Abstract
The innumerable cases of opportunistic behavior by directors, managers, and employees, primarily the various forms of corruption, have shown that neglecting conflicts of interest (CoI) situations can have important negative effects on the organizations involved, undermining, in some cases, their survival and development, as well as creating harmful consequences for stakeholders and the wider community. In proposing remedies to deal with CoI scholars underline the importance of assessing it. However, this aspect has been not investigated adequately. Using the literature on CoI and, in particular, the framework proposed by Thompson (2009) for the medical sector, the objective of the paper is to outline the elements required to assess the extent of the risk of CoI in organizations. Our framework considers the following two elements: a) the probability that the secondary interest may interfere, even if only apparently, with the primary interest of the organization; b) the seriousness of the damage and/or moral unacceptability of the mere appearance of improper behavior. The assessment also allows understanding not only what the causes are, that can increase the probability of interference of the secondary interests, but also the factors that feed these interests, suggesting the most suitable remedies. The analysis has several implications for researchers, practitioners, and regulators.
Highlights
The innumerable cases of opportunistic behavior by directors, managers, and employees, primarily the various forms of corruption, have shown that neglecting conflicts of interest (CoI) situations can have relevant negative effects on the organizations involved, undermining, in some cases, their survival and development, as well as creating harmful consequences for their stakeholders and for the wider community.The CoI, accompanied by the spread of the selfish culture of a “market society”, can be considered among the main causes that in the last 20 years have led, sadly, to the known financial and environmental scandals as well as the global economic recession of 2008, along with the subprime mortgage crisis (Tang, Peytcheva, & Li, 2020)
The assessment allows understanding what the causes are, that can increase the probability of interference of the secondary interests, and the factors that feed these interests, suggesting the most suitable remedies
There is a tendency to describe the CoI with adjectives such as large, intense, reduced, irrelevant, without clarifying what these adjectives refer to: rating agencies have a “huge conflict of interest” because the issuer pays the agency that rates the security (Altman, Öncü, Richardson, Schmeits, & White, 2011); audit companies face a “huge conflict of interest” when they are consulting partner of the audited client (Duska, Duska, & Kury, 2018); university researchers face an “enormous conflict of interest” when they are paid for their activity from industry (e.g., tobacco industry (Grannis, 2019)
Summary
The innumerable cases of opportunistic behavior by directors, managers, and employees, primarily the various forms of corruption, have shown that neglecting conflicts of interest (CoI) situations can have relevant negative effects on the organizations involved, undermining, in some cases, their survival and development, as well as creating harmful consequences for their stakeholders and for the wider community. The literature proposes several remedies to deal with CoI These studies can be divided into two categories: those that have analyzed the CoI in general (Davis, 1982; Carson, 1994) and those that, instead, have focused on specific sectors of activity, individuals, or professions. The latter examine in greater detail the remedies to deal with the CoI, due to the fact that these remedies depend on specific variables that concern the areas in which the CoI occurs (e.g., types of primary and secondary interests, an extension of reporting, and scope of consequences).
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