Institutional Corruption: A Fiduciary Theory

Abstract

Dennis F. Thompson developed a theory of “institutional corruption” in order to explain a phenomenon that he believed the Congressional ethics rules failed to address: Congress’ systematic deviation from its proper purpose as a consequence — not merely of individual wrongdoing — but of the influence of several general systemic features of the legislative process. Researchers at Harvard University’s Edmond J. Safra Center for Ethics have recently deployed the language of institutional corruption broadly in analyses of various other public and private institutions, such as regulatory agencies, banks, pharmaceutical companies, and think tanks. The states of affairs that researchers have identified as “institutional corruption” fall into four categories: 1) breaches of fiduciary duty, 2) fraud or otherwise unfair commercial practices, 3) destructive firm behavior, and 4) mistake, inefficiency, or incompetence. This Article reveals that only the first of these represents a true application of Dennis F. Thompson’s theory of institutional corruption, which was originally developed in the context of Congressional ethics. Research projects that deploy the terminology of institutional corruption in non-fiduciary contexts are certainly valuable, but they do not address the subject matter of institutional corruption, properly understood.

Keywords: Fiduciary duty, institutional corruption, corruption, commercial law, pharmaceuticals, banking, think tanks, Congress, professional ethics, corporate social responsibility, business regulation