We don’t think much of “transparency” as a tool of good government. It’s an essentially passive technology that leaves no one to blame when it fails. Transparency has done nothing to keep the likes of Rush Limbaugh and Fox News and even, it seems, the Koch Brothers from pressing their toxic misrepresentations on anxious audiences. Max Bazerman and Ann Tenbrunsel, authors of Blind Spots, argue that transparency, like fines, denatures the ethical content of troublesome decisions.

A solution often advocated for this lack of objectivity is to increase transparency through disclosure of conflicts of interest. But a 2005 study by Daylian M. Cain, George Loewenstein and Don A. Moore found that disclosure can exacerbate such conflicts by causing people to feel absolved of their duty to be objective. Moreover, such disclosure causes its “victims” to be even more trusting, to their detriment.

Our legal system often focuses on whether unethical behavior represents “willful misconduct” or “gross negligence.” Typically people are only held accountable if their unethical decisions appear to have been intentional — and of course, if they consciously make such decisions, they should be. But unintentional influences on unethical behavior can have equally damaging outcomes.

Our confidence in our own integrity is frequently overrated. Good people unknowingly contribute to unethical actions, so reforms need to address the often hidden influences on our behavior. Auditors should only audit; they should not be allowed to sell other services or profit from pleasing their customers. Similarly, if we want credit-rating agencies to be objective, they need to keep an appropriate distance from the issuers of the securities they assess. True reform needs to go beyond fines and disclosures; if we are to truly eliminate conflicts of interest we must understand the psychology behind them.

Drop me a line at rjk@dailyblague.com
This entry was posted on Thursday, April 21st, 2011 at 10:30 am.