Download Issue paper (Workshop D) Conflict of Interest

ADB/OECD Anti-Corruption Initiative for Asia and the Pacific
5th regional anti-corruption conference
28-30 September 2005, Beijing, PR China
Issue paper (Workshop D)
Conflict of Interest: An Ethical Issue in Public and Private
Management1
Pairote Pathranarakul, Ph.D.
Associate Dean for Planning and Development, School of Public
Administration, National Institute of Development Administration, Bangkok,
Thailand
Abstract
Conflict of interest becomes a key issue among stakeholders, both public and private sectors. Conflict of
interest is a matter of ethics and potentially leads to more severe corruptions. It is visualized as new threats
or barriers to national development. When policy makers and government officials abuse their powers for
private gains it affect public interest. This demolishes potentials and destroys opportunities for long-term
development. This paper has its aims to investigate the meanings and typologies of conflict of interest and to
illustrate major components underlying conflict of interest in Thailand’s management perspectives. In the
paper, policy measures are proposed addressing prevention and remedy which emphasis is on changes in
values and cultural systems. Change leaders are vital in enhancing public consciences and bring about
social movement Thailand towards a civilized society.
Keywords: Conflict of Interest; Ethical standard; Public Interest.
1
The paper was prepared based on the author’s research works on Conflicts of Interest: Study on Public Sector
Professional Groups. Research project supported by the Ethics Promotion Center, Civil Service Commission of Thailand
(2004).
ADB/OECD Anti-Corruption Initiative for Asia and the Pacific
5th regional anti-corruption conference
28-30 September 2005, Beijing, PR China
Issue paper Workshop D
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Introduction
Conflict of interest is a complex issue that reflect structural problems of any uncivilized society. It relates with
several facets including socio-cultural, political, and administrative. If government officials lack of ethical
immunity in enhancing values and cultural systems then they lost of consciences to protect public interest.
The common phenomena are the abuses of power for interfering in development policies, projects and
economic activities. The abuses of political and administrative power for self interest whether for individual,
group or party, have damaged public and private sector organizations, general public and society as a
whole. It also destroys future opportunities for sustaining long-term socio-economic development.
Thus, it is prime time to raise public awareness among agencies concerned, both local and international
communities and to seek mutual efforts to prevent and protect the negative impacts arising from the conflict
of interest. It is, indeed, an urgent task of policy makers, government leaders, advocates, and all partners to
rethink and renovate our consciousness with new values and cultural framework. Enhancing governance
system of political and administrative organizations and promoting ethical standard among key actors to
ensure their transparency and accountability for the sake of public interest is on top priority. Agendas with
public forum both at national, regional and global level are necessary inputs for improving better
understanding on conflict of interest. Policy measures on values and cultural reform, and specific laws should
be seriously addressed through close collaboration among public, private and civil sectors.
Conflict of Interest Defined
Longman Dictionary of Contemporary (Third Edition) (1995:281) explains the meanings of conflict of interest
as “a situation in which you cannot do your job fairly because you will be affected by the decision you make:
There is a growing conflict of interest between his/her position as a politician and his/her business activities.
Macmilan English Dictionary for Advanced Learners (2002:290) describes conflict of interest(s) with two
meanings: 1) a situation in which someone make fair decisions because they will be affected by the results,
and 2) a situation in which something that is good for one person is bad for another person. Other sources
share the same direction:
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Conflicts between private and public interest in public office (Dictionary of Politics: Selected American
and Foreign Political and Legal Terms, Seventh Edition, p. 92)
A situation in which officials gain private interest from using political influences (The Random House
Dictionary of English Language, Random House, 1968, p. 282)
Incompatibility between official function/duty and public interest (Mellinkoff’s Dictionary of American
Legal Usage, West Publishing, 1992, p.104-105)
Katz & Kahn (1978:623) points out that conflict of interest is a situation in which government officials use
their authorities for private benefits. Michael McDonald defines the term "conflict of interest" as "a situation in
which a person, such as a public official, an employee, or a professional, has a private or personal interest
sufficient to appear to influence the objective exercise of his or her official duties."
(http://www.ethics.ubc.ca/people/mcdonald/conflict.htm)
Based on McDonald, there are three key elements: 1) a private or personal interest—often a financial
interest; 2) official duty--quite literally the duty you have because you have an office or act in an official
capacity; and 3) conflicts of interest interfere with professional responsibilities in a specific way, namely, by
interfering with objective professional judgment. He emphasizes that conflict of interest is an ethical issue.
Whenever the official lacks of ethical standard there is potential risk for underlying conflict of interest.
ADB/OECD Anti-Corruption Initiative for Asia and the Pacific
5th regional anti-corruption conference
28-30 September 2005, Beijing, PR China
Issue paper Workshop D
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Conflict of interest typologies can be considered the work Canadian political scientist Ken Kernaghan and
John Langford in their book, The Responsible Public Servant. They list seven categories:
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Self-dealing: Using official position to secure a contact for a private consulting company of you own.
Another instance is using government position to get a summer job for your daughter.
Accepting benefits: Bribery is one example; substantial [non token] gifts are another. For example,
you are the purchasing agent for your department and you accept a case of liquor from a major supplier.
Influence peddling: The professional solicits benefits in exchange for using her influence to unfairly
advance the interest of a particular party.
Using your employer’s property for private advantage: This could be as blatant as stealing office
supplies for home use. Or it might be as a bit more subtle, say, using software which is licensed to your
employer for private work of your own.
Using confidential information. While working for a private client, you learn that the client is planning
to buy land in your region. You quickly rush out buy land in your region. You quickly rush out and buy
the land in your region. You quickly rush out and buy the land in your wife’s name.
Outside employment or moonlighting. An example would be setting up a business on the side that is
in direct competition with your employer. Another case would be taking on so many outside clients that
you don’t have time and energy to devote your regular employer. In combination with influence
peddling, it might be that a professional employed in the public service sells private consulting services
to an individual with the assurance that they will secure benefits from government: “if you use my
company, I am sure that you will pass the environmental review.”
Post-employment. A person who resigns from public or private employment and goes into business in
the same area. For example, a former public servant sets up a practice lobbying the former department
in which she employed.
The factors contributing to a conflict of interest can be considered as five main components. First, the
individual factor which comprises of personal values, belief, attitudes and behaviour. Second, the economic
factor which involves official’s incomes and indebtedness. Third, the social factor such as societal values,
moral and ethical framework, position, patronage system and nepotism, and roll model of top leaders and
supervisors. Fourth, legal factor including rules and procedures: some pitfalls are outdated laws with legal
loopholes, lack of rules of law and auditing system. Fifth, the environmental factor such as organizational
culture, expectations and traditional practices of government officials.
Ethics, Morality and Conflict of Interest
Bandfield (1967), in his work on The Moral Basis of a Backward Society, studied the cultural conditions and
moral standard then concluded that individual may not lose his morality when household or institution uphold
public spiritedness or enlightened self interest. He also pointed out that amoral society member trend to
neglect public interest and always seek for self interest.
2
In Moral Harzards of an Executive, Norris (1989) addressed on ethics and morality of executive and
emphasized that integrity and loyalty are preamble for organizational achievement. One key issue is whether
the executive’s decision is made for the sake of general public or of inner group. This reflects the principles
of democratic morality which is in practice that executive must be strongly concerned about public values. It
also involves the moral control of reality and justice in decision-making in particular situation. The protection
of truth is an indicator testing integrity of any executive. As for utilitarianism, the principle “the greatest good
for the greatest number” may or may not responsive to people expectations. In reality, executive often face
2
Moral Hazards of an Executive in Andrews, Kennet R. Ethics in Practice: Massachusetts: Harvard Business
School Press.
ADB/OECD Anti-Corruption Initiative for Asia and the Pacific
5th regional anti-corruption conference
28-30 September 2005, Beijing, PR China
Issue paper Workshop D
–4–
with ethical issues and conflicting circumstance. At least one might be concerned on people awareness and
take actions for maintaining common benefits for the public.
Conflict of interest is one type of corruption. When we considered corruption as an action that violate rules of
law, lost of loyalty and integrity, and lack of moral standard. It is the abuse of public office for private gain and
it generates social equity problems that imply inequality so-called distributive justice (White, 1993)
Thai political scientist Somporn Saengchai (1985) classified corruption based on Heidenheimer (1978) into
three main types:
1. White corruption. Corruption which the general public visualizes as a common thing and allows it to
happen since it has no serious effect to society.
2. Grey corruption. This type of corruption the general public is still unclear about its processes and
impacts. Academics think it is a serious issue but the general public seems to be reluctant.
3. Black corruption. This type of corruption society and all parties concerned judge a wrong conduct that
requires to be punished in accordance with legal framework
Conflict of interest, thus, lies in the gray area of corruption (Anechioco and Jacobs, 1996: 45-62). It relates
with ethical standard and social values. Each society has different values system in judging human actions.
Some people may not perceive conflict of interest as a misconduct action but for civilized society one could
not bear for a violation of moral and ethical behavior.
Conflict of Interest: Thailand’s Experience
Understanding Conflict of Interest
Academics and experts perceive conflict of interest as a conflict between private and public interest. Conflict
of interest is equivalent to policy corruption or overlapping between private and public benefits. What is
serious to them is whether such conflict of interest destroys people welfare and national benefits or not.
Some view conflict of interest as western values, however, they accept it as one standard practice among
international communities.
Conflict of interest can be considered in two senses, narrow and broad. Narrow sense is an attempt to build
up new measures or new institution to monitor and mitigate the problems. Try to make things lawful and
bring the issue into legal formal procedures. In a broader sense, conflict of interest is a policy corruption
where decision-making behaviour always leads to personal and group interest for industry or business
entities. There is a networking system, both forward and backward linkages on policy corruption in
development programs and projects especially, procurement in mega-projects.
It is agreed that conflict of interest leads to corruption, and that the more interference from interest group, the
more severe the case is. Most cases are directly or indirectly linked with political power, both formal and
informal. In Thai society, the abuse of power is connected with the legal procedures and informal
relationship. Conflict of interest, thus, involves kinships and officials’ relatives.
From the academic and expert points of view, conflict of Interest can be classified into two levels: policy level
involves state power of policy makers; and operational level where government officials seek private benefits
from official duties. Conflict if interest depends on political development and political accountability. Thai
politics is not progressive enough in addressing public interest in the real sense. Various agencies might not
use power for the sake of people but for expansion and protection of their own interests. When politician
enter politics with buying votes their absolute power trends to dominate government officials who serve as
mechanism for conflict of interest.
ADB/OECD Anti-Corruption Initiative for Asia and the Pacific
5th regional anti-corruption conference
28-30 September 2005, Beijing, PR China
Issue paper Workshop D
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Common types of conflict of interest among government officials are:
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Self-dealing
Accepting benefits such as substantial gifts, valuable assets for advancement in official posts.
Influence peddling
Using public property such as public car for private business.
Using confidential in seeking private interest from development policies and projects.
Post employment of high ranking officers after retirement
Abuse power in favour of relatives and clients in bidding contract in the government agencies;
Using money to buy advanced positions or extra promotional scheme.
Current Efforts in Managing Conflict of Interest in Thai Society
At present, conflict of interest is among key issue that bring attention to the general public. Current efforts are
listed to reflect Thailand’s progress on anti-corruption and conflict of interest initiatives.
First, Thailand’s new constitutions outlaws address clearly on conflicts of interest.3 In terms of substance,
specific provisions are included requiring government officials to be politically impartial (Section 70, Chapter
IV) and which prohibit a member of House of Representatives from placing himself or herself in a conflict of
interest situation.
Section 110 (Chapter VI, Parts) clearly states that a member of the House of Representatives shall not:
1. Hold any position or have any duty in any State agency or State enterprise, or hold a position of member
of a local assembly, local administrator or local government official or other political official other that
Minister;
2. Receive any concession from the State, a State agency or State enterprise, or become a party to a
contract of the nature of economic monopoly with the State, a State agency or State enterprise, or
become a partner or shareholder in am partnership or company receiving such concession or becoming
a party to the contract of that nature;
3. Receive any special money or benefit from any State agency or State enterprise apart from that given by
State agency or State enterprise to other persons in the ordinary course of business.
Section 111 states: “A member of the House of Representatives shall not, through the status or position of
member of the House of Representatives, interfere or intervene in the recruitment, appointment, reshuffle,
transfer, promotion and not being a political official, an official or employee of a State agency, State
enterprise or local government organization, or cause such persons to bare moved from office”. By virtue of
section 128 this provision also applies to senators.
Second, public sector reform has stimulate all public agencies act as catalyst for changes through capacity
building with reform strategies, among others, structural reform, legal reform, and values and cultural reform.
Third, anti-corruption measures have been promoted through workshop and seminar, both national and
organizational levels as a means to improve better understanding among stakeholders on corruption
problems.
Fourth, civic groups initiative through collaboration with voluntary associations, non-governmental
organizations (NGOs), civil society organizations (CSOs) on their efforts through partnerships among
agencies concerned and the people’s network to educate the general public as well as take a lead on
improving governance, both political and administrative. In addition, independent public organizations and
3
1997 Constitution of the Kingdom of Thailand
ADB/OECD Anti-Corruption Initiative for Asia and the Pacific
5th regional anti-corruption conference
28-30 September 2005, Beijing, PR China
Issue paper Workshop D
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mass media association play active roles in monitoring on transparency and accountability of policy makers
and government officials.
Fifth, Transparent Thailand: The raising public awareness program on good governance through the initiative
efforts of the Foundation of a Clean and Transparent Thailand (FaCT). The objectives are to raise public
consciousness on accountability and conflict of interest among Thai people from all folks of life, including
politician, government officials, business man, and public at large. The main activities are the enhancement
of ethical and moral standard, campaigning for public participation to protect public interest, to refrain from
corruption of all types. It is expected to bring mutual cooperation for anti-corruption movements in Thai
society.
Conclusion and Recommendations
In conclusion, conflict of interest is one type of corruption since it is a way to use an official duty for seeking
personal benefits. Conflict of interest violates the country laws and code of public ethical conduct. In a
situation when personal advantages involved, conflict of interest lead to manipulate authoritative power to
intervene the decision making process for private interest. This unethical practice has negative results in
providing public services since there is inadequate freedom, lack of neutrality and morality. Conflict of
interest influences the public interest in a way that it abuses the primary interest of the agency, the
organization, the institute and society. The social lost may be in a form of financial benefits, quality of
services and the future opportunities. Conflict of interest also destroys equity and other values and norms of
the Thai society.
Conflict of interest is one key ethical issue in public and private management and has significant association
with corruption. It relates to power on official duties, roles and values conflicts in decision making processes.
Conflict of interest can be divided into two levels: policy and operational. At the policy level, policy makers
have political intervention in making decision for the sake of their own benefits, both direct or indirect. While
at the operational level, officials use official capacities for seeking personal interests.
There are several factors determining conflict of interest, including among others, private interest, ethical
standard, discretion in using power, and lack of clear guidelines for official practices. Inefficient law
enforcement and lack of effective measures to protect the common benefits of the society is also another
crucial factor. Besides, the conflict of interest is correlated with the Thai political structure wherever the
patronage system allows the businessmen to get involved politics and siphon common benefits from society.
Measures to improve the situation line with the strengthening of ethical code of conducts of government
officials at policy and operational level. Raising public awareness through socialization process among new
officials, both public and private organization is vital. Mutual efforts among international communities are
necessary to bring about enhancing professional and ethical standard among policy makers and officials.
Specific measures are proposed covering: 1) encouraging organizational leaders of all types act as catalyst
for changes or change leaders in enhancing professional ethics and integrity management in public and
private organizations; 2) putting the conflict of interest issue into a national agenda and earnestly push
efforts in implementation with people’s organizations; and developing guidelines for managing conflict of
interest in the public service, both political and governmental organizations.
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ADB/OECD Anti-Corruption Initiative for Asia and the Pacific
5th regional anti-corruption conference
28-30 September 2005, Beijing, PR China
Issue paper Workshop D
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Websites
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www.ethics.ubc.ca/mcdonald/conflict.htm
www.gov/Ethics/ethicforward.html