In our day-to-day living, we have encountered those (and indeed it may even be us) who have had a conflict of interest and so have disclosed it. It may have been our real estate  broker who is representing both the buyer and seller,  or our medical professional who is being paid to consult on research about a particular drug which she is prescribing. Or it is our stockbroker who stands to gain monetarily if we take her investment advice.

Attorneys are  aware (or should be!) that if they have a conflict of interest, the Rules of Professional Conduct require that they disclose it and obtain informed written consent  before proceeding further or if the conflict is so severe, they withdraw altogether. ( See ABA  Model Rules of Professional Conduct  Rules 1.7, 1.8 and 1.9.)

And mediators are aware that under the Model Standards of Conduct for Mediators, they must disclose any conflicts of interest and obtain consent of the parties before proceeding. But, if the conflict is so severe that it undermines the integrity of the mediation, they must withdraw even against the wishes of the parties. ( See, Standard III).

But does disclosure really solve the problem?  In  their article appearing in The Journal of Legal Studies (Vol 34, No. 1, January  2005) entitled “The Dirt on Coming Clean: Perverse Effects of Disclosing Conflicts of Interest”, ( SSRN-id480121 ) Daylian Cain, George Lowenstein and Don A. Moore concluded based on their experiment  that full disclosure does NOT solve the problem. In actuality, it creates additional problems.  The abstract to their paper explains:

Conflicts of interest can lead experts to give biased and corrupt advice. Although disclosure is often proposed as a potential solution to these problems, we show that it can have perverse effects. First, people generally do not discount advice from biased advisors as much as they should, even when advisors’ conflicts of interest are honestly disclosed. Second, disclosure can increase the bias in advice because it leads advisors to feel morally licensed and strategically encouraged to exaggerate their advice even further. As a result, disclosure may fail to solve the problems created by conflicts of interest and may sometimes even make matters worse.(Id. at 1.)

We think that  by disclosing a conflict of interest, the recipients of such information will benefit from such information and use it as they proceed forward with the conflicted individual. But what the recipients do not realize is that unconsciously, they will still trust the conflicted individual and will not  discount the information coming  from the conflicted individual or see it as being biased in any way. If anything,  they may be more trusting in the advice being given because the disclosure has conveyed a false sense of trust.    Meanwhile, the conflicted individual is unconsciously providing biased advice. Or being aware that the disclosure may cause the recipient to discount the advice, the conflicted individual may end up giving more extreme advice than otherwise.( Id. at 2-10)

By virtue of the full disclosure, both sides may  feel a sense of relief from any responsibility for the possible negative consequences. Having disclosed the conflict to the individual who still  agrees to go forward, both the conflicted individual and now the recipient who  has agreed to go forward feel relieved of any consequences that may ensue. Or, as the authors note, Caveat Emptor will prevail. (Id. at 4. )

The authors note that it is perhaps only the sophisticated recipient  (who can rely on her own professional expertise )  of a conflict disclosure who may not fall prey to the downside of such disclosures.  Those less experienced will  most likely be too trusting by the disclosure and thus fall prey to its downsides.

So, while  full disclosure of a conflict of interest seems to be the “go to” remedy to resolve conflicts, it is not the panacea that truly resolves the issue.

… Just something to think about.

-------------------------------------

Do you like what you read?

If you would like to receive this blog automatically by e mail each week, please click on one of the following plugins/services:

and for the URL, type in my blog post address: http://www.pgpmediation.com/feed/ and then type in your e mail address and click "submit".

Copyright 2021 Phyllis G. Pollack and www.pgpmediation.com, 2021. Unauthorized use and/or duplication of this material without express and written permission from this site’s author and/or owner is strictly prohibited. Excerpts and links may be used, provided that full and clear credit is given to Phyllis G. Pollack and www.pgpmediation.com with appropriate and specific direction to the original content.