The True Cost of Conflict of Interest

What does conflict of interest cost?

It was recently reported that certain employees of the Chicago Public Schools food services department were going to be required to undergo ethics training, after it was revealed that they had accepted improper gifts from contractors.

The worry, naturally, is that accepting gifts put those CPS employees into a conflict of interest, a situation in which they were trusted to make good decisions on behalf of CPS, but in which they had an ‘outside’ interest — in this case, gratitude to the gift-givers — that might reasonably be thought likely to warp their judgment. The behaviour here was more specifically a violation of the section of the CPS Code of Ethics that specifically forbids accepting gifts, but the moral root of the problem is conflict of interest.

Now, in addition to the trouble the employees are in, it’s been reported that Chicago Mayor Rahm Emanuel wants to go after two food services companies that had given improper gifts.

Just what have those companies done wrong? What’s wrong with putting someone else in a conflict of interest? I’ve argued before that we might think of this as analogous to suborning perjury. When you intentionally put someone else in a conflict of interest, it means that even if you’re not violating any duties yourself, you’re encouraging other people to violate their duties.

And the companies’ bad behaviour, here, is going to cost them. It may well cost them future contracts, but it may cost them (and other companies that want to compete for CPS contracts) more than that. It’s been reported that they may be required to provide ethics training for their employees, and hire an independent auditor to make sure they’re complying with CPS ethics standards. Neither of those things is likely to be cheap. In an industry with narrow profit margins, such additional costs could well mean the difference between black ink and red.

But the most important “cost” in this case is, of course, the loss of confidence in the CPS and its purchasing procedures. That is always the risk with conflict of interest, namely that when conflicts are accepted and fostered, rather avoided or remedied, they erode confidence in the judgment not just of individuals, but of entire institutions.

3 comments so far

  1. Laura Lemmermann on

    Hi Chris,

    Thanks for your piece and raising questions of conflict of interest. I think we see this happening often at the cost of public trust. It shows a real lack of transparency for organizations and happens no matter the type organization- private or public. I think this type of behavior draws attention to the fact that organizations need to be infusing within their employees at all levels the importance of ethical behavior. They need to somehow teach how their inside decisions can affect public perceptions and trust. You say well at the closing of your post that that entire institutions rest on risking conflict of interests- “That is always the risk with conflict of interest, namely that when conflicts are accepted and fostered, rather avoided or remedied, they erode confidence in the judgment not just of individuals, but of entire institutions.” Angelidis, Massetti, and Egan (2008) write a piece about CSR and ethics at all levels of an organization. They say that research indicates “there are indications that the hierarchical level a person occupies in his or her organization may influence his or her view of corporate social responsibility”. Can an organization somehow engage employees at all levels in such a way to ensure ethical behavior? Can they demonstrate how inside decisions affect the outside of the organization and can build or tear down public trust and confidence? I think these are pertinent questions to ask at this juncture in the ethics debate.

    Laura Lemmermann

    Angelidis, J., Massetti, B., Egan- Magee, P. (2008). Does corporate social responsibility orientation vary by position in the organizational hierarchy? Review of Business, 28.

  2. andreabcreative on

    I think the conclusion for this post is the most meaningful regarding this issue:
    “But the most important “cost” in this case is, of course, the loss of confidence in the CPS and its purchasing procedures. That is always the risk with conflict of interest, namely that when conflicts are accepted and fostered, rather avoided or remedied, they erode confidence in the judgment not just of individuals, but of entire institutions.”

    And this is exactly why the companies think they must, and they must, make decisions the way that they do. After all, it’s not like this issue is a small, non-discussed issue. I’d never heard of it before I read this blog. But now, because of social media, I am aware of the individuals’ decision and the company’s actions. “Ethics ‘is always about the world we inhabit and the world we want to construct.’ And yet, we need to acknowledge that the “we” does not emerge outside of the highly complex structures, institutions and practices, which make a “we.” In other words, ethics is grounded in local context” (Cheney et al., 2010, pg 125). So although, the employees are thinking about themselves in their lives, I am thinking about this on a larger scale because everything is connected.

    I think this is something that we all must understand. We are more connected now than ever: As Joanne Myers (2002) puts it “Although there was a time when it was possible for citizens of one country to think of themselves as owing no obligation to the people of other nations, admittedly that was long ago. Today national borders have less meaning as issues of trade, environment, and health, along with incredible technological advances of the last century, have left us with a legacy of connectedness we cannot ignore. Globalization has changed the way societies work and the way individuals think and interact with one another” (Cheney et al., 2010, pg 16).

    Because everyone has the chance to be exposed to our successes, and especially our failures, we need to act accordingly like the whole world is watching.

  3. […] Chris MacDonald’s The Business Ethics Blog, a piece on the far reaching costs of COIs, occasioned by a story about employees of a public […]


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