[Associate Professor Lamar Pierce] Incentives are pervasive in every aspect of society.
People are rewarded for taking certain actions, and not rewarded for taking others.
Workers are paid for their effort and productivity, salespeople are paid for their sales,
and small business owners are rewarded with profits for successful ventures.
So long as these incentives are well understood by everyone, they work reasonably well.
They motivate effort, performance, and social welfare.
But sometimes, individuals have incentives that conflict with their professional responsibilities,
often in ways that are not transparent to the public or even in their own mind.
These conflicts of interest produce serious economic and social problems.
[Taylor] You can get tipped at Mac, so some people would come into Mac and they would
try to return things that obviously you can’t return.
If you returned it, then they usually would tip you more, but if you didn't return it,
then they probably wouldn't tip you anything.
My job is not to return stuff that's completely gone, but I do because
I probably get ten bucks out of it.
Conflicts of interest are pervasive in markets and in society, and can motivate professionals
to act in ways that violate their responsibilities and hurt their clients and employers.
Doctors, for example, may face a conflict of interest when they are paid more for
some procedures than for others.
Their professional responsibility is to do what is best for the patient, but their financial
incentive is not always aligned with this responsibility.
If an oncologist profits from selling chemotherapy agents to their patients, and some agents
are more expensive than others, this conflict becomes a problem.
Most doctors would never think of profiting in ways that hurt their patients, but some may,
either consciously or subconsciously.
[Cheyenne] I run a magazine on campus and I started dating one of my writers and I'm the editor.
And he started getting entertainment stories that were not as good as the other entertainment
writers, and I was like, "Did I make that decision because he's improving in this section?
Or do I want to please him and make him happy on the staff as well as in our relationship?"
When there are conflicts of interest, you can almost guarantee that they will sometimes
lead to bad outcomes.
Surprisingly, in many states, real estate agents can represent both the buyer and the
seller in a home transaction.
The conflict in such transactions is clear.
The agent could never have both parties' best interests in mind, just as an attorney could
never adequately represent both a plaintiff and defendant in civil lawsuit.
Even professors face a conflict of interest when they are designing courses that will
be evaluated by students seeking high grades and low workload.
If the professor is ultimately promoted based on their popularity with students,
will they consider making the course a little easier?
[Lauren] If every single time someone got a lower score in a class than they expected
and that counted against the professor...
It doesn’t really add up because you're not encouraging the teaching faculty to do
what they are there to do, which is to challenge students and push them.
They key implication is that managers and policy-makers must constantly evaluate whether
professionals and employees might face incentives to act counter to their responsibility.
Eliminating conflicts of interest is one of the simplest and most effective ways to reduce
unethical behavior.
But in order to do so, we must be willing to acknowledge that professional codes of
conduct, like those followed by doctors, lawyers, accountants, and real estate agents, do not
make people immune to these conflicts, and that these codes are rarely a justification
for ignoring the likely outcomes that conflicts of interest create.
[Charity] It's a series of choices and sometimes the choices that you make are more important
than other choices.
[Jason] My clients, my customers, put myself into their shoes and see how they would react
if I'm doing certain things.
I think honesty and being straightforward about...
those sorts of situations is what leads to the best result.
Before doing some actions that makes you think twice, really do think twice again and then
consult somebody who's more experienced than you; so don't make the wrong decision,
otherwise you're gonna regret like... forever.
Really, sometimes a bad decision can make you fail in the business world.