Conflict of interest

Understanding Conflict of Interest

A conflict of interest is a situation where an individual or organization is involved in multiple interests that may be at odds with each other, potentially affecting their ability to make decisions impartially.

The Nature of Interests

An ‘interest’ can be defined as a commitment, obligation, duty, or goal associated with a specific social role or practice. When an individual occupies two social roles simultaneously and these roles generate opposing benefits or loyalties, a conflict of interest arises.

Primary vs Secondary Interests

Primary interests are the principal goals of the profession or activity, while secondary interests include personal benefit, such as financial gain, professional advancement, or favors for family and friends. Understanding these distinctions is crucial in navigating complex ethical landscapes.

Conflict of Interest in Law

In law, conflicts of interest are considered a pervasive issue. Lawyers face two fundamental fiduciary duties: loyalty and preserving client confidences. The duty of confidentiality is protected by rules prohibiting successive conflicts of interest when a lawyer proposes to act adversely to the interests of a former client.

Corporate Practice and Conflicts

The identity of the client—corporations—is often a frequently arising question in corporate practice. The California State Bar Ethics Committee has ruled that parent corporations and their subsidiaries are considered distinct entities for conflicts purposes, as long as they do not have a ‘sufficient unity of interests.’ This standard is followed by most jurisdictions with exceptions noted by the California ethics committee.

Conflict Resolution

A concurrent conflict of interest may be resolved under four conditions: the lawyer believes they can provide competent and diligent representation, representation is not prohibited by law, it does not involve claiming a right by one client against another represented by the lawyer, and each affected client gives informed, written consent.

Prospective Consent

In large multinational law firms, prospective consent for future conflicts is common. Courts uphold these waivers when given by sophisticated corporate clients with independent counsel. The ‘hot potato’ doctrine states a lawyer cannot withdraw from an existing representation due to a conflict without the client’s consent, as this would end the duty of loyalty and treat the client like a former client.

Conflicts in Judicial Disqualification

Judicial disqualification refers to the act of abstaining from participation in an official action due to a conflict of interest. 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, except under specific conditions.

Organizational Conflicts of Interest

Organizational conflicts of interest (OCIs) occur when a corporation provides services to the government and these services conflict. Corporations develop systems to mitigate such conflicts, while governments evaluate risks to determine if they create a substantial advantage over competitors or decrease competitiveness.

The Pharmaceutical Industry

The pharmaceutical industry’s influence on medical research raises concerns about conflicts of interest in the healthcare industry. Self-dealing, outside employment, nepotism, and gifts from friends or individuals who do business with the organization are common forms of conflicts of interest that can lead to ethical dilemmas.

Examples of Conflicts

An internal auditor with a competing professional or personal interest, a commissioner owning property that may need condemnation, an officer or director owning a patent developed before joining the corporation, and judges or arbitrators deciding cases where relatives, acquaintances, or business partners are parties are all examples of conflicts of interest.

Conflicts in Government

Government officials must balance public service with personal interests. Regulating conflict of interest is key to preventing decisions that could be perceived as violating their duty of office. The problem lies in distinguishing special interests from general constituents’ interests, and the influence of money in politics can significantly impact legislative behavior.

The Finance Industry

In the US, the finance industry has become a dominant force, capturing 13% of corporate domestic profits since 1934. This is partly due to campaign contributions and the revolving door between government and private sector jobs, which creates conflicts of interest for public officials whose future may depend on their employment.

Conflicts in Media

The business model of commercial media organizations relies on advertising revenue, creating a conflict of interest with advertisers. This can lead to biased reporting, suppression of news or content that offends advertisers, and reduced investigative journalism. The commercialization of media has resulted in increased censorship, higher advertising rates, and fewer alternatives for audiences.

Conclusion

A conflict of interest is a complex issue that affects various sectors, from law to government and media. Understanding these conflicts and implementing effective measures to mitigate them is crucial for maintaining ethical standards and public trust. By recognizing the potential for bias and taking proactive steps, we can ensure fair and impartial decision-making in all areas.