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 Thailands 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.

The paper was prepared based on the authors 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).

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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: 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 (Mellinkoffs 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 interestoften 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.

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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: 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 employers 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 wifes 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 dont 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 officials 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. 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 executives 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.

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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: Thailands 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 6

Common types of conflict of interest among government officials are: 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 Thailands progress on anti-corruption and conflict of interest initiatives. First, Thailands 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 peoples 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

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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 peoples organizations; and developing guidelines for managing conflict of interest in the public service, both political and governmental organizations.

References
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5th regional anti-corruption conference 28-30 September 2005, Beijing, PR China Issue paper Workshop D
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Websites
www.archieve.official-documents.co.uk/document/parment/Nolan/Nolan... www.ethics.ubc.ca/mcdonald/conflict.htm www.gov/Ethics/ethicforward.html