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International Corporate Responsibility Series

Volume 3, 2007

Controversies in International Corporate Responsibility

Daylian M. Cain, George Loewenstein, Don A. Moore
Pages 81-99
DOI: 10.5840/icr200737

The Dirt on Coming Clean
Perverse Effects of Disclosing Conflicts of Interest

Conflicts of interest can lead experts to give biased and corrupt advice. Although disclosure is often proposed as a potential solution to these problems, we show that it can have perverse effects. First, people generally do not discount advice from biased advisors as much as they should, even when advisors’ conflicts of interest are disclosed. Second, disclosure can increase the bias in advice because it leads advisors to feel morally licensed and strategically encouraged to exaggerate their advice even further. As a result, disclosure may fail to solve the problems created by conflicts of interest and may sometimes even make matters worse.

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