Compromised Fiduciaries: Conflicts of Interest in Government and Business

56 Pages Posted: 6 Sep 2011

See all articles by Claire A. Hill

Claire A. Hill

University of Minnesota Law School

Richard W. Painter

University of Minnesota Law School

Date Written: September 5, 2011

Abstract

In the present financial crisis, the government has become extensively involved in managing companies, at times undertaking massive bailouts. The results of government involvement in business are at best mixed. Moreover, its involvement has generated significant criticism. But government involvement in managing companies is sometimes inevitable. It is therefore important to consider how it can be improved. One critical reason why government might perform poorly is conflicts of interest. Given the conflicts that arise at multiple levels of decisionmaking in both government and private companies, it should not be surprising that government management of companies is often problematic.

In both government and business, law has had mixed success in changing the way individuals behave. Conflicts of interest and their concealment continue on a scale that most observers find troubling. The best counterweight to conflicts of interest is a strong commitment to personal and professional responsibility that empowers a business or government decisionmaker to overcome the motivation to advance interests other than those he is supposed to be advancing.

It is important, too, to look for ways to mitigate the effects of conflicts of interest. Dispersing decisionmaking among different groups of people - for example, shareholders as well as directors in a corporation or different agencies in government - could be part of the solution. Furthermore, collective decisionmaking and oversight functions are aided by transparency. Finally, the greatest source of conflicts of interest in government is campaign contributions. Unless and until something is done about our system of campaign finance, conflicts of interest will be an ever-present threat.

Keywords: government bailouts, fiduciary duties, conflicts of interest, professional responsibility

JEL Classification: K22, P17, L33, H50, H11

Suggested Citation

Hill, Claire Ariane and Painter, Richard W., Compromised Fiduciaries: Conflicts of Interest in Government and Business (September 5, 2011). Minnesota Law Review, Vol. 95, p. 1637, 2011, Minnesota Legal Studies Research Paper No. 11-35, Available at SSRN: https://ssrn.com/abstract=1922838

Claire Ariane Hill (Contact Author)

University of Minnesota Law School ( email )

229 19th Avenue South
Minneapolis, MN 55455
United States
612-624-6521 (Phone)

Richard W. Painter

University of Minnesota Law School ( email )

229 19th Avenue South
Minneapolis, MN 55455
United States
612-626-9707 (Phone)

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