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Conflicts of interest and disclosure

The Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry (Banking Royal Commission), as part of its inquiry, sought advice from Professor Sunita Sah from Cornell University, in the form of a research paper, on how conflicts of interest and disclosures of conflicts of interest can influence decision making. Professor Sah, an acknowledged expert in behavioural ethics and conflict, provided her research paper on 1 November 2018. That advice is published on the Banking Royal Commission website, and can be accessed here.

The paper highlights how conflict and bias are psychological processes which can lead to selective and collective moral disengagement which in turn can lead to unethical business practices and corruption.  Professor Sah reminds us that humans are fantastically adept at rationalising and believing what we want to believe. The paper further outlines, when setting public policy, to beware that disclosure may fail to help compliance. In fact, disclosure can infer greater trust. The paper has a lot to say about the traps around disclosure and the concept of compliance pressure.

Professor Sah does offer some sage advice – avoiding conflicts rather than attempting to manage them seems to be the best solution together with embedding robust and ethical culture into your organisation. Professor Sah’s research paper is fascinating and should be a must read for any board member.  It is arguably one of the more important pieces of advice coming out of the Banking Royal Commission.

Stephen Howell
Director and Principal Advisor
Stephen is the Principal Advisor for Effective Governance Pty Ltd, a corporate governance consultant, forensic accountant and company director.