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Recognizing and Managing Conflicts of Interest: the Case of Italian Listed Companies

Author

Listed:
  • Emiliano Di Carlo

    (Università degli Studi di Roma "Tor Vergata")

  • Silvia Testarmata

    (Università degli Studi di Roma "Tor Vergata")

Abstract

Conflict of interest could be a serious problem and may lead to fraud practices if it is not managed properly. The various remedies proposed by scholars and practitioners seem to assume that individuals and institutions have a very clear definition of what conflict of interest is and are fully aware of what are the different ways in which the phenomenon occurs, and its potential for harm. However, the term "conflict of interest" is used in many different and often inconsistent ways. Conflict of interest is still sometimes viewed as a crime. As a result of this pejorative or negative connotation, the term conflict of interest loses much of its utility in practice, especially in terms of fraud prevention. For that reason there is a need to clarify this concept, in order to better resolve the conflicts of interest when they cannot be avoided. We critically review the academic literature on conflict of interest for agents within firms. Then, we present an exploratory study, based on a content analysis of the Italian listed companies that sought to empirically assess the conflict of interest definitions provided by corporate codes of ethics. Finally, we suggest some remedies to manage conflict of interest situations.

Suggested Citation

  • Emiliano Di Carlo & Silvia Testarmata, 2012. "Recognizing and Managing Conflicts of Interest: the Case of Italian Listed Companies," DSI Essays Series, DSI - Dipartimento di Studi sull'Impresa, vol. 20.
    • Handle: RePEc:tov:dsiess:v:20:y:2012
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    File URL: http://160.80.46.16/public/igf/files/Ricerca/collane_riviste/20_Di_carlo_Testarmata_EPOD.pdf
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    References listed on IDEAS

    as
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    4. Sean Valentine & Gary Fleischman, 2008. "Ethics Programs, Perceived Corporate Social Responsibility and Job Satisfaction," Journal of Business Ethics, Springer, vol. 77(2), pages 159-172, January.
    5. Pamela Murphy & M. Dacin, 2011. "Psychological Pathways to Fraud: Understanding and Preventing Fraud in Organizations," Journal of Business Ethics, Springer, vol. 101(4), pages 601-618, July.
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    Cited by:

    1. Tatiana Dănescu & Maria Alexandra Botoş, 2018. "Analysis of Companies' Behaviour in Smoothing Conflicts of Interest," Annals of the University of Petrosani, Economics, University of Petrosani, Romania, vol. 18(1), pages 45-56.

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    More about this item

    Keywords

    Code of Ethics; Conflict of Interest; Ethics Programs; Fraud;
    All these keywords.

    JEL classification:

    • M14 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Corporate Culture; Diversity; Social Responsibility
    • L21 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Business Objectives of the Firm
    • D74 - Microeconomics - - Analysis of Collective Decision-Making - - - Conflict; Conflict Resolution; Alliances; Revolutions

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