Societys interests versus self interests

A conflict of interest (COI) occurs when an individual or organization is involved in multiple

interests, one of which could possibly corrupt the motivation for an act in the other.
The presence of a conflict of interest is independent from the execution 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 judgment 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 favors 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.
Judicial disqualification, also referred to as refusal, refers to the act of abstaining from
participation in an official action such as a 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 refusal in a given proceeding or matter. Providing that the judge or
presiding officer must be free from disabling conflicts of interest makes the fairness of the
proceedings less likely to be questioned.[4]
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. 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 case.
A prohibited or undisclosed representation involving a conflict of interest can subject an attorney
to disciplinary hearings, the 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.
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 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.)
An organizational conflict of interest (OCI) may exist in the same way as described above, in the
realm of the private sector providing services to the Government, where a corporation provides
two types of services to the Government that have conflicting interest or appear objectionable
(i.e.: 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 are typically evaluated by a governmental
office (for example, in a US Government RFP) to determine whether the risks pose a substantial
advantage to the private organization over the competition or will decrease the overall
competitiveness in the bidding process.

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. The
official is on both sides of the "deal."

Outside employment, in which the interests of one job contradict another.

Family interests, in which a spouse, child, or other close relative is employed (or applies
for employment) or where goods or services are purchased from such a relative or a firm
controlled by a relative. For this reason, many employment applications ask if one is
related to a current employee. If this is the case, the relative could then recuse from any
hiring decisions. Abuse of this type of conflict of interest is called nepotism.

Gifts from friends who also do business with the person receiving the gifts. (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
better classified elsewhere. Accepting bribes can be classified as corruption; almost
everyone in a position of authority, particularly public authority, has the potential for such
wrongdoing. Similarly, use of government or corporate property or assets for personal use
is fraud, and classifying this as a conflict of interest does not improve the analysis of this
problem. 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), unless being a (fallible) human being rather than (say) a robot in a
position of power or authority is considered to be a conflict.

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 victim hood and unfair aggression. Nevertheless, denotatively,
there is too much overlap between the terms to make any objective differentiation.

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 ethical problem to which the public has knowledge, but keep remaining breaches
hidden.

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.

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."

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. Two problems make legislative ethics of conflicts difficult and
distinctive. First, as James Madison wrote, legislators should share a "communion of
interests" with their constituents. Legislators cannot adequately represent the interests of
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." 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 interest: fulfilling the duties of
office.

Politics in the US is dominated in many ways by political campaign contributions. [4]

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 pernicious
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
US has been roughly double the international price for over half a century. In the 1980s,
this added $3 billion to the annual budget of US consumers, according to Stern, [15] who
provided the following summary of one part of how this happens:

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
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 Barrack Obamas Council of Economic Advisers.

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.[23] 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.

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.