Disclosing a conflict of interest: what transparency does not resolve
A recommendation can be well documented while still serving the interests of the person making it. The managerial question is precise: is disclosing a conflict of interest enough to protect a purchasing, investment or partner-selection decision?
What the literature establishes
Daylian M. Cain, George Loewenstein and Don A. Moore (2005, The Journal of Legal Studies) experimentally studied situations in which an adviser had an incentive to influence another participant’s estimate. In their experimental setting, disclosing this conflict could lead to more biased advice without recipients adjusting sufficiently for that distortion. Transparency therefore did not operate as an automatic safeguard.
An interest can shape the reasoning itself
Ziva Kunda (1990, Psychological Bulletin) reviews research on motivated reasoning: the desire to reach a particular conclusion can shape the search for, construction and evaluation of arguments. This tendency remains constrained by the ability to produce an apparently reasonable justification. The problem is therefore not limited to advisers who knowingly conceal information; it also concerns those who sincerely find the option that benefits them persuasive.
The premature conclusion
It would be excessive to conclude that conflicts of interest should be concealed. Disclosure makes an interest visible and can enable safeguards that silence would prevent, while applicable transparency requirements remain in force. The important distinction is between information about the conflict and the arrangements that limit its influence: independent review, criteria defined in advance or recusal from the decision. (our executive and employee training programmes)
What the evidence cannot promise
An experimental estimation task reproduces neither a long-standing banking relationship nor the commercial and family ties within an SME. The review of motivated reasoning does not assess the effectiveness of any particular disclosure procedure either. These studies justify checking the safeguards actually in place, not predicting a uniform effect of transparency across all organisations.
A practical check in Lugano
As part of SHR’s decision-making programme, a team in Lugano can review one month’s decisions involving a disclosed interest: a banking recommendation, selection of a fashion supplier, a trading contract or the choice of a service provider connected to an owning family. For each case, a record in Italian distinguishes disclosure from the safeguard actually implemented before the decision, supported by dated evidence. The indicator is the proportion of these cases with a documented independent review or effective recusal of the interested person. This ratio checks a governance practice; it does not, on its own, prove that decisions are better. To go further: explore the Decision-making training in Lugano in the canton of Ticino, or browse our executive and employee training programmes in Switzerland.
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