Conflicts of interest

Every team has a doctor. But when players get injured, they don’t go see the team doctor. There is a conflict of interest because the doctor is paid by the team. Chris Walsh –American Footballer

When given advice and guidance it is not unusual to question the motives of the giver. Are you being told what you want to hear or are there more sinister agendas at work?

In the complex arena of consulting, there are a number of potential conflicts of interest that should be considered when understanding ethics in the industry.

The first of these is the issue of impartiality between the auditing and consulting arms of the same organisation. Some audit/accountancy firms have counsulting (or ‘advisary’ arms) which often work in the same companies that the companies audit. The suspicion is that the firms may be under pressure to sign off client accounts to perpetuate the large fees being charged by their consulting colleagues. The most infamous example of this is the collapse of ENRON. The part played in this by major consultancies Arthur Andersen and McKinsey can be found on page 300 of MANAGEMENT CONSULTANCY by Joe O’Mahoney.

Subsequently, the Financial Services Authority in the UK and US Securities and Exchange Commission pressurised audit houses to dismantle their consulting arms. With the exception of Deloitte they did so. Despite this promising move, the position has since reversed; many of these industry big hitters now have re-established their consultancy divisions, and the pre-ENRON situation where the same company often audits accounts while simultaneously charging consultancy fees has returned.

Regulations have been introduced, but are generally agreed to be fairly lax.

These major conflicts of interest therefore tend to occur regularly, and the consultancy sector continues to operate with minimal regulatory supervision.

The issue of “lobbying” is another potential conflict of interest. With PROCUREMENT introduced as a middle tier between the commissioners and the commissioned, the power of personal relationships and networking has been diffused and consultants have needed to develop other ways to channel funds in their direction. Inevitably the biggest budgets lie with governments, and one of these new methods is a significant element of cross –pollination between consultancies and the state.

Many high profile consultants have managed to secure senior government roles, enabling them to determine agendas and stealthily advocate the use of consultancies – more often than not their own. Conversely, government figures often retire from politics into lobbying roles and continue to use their residual influence and reputation for the benefit of the consultancy sector. Agenda building – creating a discourse in minds of key decision makers – is easier to achieve “inside the tent” than from the “outside”.

Untitled from Joe O'Mahoney on Vimeo.

In conclusion, motives are usually shaped by political economy. As “Deep Throat” instructed Bob Woodward in “All The President’s Men”, when investigating motivations and justifications, “…..just follow the money….”

That would appear to be a conflict of interest to me. The majority of time you hire outside consultants, they give you the outcome you want because they want to be hired again.
Brian Blair – American Wrestler cum politician

Download Conflicts of Interest pdf