Disclosing a conflict of interest: what transparency does not guarantee
A manager may know about an adviser’s interests without knowing how to adjust for them in a recommendation. The management question is specific: is disclosing a conflict of interest enough to protect a purchasing or investment decision?
What the literature establishes
Daylian M. Cain, George Loewenstein and Don A. Moore (2005, The Journal of Legal Studies) experimentally examined disclosure of interests in an advice and estimation task. In their setting, disclosure can increase bias in advice without recipients adequately adjusting for that influence. Transparency alone therefore does not provide effective protection in this context.
An interest can also shift what seems fair
Linda Babcock and George Loewenstein (1997, Journal of Economic Perspectives) review research on self-serving judgements of fairness and bargaining impasses. This research shows that the position people occupy can shape what they consider a fair agreement, even when they share the same information. A conflict of interest therefore need not involve conscious deception: it can also affect a sincerely held belief.
The premature conclusion
It would be excessive to conclude that conflicts of interest should remain undisclosed. Disclosure makes scrutiny possible and may fulfil a requirement; it simply does not guarantee that scrutiny will sufficiently change the decision. The useful distinction is between a declaration of interests and a process that effectively limits their influence. (our executive and employee training programmes)
What the evidence cannot promise
An experimental advice task does not reproduce public procurement, clinical decision-making or industrial investment. Research on bargaining illuminates a related mechanism but does not directly measure the effectiveness of a corporate disclosure procedure. These sources therefore neither quantify an expected effect in Sion nor justify treating every recommendation involving a vested interest as wrong.
A practical check in Sion
Within SHR’s “Decision-making” programme, an exercise applicable in Sion would track documented decisions over one month, whether they concern a hydropower contractor, healthcare equipment, a viticulture supplier or an alpine tourism partnership. For each declared interest, the register would specify the associated response: independent assessment, withdrawal of the person concerned from the decision, or continued participation with written justification. The indicator would be the proportion of decisions involving a declared interest for which such a response is actually documented, reporting both numerator and denominator. This check would verify how the conflict was addressed, not the absence of bias or the ultimate quality of the choice. To go further: explore the Decision-making training in Sion in the canton of Valais, or browse our executive and employee training programmes in Switzerland.
In pictures: Decision-making in Sion
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