity. The prospective employee of an HMO, a hospital, or other institutional provider should check carefully into its incentive structure and refuse to join any organization that links financial consequences too closely to individual patient care decisions. The physician in private practice can refuse to accept costly gifts from drug company representatives. Those who would invest in ancillary facilities within or outside of their offices can ensure that there is a genuine need for the facility, and they can empower their patients with information and freedom to make their own choices regarding their ancillary healthcare providers. Researchers can refrain from investing in corporations sponsoring their research, and they can work with other research-sponsoring institutions to minimize conflicts. Where private industry pays universitybased physicians a large per-patient fee, for example, that fee can be put into a general fund to benefit the institution after research costs are paid. Nurses and allied health professionals can work individually or collectively for contract terms that protect their right to exercise professional integrity.
Institutions must ensure that they do not create inordinate conflicts of interest for the professionals they employ. HMOs, for instance, should refrain from instituting incentive systems that unduly influence individual patient-care decisions. They and other payers should likewise disclose to current and potential subscribers any such incentives or limits on care. Informed subscribers are better empowered to guard their own interests. Institutions can also ameliorate their conflicts by pursuing ongoing quality improvement as a way of promoting quality care while economizing on costs. A focus on the success that comes from long-term quality should replace any preoccupation with short-term profitability.
Conflicts of interest affect providers pervasively, powerfully, and personally. Where fiduciary duty once consisted mainly of refraining from vulgar exploitation, the obligation to place the patient's interests before one's own can no longer be an unlimited obligation. Providers must exercise great care to avoid conflicts where possible, and to uphold a strong fiduciary presumption to favor patients' interests over their own. However, they cannot be expected to commit professional self-sacrifice in what may be a futile unilateral attempt to battle economic forces beyond their control. Therefore, one of the most important and difficult moral challenges of medicine's new economics is to consider not just what providers owe their patients but also the limits of those obligations. As healthcare systems continue to evolve, one important remedy will be to provide patients with greater choice and control over the content of their healthcare benefits, and thereby with more power to make their own trade-offs between the cost and quality of care. This will alleviate at least some of the conflicts of interest that arise as providers attempt to make these trade-offs on their patients' behalf.
e. haavi morreim (1995)
revised by author
SEE ALSO: Commercialism in Scientific Research; Divided Loyalties in Mental Healthcare; Healthcare Resources, Allocation of; Just Wages and Salaries; Managed Care; Maternal Fetal Relationship; Nursing Ethics; Pharmaceutical Industry; Pharmaceutics, Issues in Prescribing; Profession and Professional Ethics; Surrogate Decision-Making; Whistle blowing in Healthcare
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Conflict of Interest
Conflict of Interest
How can there be assurance that a government official, businessman, or professional person will properly perform his duty to the public, to his employer, or to his client when that duty affects his own private economic interests? In its narrowest sense, this is the key question of conflict of interest. The question rapidly broadens when the range of primary interests attached to duty are considered in relation to the dazzling variety of property and other interests potentially in conflict. In modern industrial society, where services abound, where government and business intersect in countless ways, the nature of conflicting interests is most complex. Government employees retain private economic interests that may be benefited by official actions. Officers of one corporation may own stock of another, whose value may be affected by actions of the first.
An ethical crisis in the public life of the United States after World War II was expressed in concern over conflicts of interest for upper-echelon civil servants. The matter was isolated and widely recognized as a moral and legal issue about 1950, and has been pondered and studied ever since. Conflict-of-interest legislation and regulations eventually were adopted for the United States government and a number of states and municipalities and by governments of other nations. Every sign suggests that this movement of concern and control will become more widespread in the world and will apply beyond the executive branch of government.
Since its control involves preventive law, conflict of interest must be distinguished from other kinds of criminal behavior, such as theft or bribery. A government official may be found guilty of bribery if he agrees to act in response to money or favors. The first general federal bribery statute in the United States, dating from 1853, declares that a payment to influence official action is a clear abuse and declares it a criminal act. By contrast, the term “conflict of interest” implies the need for preventive action to mark the kinds of situations individuals should avoid. “Regulation of conflicts of interest seeks to prevent situations of temptations from arising” (Association of the Bar … 1960, pp. 3–4). It is regulation of potential harm, of evil before it occurs. The added subtlety of preventive law gives the control of conflicts of interest unusual delicacy.
In the nineteenth century, if an official resolved a clash between his personal advantage and public duty in favor of personal advantage, it was called corruption. But since then “corruption” has come to be associated with only the most odious and obvious forms of venality and self-service, and the term “conflict of interests” was coined to cover less blatant cases. The leading study on the subject limited itself to two interests: “… one is the interest of the government official (and of the public) in the proper administration of his office; the other is the official's interest in his private economic affairs. A conflict of interest exists whenever these two interests clash, or appear to clash” (Association of the Bar … 1960, p. 3). The present article, accepting this usage, will review the significant recent developments in the framing of a system of relevant, up-to-date restraints against conflicts of interest in federal service in the United States. These limitations are being widely copied or adapted in other countries and by state and local governments in the United States. After surveying conflicts of interests in government service, this article will touch on other arenas in which such problems are now identified.
The legal profession, far more than any other professional group or social-science discipline, has scrutinized the problem of government officials' conflicts of interest. Leaders of the bar, as well as their clients in business and in other professions, have long counted public service as part of a viable career. Conscientious effort to disentangle public duty from private opportunity could not always shield such men from criticism. After World War II, American law on the subject of conflict of interest was so antiquated that little protection was afforded either the public or the large numbers of people entering and leaving public service, and many individuals were discouraged from taking jobs in the federal government. This was the chief impetus that led the New York City Bar Association to form, in 1956, a special committee, which has developed a corpus of knowledge on the subject (Association of the Bar … 1960, pp. vii-xii; Perkins 1963, p. 1114; Manning 1964).
Several other factors have been behind a trend toward deepening attention to conflicts of interest in the public service: (1) the growing reliance of government on the skills of individuals in private life, notably in the fields of science and technology; (2) the mobility of individuals in industry, business, and the professions, in and out of government employment; (3) the intricacy and extent of government regulatory, promotional, and financially supportive programs affecting private sectors of the economy; (4) the expansion in peacetime of government as a customer of business; (5) growing stock ownership among individuals, who have a resulting stake in the private economy (Perkins 1963, p. 1114); (6) the emergence of government during the past decade as a major source of wealth. “The Wealth of more and more Americans depends upon a relationship to government. Increasingly, Americans live on government largess …” (Reich 1964, p. 733). These accelerating changes have multiplied the number of potential conflicts of interests. The newness of these situations has led to subtleties difficult to understand, explain, or curb.
Legal analysis has succeeded in isolating some of the peculiar problems of conflict of interest in modern society. Some relevant skills in coping with the issue were noted by the Harvard Law Review in this way: “… behavior profitable but in itself innocent may be outlawed because it tempts abuse of power or allows misuse of information and advantages gained through government service. The resulting tension taxes the lawyer's faculty for inference drawing, for weighing competing interests, and for ingenuity in framing legal solutions” (”With the Editors …” 1963, p. vii). Lawyers have analyzed the aims of the conflict-of-interest statutes of the past and willingly specified the ethical norms upon which new rules of law should be based. Five principles have been established as fundamental to prudent conflict-of-interest regulations at the federal level in the United States (Perkins 1963, pp. 1118–1122).
The first moral imperative to be protected by conflict-of-interest rules is that against self-dealing. A public official may not participate in government action where that specific action might significantly affect his private economic interests.
A second principle, less distinct than the concept of self-dealing, stops a public official from accepting transfers of economic value from private sources. It is believed that gifts should be barred, even though bribery is absent, on the assumption that a danger of subservience remains present. A government official acting in his official capacity must be free of the relationship created when an individual accepts gifts and other valuable transfers from private sources (Perkins 1963, pp. 1119–1120).
Third, a public official should not ordinarily be allowed to drop his official role to help private individuals or organizations in their dealings with the government. This is an especially forceful conflict-of-interest principle when compensation is received for the assistance.
Fourth, the same principle also applies to a former public official in connection with his past official responsibilities. This principle is usually cushioned by a limitation of time, although objection has been made that any definite limit, say two years, is both artificial and ineffective. Nevertheless, the principle remains that a former official should not be able to trade against the government with influence gained from past association or friendship in his official capacity (Perkins 1963, pp. 1120–1121).
The fifth conflict-of-interest principle holds that a public official should not be allowed to use for private gain confidential information acquired in his official capacity. There may be no specific injury to the government, but it is argued that a wrong occurs in the private use of information that belongs to the public (Perkins 1963, pp. 1121–1122).
In 1962, following several years of study, education, and agitation, the federal code and regulations governing conflicts of interest were overhauled to express these principles better. The new act applies to all officers and employees “in the executive, legislative, or judicial branch of the Government, or in any agency of the United States” (Public Law 87–849, 76 Stat. 1121). Conflict-of-interest principles are applied to all forms of modern decisions: “… any proceeding, application, request for a ruling or other determination, contract, claim, controversy, charge, accusation, arrest, or other particular matter in which the United States is a party or has a direct and substantial interest.” The official is culpable if he “participates personally and substantially” in any of these transactions “through decision, approval, disapproval, recommendation, the rendering of advice, investigation, or otherwise.” The 1962 act thus embodies a creative effort to make the chief conflict-of-interest principles applicable to today's circumstances.
Criminal sanctions imposed by statute play a limited role in protecting conflict-of-interest principles. Bayless Manning has named many other means of conflict-of-interest regulation in the federal government:
The Senate, in its conduct of confirmation proceedings, has frequently imposed special conflict of interest standards not found in the statutes. Congress may also bring strong pressures to bear through its investigatory process. Many relationships that might be legally acceptable, and not considered morally reprehensible conflicts of interest, may be politically very sensitive and politically unacceptable. And, finally, many agencies of the government have developed their own operating rules and their own internal regulations for dealing with the problem of ethics as it affects their own operations. No one called upon to consider a question of conflict of interest in the federal service will have done his job unless he has weighed and investigated, in addition to the statutes in the field, the applicable administrative regulations, likely Congressional response, and the general political environment. (Manning 1964, pp. 10–11)
The American press almost daily reports incidents that bring wide public disapproval but where neither the statutes nor informal sanctions have been effective in preventing a conflict of interest in the federal service. Resignations occur, but public criticism is not always effective. This becomes comprehensible when it is recognized that the goal of avoiding corruption is balanced against other, competing goals, particularly employee recruitment and morale. This is a typical statement of the view: “In drafting a conflict-of-interests statute it is easy to become overzealous and to forget the impact which a broad restriction may have. A well-drawn statute should prohibit conflicts of interests which are most damaging to the standards of good government and yet not prohibit so much that competent people will be discouraged from serving” (Harvard Student Legislative Research Bureau 1964, p. 69).
This view has been carried further by some critics of conflict-of-interest regulation. In particular, a proposal to establish a commission on ethics in government was criticized as irrelevant to the problem, which is seen fundamentally as a question of the status of the government employee in the community (Davis 1954, p. 915). Thurman Arnold said this: “Ethics in any group arise out of a sense of tradition and pride in his particular calling. Humiliate that group. Subject them to constant restriction and supervision. Refuse to trust them in any of their activities in or out of Government and you destroy any possibility of an effective ethical code” (U.S. Congress … 1951, p. 372).
Altogether, several criticisms may be made of the approach to conflict of interest of the Bar Association, the 1962 act, and the federal regulations. The code-of-ethics approach has been mentioned. Another view is that in a democratic society all government employees should be required to disclose their personal assets and economic interests to the public or to Congress (Ross D. Davis in Chicago, University of … 1961, pp. 83–84). More often this suggestion is applied only to elected officials, on grounds that voters are the appropriate judges of improper conflicts of interests. But such publicity would unduly violate the private affairs of all the employees. Such a requirement for elected officials is more pertinent, but whether voters function effectively as judges of impropriety is open to question.
Another view is that the kinds of conflicts of interest described here are only a small part of the pressure and cross fire public officials feel. Against this, a concept of the “public interest” is put forward as the value to be served, and words like “neutral,” “objective,” and “disinterested” describe the desired stance. Davis remarked that “in an ideal state the only influence brought to bear upon a public official should of course be his enlightened consideration of the public interest as defined by law” (Chicago, University of … 1961, p. 81). Yet the acceptance of interest groups at all levels and branches of government as legitimate registers considerable faith in the capacity of public officials to be disinterested. Of course, gross forms of pressure have been banned, and disclosure of lobbying and campaign expenses is required. The Bar Association report (Association of the Bar … 1961, pp. 20–22) distinguishes conflicts of policy from the problem of personal conflicts of interest. The view is that when an organization seeks to persuade, even though the persuasiveness is backed by reprisal, the acts are political. Accordingly, conflicts of policy are altogether proper and desirable.
Actually, the Bar Association approach recognizes that public officials cannot put aside longtime associations. The legal realists of a past generation saw that emotional nuances and environmental conditioning inevitably affect the approach men take to the decisions they face. Of course, values such as affection or rectitude color official decisions. Indeed, nepotism is banned in government and other institutions, as a kind of conflict of interest. But the outlook of officials cannot and should not be neutralized or sterilized, and the conflict-of-interest laws can never control more than a small part of the total possible relationships that bear on those who make decisions. From the standpoint of the individual, conflicts of interest, under this usage, are a small part of political and personal ethics; from the standpoint of public affairs, they are a part of corruption and of the factors entering into the formation of public policy.
Setting tolerable limits to conflicts of interest also troubles many nongovernmental institutions. Corporation officials may have conflicting economic interests with competing companies. Law firms and advertising agencies may have client relationships that impinge on other loyalties. Philanthropic foundations and universities encounter conflicts of interest. Accountants, physicians, scientists, and athletes are among those whose conflicts have been reported.
Every group develops informal and unwritten codes of conduct, and it is only after a violation of such a standard that discussion begins to shape more precise rules. Then problems essentially like those in government come to the surface. Consider this definition of the attributes of conflicts in a corporation: “A conflict of interest exists where an employee has a private financial interest or other relationship outside the company that has the potentiality of being antagonistic to the best interests of the company, even though it may result in no financial loss to the company and irrespective of the motives of the individual concerned” (Adam 1963, pp. 12–13). The discovery and isolation of employee relationships that could bring potential harm raise delicate questions of supervision. These questions are so difficult that most private organizations continue to cope with them through informal methods rather than by formal rules and procedures.
Social scientists have yet to make studies designed to answer a number of key assumptions of popular writers on the subject. Is morale insurance against corruption? How may concepts such as morale and corruption best be defined and measured? Are salary and tenure protection against employee conflicts of interest? To the extent that conflicts of interest can be distinguished from bribery and from conflicts of policy, what circumstances nourish them? The effectiveness of statutory and other regulatory controls also needs to be measured. The effect of conflict-of-interest restrictions on the recruitment of public officials and on the entry of persons into particular businesses should also be ascertained with exactitude. Such knowledge is needed to understand the subject, and it will also be pertinent to future efforts to delineate and regulate conflicts of interest.
If the factors giving rise to these problems have universality, then developed societies are no more conflict-of-interest prone than developing ones. (This is another area where research is much needed.) Yet if the subject is not limited either to economic conflicts or to the public sector, conflicts of interest appear to be inevitable by-products of complex societies, of the development of sophisticated relationships among business, professional, and governmental institutions.
Clement E. Vose
Adam, Paul J. 1963 What Is a Conflict of Interest? Management Dilemma. Challenge 11:11–14.
Appleby, Paul H. 1952 Morality and Administration in Democratic Government. Baton Rouge: Louisiana State Univ. Press.
Association of the Bar of the City of New York, Special Committee on the Federal Conflict of Interest Laws 1960 Conflict of Interest and Federal Service. Cambridge, Mass.: Harvard Univ. Press.
California, University of, Bureau of Public Administration 1961 Conflict of Interest in the Federal Government: A Bibliography. Compiled by Dorothy Campbell Tompkins. Berkeley: Univ. of California Press.
Chicago, University of, Law school 1961 Conference on Conflict of Interest, February 20, 1961. Chicago: The School.
Conflict of Interests: State Government Employees. 1961 Virginia Law Review 47:1034–1076.
Conflicts of Interest of State Legislators. 1963 Harvard Law Review 76:1209–1232.
Congress Amends Conflict-of-interest Laws. 1962 Congressional Quarterly Almanac 18:385–389.
Davis, Ross D. 1954 The Federal Conflict of Interest Laws. Columbia Law Review 54:893–915.
Graham, George A. 1952 Morality in American Politics. New York: Random House.
Harvard Student Legislative Research Bureau 1964 A Conflict-of-interest Act. Harvard Journal on Legislation 1:68–85.
Lasswell, Harold D. 1930 Bribery. Volume 2, pages 690–692 in Encyclopaedia of the Social Sciences. New York: Macmillan.
McElwain, Edwin; and Vorenberg, James 1952 The Federal Conflict of Interest Statutes. Harvard Law Review 65:955–983.
Manning, Bayless 1964 Federal Conflict of Interest Law. Cambridge, Mass.: Harvard Univ. Press.
Noel-Baker, Francis 1961/1962 “The Grey Zone”: The Problem of Business Affiliations of Members of Parliament. Parliamentary Affairs 15:87–93.
Odegard, Peter H. 1931 Corruption, Political: United States. Volume 4, pages 452–455 in Encyclopaedia of the Social Sciences. New York: Macmillan.
Perkins, Roswell B. 1963 The New Federal Conflict-of-interest Law. Harvard Law Review 76:1113–1169.
Reich, Charles A. 1964 The New Property. Yale Law Journal 73:733–787.
Senturia, Joseph J. 1931 Corruption, Political: General. Volume 4, pages 448–452 in Encyclopaedia of the Social Sciences. New York: Macmillan.
Unchanging Rules in Changing Times: The Canons of Ethics and Intra-firm Conflicts of Interest. 1964 Yale Law Journal 73:1058–1079.
U.S. Congress, Senate, Committee on Labor and Public Welfare 1951 Establishment of a Commission on Ethics in Government: Hearings Before a Subcommitee to Study Senate Concurrent Resolution 21 of the Committee on Labor and Public Welfare. 82d Congress, 1st Session. Washington: Government Printing Office.
Wilson, H. Hubert 1951 Congress: Corruption and Compromise. New York: Rinehart.
With the Editors … . 1963 Harvard Law Review 76, no. 6:vii.
Conflict of Interest
CONFLICT OF INTEREST
A conflict of interest is a situation in which some person (whether an individual or corporate body) stands in a certain relation to one or more decisions. Often such persons are engineers, scientists, or organizations of engineers or scientists. On the standard view, a person has a conflict of interest if, and only if, that person (a) is in a relationship with another requiring the exercise of judgment in the other's behalf and (b) has a (special) interest tending to interfere with the proper exercise of such judgment.
Key Features of Conflict of Interest
The crucial terms here are relationship, judgment, interest, and proper exercise. Relationship is quite general, including any connection between persons or organizations justifying one's reliance on the other for a certain purpose. A relationship may be formal (as is that between the Academy of Science and the government it advises) or informal (as when an engineer responds to a neighbor's question about the best bicycle to buy). A relationship can last years (as the relationship between colleagues in a lab often does) or only a minute (as when one answers a stranger's question at a talk). The relationship required must, however, be fiduciary, that is, involve one person justifiably trusting (or, at least, being entitled to trust) another—to exercise judgment in the other's service.
Judgment refers to 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, ministerial, mechanical, or something a technician could do; they have (something like) an algorithm. The decision maker contributes nothing special. Any difference between the decision maker's decision and that of someone equally well trained would mean that (at least) one of them erred (something easily shown by examining what they did). Ordinary math problems are routine in this way; so is the taking of readings from a gauge.
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 obviously wrong. Over time, observers should be able to tell that some decision makers are better than others (indeed, that some are incompetent). But, except in extraordinary circumstances, an observer will not be able to do that decision by decision; nor will an observer be able to explain differences in outcomes in individual decisions merely by error—or even be able to establish decisively that one decision maker's judgment is better than another's in this or that case. Even if one decision maker is successful this time when another is not, the difference might as easily be the result of dumb luck as insight. Good judgment lasts. What makes a good scientist or a good engineer is good scientific or engineering judgment. Judgment is less general than expertise. Some of what is expected from experts is not judgment but merely special knowledge or routine application of a special skill.
Not every relationship, not even every relationship of trust or responsibility, requires judgment. A person may, for example, be asked to keep safe—but not look at—important lab notebooks until the owner returns. That person has been charged with a great trust as a fiduciary upon whom the owner may be relying to protect an important discovery. But the person need not exercise judgment to carry out the task. The task is entirely routine, however much the ability to behave as required is strained by a desire to peek. The notebooks need only be placed in a desk and left there until the owner returns and asks for them. The holder of the notebooks is a mere trustee, lacking the permissible options that make conflict of interest possible. Not all temptations to misbehave constitute conflict of interest in the strict sense.
Interest refers to any influence, loyalty, concern, emotion, or other feature of a situation tending to make a person's judgment (in that situation) less reliable than it would normally be, without rendering that person incompetent. Financial interests and family connections are the most common sources of conflict of interest, but love, prior statements, gratitude, and other subjective tugs on judgment can also be interests. For example, a biologist hired by a drug company to test some drug for efficacy has an interest (in the relevant sense) if the drug's inventor is a friend or enemy (just as if the biologist were paid with stock in the drug company).
What constitutes proper exercise of judgment is a social fact, that is, something decided by what people ordinarily expect, what the person exercising judgment or the group to which that person belongs invites others to expect, what that person has expressly contracted to do, and what various laws, professional codes, or other regulations require. Because what is proper exercise of judgment is so constituted, it changes over time and, at any time, may have a disputed boundary. For example, civil engineers in the United States today are expected to give substantial weight to considerations of environmental harm when deciding what to recommend, something (probably) not within the proper exercise of their judgment until the second half of the twentieth century.
The Problem with Conflict of Interest
What is wrong with conflict of interest? Having a conflict of interest is not wrong. However what one does about the conflict may be—for one of three reasons.
First, the person exercising judgment may be negligent in not responding to the conflict of interest. Society expects those who undertake to act in another's behalf to know the limits of their judgment when the limits are obvious. Conflict of interest is obvious. One cannot have an interest without knowing it—though one can easily fail to take notice of it or misjudge how much it might affect one's judgment. Insofar as the person exercising judgment is unaware of the conflict of interest, that person has failed to exercise reasonable care in acting in another's behalf. Failing to exercise reasonable care is negligent, and therefore the conduct is morally objectionable.
Second, if those justifiably relying on a person for a certain judgment do not know of the conflict of interest but the person knows (or should know) that they do not, then the person is allowing them to believe that the judgment in question is more reliable than it is—in effect, deceiving them. That deception is a betrayal of their (properly-placed) trust and therefore morally objectionable.
Third, even if the person exercising judgment informs those justifiably relying on that judgment that a conflict of interest exists, the judgment will still be less reliable than it ordinarily is. The person will still be less competent than usual—and perhaps appear less competent than members of the profession, occupation, or discipline in question should be. Conflict of interest can remain a technical problem, affecting reputation, even after it has ceased to be a moral problem.
How to Respond to Conflict of Interest
What can be done about conflict of interest? One common answer, one still enshrined in many codes, is: Avoid all conflicts of interest. That answer probably rests on at least one of two possible mistakes. One is assuming that all conflicts of interest can, as a practical matter, be avoided. Some certainly can be. For example, a journal editor can avoid most conflicts of interest by making sure all reviewing is blind. Reviewers would then (generally) not know what effect their official recommendations had on friends or enemies. An editor cannot, however, avoid all conflicts of interest in this way. Sometimes a reviewer will know enough to recognize that the author of a submission is an old friend (or enemy).
The other mistake is to assume that avoidance is the only proper response to conflict of interest. In fact, there are at least three others: escape, disclosure, and management.
Escape ends the conflict. So, for example, a reviewer who discovers that he or she is reviewing a friend's submission can stop reading, send the submission back to the editor with an explanation, and recommend a replacement.
Disclosure, even if sufficiently complete (and understood), merely gives those relying on a person's judgment the opportunity to give informed consent to the conflict of interest, to replace that person with another, or to adjust reliance in some less radical way (for example, by seeking a second opinion). Unlike escape, disclosure as such does not end the conflict of interest; it merely avoids the betrayal of trust.
Managing, though often the resolution reached after disclosure (as illustrated above), need not follow disclosure. 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.
Too frequently discussions of conflict of interest start with the biblical quotation, "Can a man have two masters?" This seems to be 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 conflict of interest, but a strategy making the concept uninteresting. Society must worry about conflict of interest only when avoiding all conflicts of interest is virtually impossible or so socially inefficient that there is general agreement that avoidance is often undesirable. Conflict of interest is an interesting concept only when loyalties are regularly and legitimately divided.
The term conflict of interest seems to have separated off from the related terms conflicting interests and conflict of interests," taking on the meaning given here, only in the middle of the twentieth century, a period in which two related trends seem to have accelerated. First, society has become more complex, making people increasingly dependent on experts. Second, society has become increasingly unsettled, making people increasingly reliant on strangers rather than on people they have known well for many years. People cannot manage the conflict of interest of those relied upon when they do not know enough about them. Society cannot tell experts to avoid all conflicts of interest because those experts could not then make a living. Society must therefore depend on such experts to disclose some conflicts (those that considerations of confidentiality allow them to disclose), to manage others, and to decline to exercise judgment where they can so decline without too much loss to those they serve. For that reason, the trend in codes of ethics in engineering and science has been away from flat prohibition of conflict of interest and toward more nuanced provisions. For example, the Code of Ethics of the Institute for Electrical and Electronic Engineers (1990) now urges members not only "to avoid real or perceived conflicts of interest whenever possible" but also "to disclose them to affected parties when they do exist."
Carson, Thomas L. (1994). "Conflicts of Interest." Journal of Business Ethics 13: 387–404. Argues that in the late twentieth century conflict of interest is endemic rather than rare.
Davis, Michael. (1993). "Conflict of Interest Revisited." Business and Professional Ethics Journal 12(Winter): 21–41. Classic statement of what has become the standard view.
Davis, Michael, and Andrew Stark, eds. (2002). Conflict of Interest in the Professions. New York: Oxford University Press. Especially Introduction, Chapter 6 (Engineering), Chapter 9 (Anthropology), Chapter 13 (Medicine), and Epilogue. A good survey of the state of thinking about conflict of interest across a broad range of professional and business activities.
Luebke, Neil R. (1987). "Conflict of Interest as a Moral Category." Business and Professional Ethics Journal 6(Spring): 66–
81. Shows that the term conflict of interest developed its present meaning only in the middle of the twentieth century.
Krimsky, Sheldon, and L. S. Rotherberg. (2001). "The Conflict of Interest Policies in Science and Medical Journals: Editorial Practices and Author Disclosures." Science and Engineering Ethics 7: 205–218. Useful discussion of journal policies designed to manage conflict of interest.
Krimsky, Sheldon, and Ralph Nader. (2003). Science in the Private Interest: Has the Lure of Profits Corrupted Biomedical Research? Lanham, MD: Rowman and Littlefield. A study of conflict of interest in science, combining Krimsky's research with Nader's Jeremiad.
May, Larry. (1996). "Conflict of Interest." In The Socially Responsive Self. Chicago: University of Chicago Press. An interesting alternative to the standard approach to conflict of interest.
Pritchard, Michael. (1996). "Conflict of Interest: Conceptual and Normative Issues." Academic Medicine 71: 1305–1313. A thoughtful critique of the standard view.
Spece, Roy G., Jr.; David S. Shimm; and Allen E. Buchanan, eds. (1996). Conflicts of Interest in Clinical Practice and Research. New York: Oxford University Press. A collection of papers on conflict of interest in medicine covering many of the same topics as Rodwin but from a variety of viewpoints, much more nuanced.
Conflict of Interest
CONFLICT OF INTEREST
A term used to describe the situation in which a public official or fiduciary who, contrary to the obligation and absolute duty to act for the benefit of the public or a designated individual, exploits the relationship for personal benefit, typically pecuniary.
In certain relationships, individuals or the general public place their trust and confidence in someone to act in their best interests. When an individual has the responsibility to represent another person—whether as administrator, attorney, executor, government official, or trustee—a clash between professional obligations and personal interests arises if the individual tries to perform that duty while at the same time trying to achieve personal gain. The appearance of a conflict of interest is present if there is a potential for the personal interests of an individual to clash with fiduciary duties, such as when a client has his or her attorney commence an action against a company in which the attorney is the majority stockholder.
Incompatibility of professional duties and personal interests has led Congress and many state legislatures to enact statutes defining conduct that constitutes a conflict of interest and specifying the sanctions for violations. A member of a profession who has been involved in a conflict of interest might be subject to disciplinary proceedings before the body that granted permission to practice that profession.
Conflict of Interest
Conflict of Interest ★½ 1992 (R)
Gideon (Nelson) is a thug who runs stolen cars, drugs, and women from his heavy-metal club on the wrong side of town. Mickey Flannery (McDonald) is the new cop determined to get Gideon behind bars, especially after Gideon kills Mickey's wife, sets up his son on a phony murder rap, and kidnaps his son's girlfriend. Now it's personal and Mickey will stop at nothing to get his revenge. Over-the-top performance by Nelson will have the viewer hoping he gets it soon and puts the film out of its misery. 88m/C VHS . Judd Nelson, Christopher McDonald, Alyssa Milano, Dey Young, Gregory Alan Harris; D: Gary Davis; W: Gregory Miller, Michael Angeli; C: Bryan England.