Monday, August 20, 2012

Professions/Professionals: Conflicts of Interest

Consistent Altruism is a rare human commodity, probably impossible over a life-time, yet that's the standard implied by: Learned Professions owe a Fiduciary Trust to their clients.
That's All Clients, All the time.

It's simply stated and tested: Are Client Interests always placed before the Practitioner and Organisations? Yet its impossible without sustained, conscious, deliberate and co-ordinated effort by the whole Profession.

As a client or user of Professions, that's a reasonable standard for them to be held to.
As a Practitioner, Professional Organisation or Profession, it's a profound and never-ending challenge.

The overwhelming human behaviour is self-interest: often expressing as greed or avarice, but also in other "temptations", including sex, power and influence.
People may start with good intents, even living up to their ideals for a long time, but as Hollywood amply demonstrates, the road to hell is paved with good intentions.

Most people exhibit Altruism some of the time and often only towards related groups. How can that be leveraged to impeccable Professional Standards? It's not just a hard problem, but a diabolical one.

It's impossible for ordinary people to keep others interests before your own for an entire career, in the face of all direct temptations and, more importantly, preventing gradual, imperceptible declines especially in the face of "but everyone is doing it".

This is exactly what got the USA from a well regulated banking system in 1999 following the repeal of the 1933 Glass–Steagall Act, to a record financial collapse in well under 10 years.

All Professions have to address this central issue: How to monitor and deal with Conflicts of Interests.

The Iron-Cald Law of Quality applies: You cannot check your own work.

Which means ever Profession that needs to meet a Fiduciary Duty has to design, implement, staff and fund third party checking, investigation and monitoring systems (i.e. Governance and Audit), create Licensing, Compliance and Regulatory Bodies with real teeth and constantly train and check its Practitioners and Professional Organisations against those standards of Knowledge, Performance and Practice.

I'd argue that this Governance and Compliance function is more important for "Fiduciary Duty" Professions than Competency Testing and Licensing:
Without an absolute trust of Clients for the Profession's Services, it is fatally compromised and incapable of delivering good, let alone Adequate or Best Practice Services. If the Public won't come to you and don't trust you, it undermines your Mission/Purpose, devalues the Profession and pushes the Public to find substitutes.
In "mid standard" Professions two factors operate that limit the excesses increasingly found in Professions such as Banking, Finance, Financial Advice and Financial Audit which led to the record collapses of 2007/2008 requiring Public Bailouts:
  • By definition, only "high standard" Professions owe a Fiduciary Duty to their clients, the rest only owe "normal commercial and contractual responsibilities.
    • Consumer Protection bodies and legislation (ACCC and TPA/ACC in Australia) offer common law remedies (protections) to consumers against unscrupulous practitioners and organisations.
    • The Consumer Protection bodies actively monitor the business world (practitioners and organisations) for illegal or 'sharp' behaviour.
    • Cartels and price-fixing is illegal and is aggressively pursued by the ACCC.
  • There is seldom, in "mid standard" Professions, a Natural Monopoly of Practitioners, Professional Organisations or Professional groupings/Associations.
    • There are commonly large numbers of "best quality" practitioners and organisations for consumers to choose between:
      • The operation of a large Free Market prevents prices ratcheting up faster than inflation.
      • Market forces (Supply and Demand) act to regulate the number of Practitioners and Organisations offering the Service, including per location.
      • Sometimes there can be a "race to the bottom" caused by new entrants (e.g. Chinese Dental Laboratories) that undermine demand even for high-quality local practitioners.
    • Consumers often can find adequate Service Substitutes, either direct or within the Profession.
    • When the Service is only offered by a sole supplier, often the Public Service or a single Government Licensee, a Natural Monopoly and market competition cannot keep Service, Quality, Safety and Price in check.
      • Often in these situations, Audit and Governance ("Industry Watchdogs") organisations are formed in an attempt to restrain outrageous excesses.
So what's needed of Practitioners, Professional Organisations and Profession Groupings/Associations in "high standard" Professions?

The New Oxford Dictionary defines "Fiduciary" as:
involving trust, esp. with regard to the relationship between a trustee.
I use a more colloquial formulation:
Put the clients interests ahead of your own, every time, and in every way.
In Law, Business and Accounting, this problem is known as Agency Theory: How do you get an 'Agent', such as an employee, trustee or representative, to always put your Best Interests first, even to the detriment of theirs, either directly or through "Opportunity Loss" a.k.a. Insider Trading?

"High standard" Professions suffer multiple problems:
  • They are Natural Monopolies without good substitutes (think Law, Medicine and Public Service).
    • Where can the Public go if they don't like the Professions' Services? Nowhere...
    • The rich always have more options like privileged access to other countries and systems, which creates its own special Conflicts of Interest in both countries.
  • If they don't internally regulate, who can or will regulate them?
    • Nobody else can properly assess their performance, errors, omissions and over-servicing.
  • Because they are Natural Monopolies:
    • The Monopoly is usually explicitly granted by the State.
      • meaning there are Registration Boards and Licensing Examinations.
    • They are highly desirable as a choice of Work: well paid, "protected" jobs for life,
    • Numbers are tightly controlled,
    • There is intense competition for admission, often on criteria irrelevant to good Professional Practice, such as Academic prowess.
    • There is usually little effort in identifying desirable High Performer Professional characteristics and less effort or attention in selecting or evaluating against those criteria.
    • All emphasis is placed on The Barrier to Entry, gaining a License, close to none is spent on ensuring All Licences are of Equal Value (a 1910 notion of Flexner's), which implies frequent full competency checking, against all current Knowledge and Best Practices, to retain a license.
  • The traditional Learned Professions are backed by an extensive heritage of Common Law and Statues that create especial problems:
    • They usually embody, explicitly or tacitly, a No Harm or No Fault clause:
      • Medical Doctors, even unqualified frauds, are generally regarded as not ever having criminal intent to harm patients.
      • This unfolded in Australia with the "Dr Death" of Bundaberg case. Whilst strict Academic-quality Evidence indicted him with causing many deaths and huge numbers of injuries, the legal system requires direct causal Evidence, reducing the criminal charges to "harming" a very few patients and a 5- or 7-year sentence. For any "mid standard" professional acting this way, they would've been found guilty of multiple counts of murder and received a probable life sentence.
      • The 2011 sentencing of the "Butcher of Bega" underlines the on-going nature of this problem and jurisdictional inconsistencies.
  • If the Profession in a country systemically fails to regulate itself against Conflicts of Interest, particularly Financial, then you end up with the US Healthcare system:
    • 18% of GDP is spent on US Healthcare, versus 9% of GDP in Australia.
      • In 1960, the US spent 5% of ts GDP on Healthcare, almost a quarter current levels.
      • But Australians have universal Medical care access, out-live and have better health outcomes that US citizens, except for "Rescue Care", where the USA beats everyone.
    • Arnold Relman and Marcia Angell, editors from 1977-2000 of the New England Journal of Medicine, have run a very long campaign against Medical Profession "Conflicts of Interest", starting in 1980 with Relman's, "The New Medical Industrial Complex".
      • Despite unequivocal data and many high-powered, highly influential internal voices/activists, the US steadily increases the proportion of its whole economy spent on Healthcare and the proportion of uninsured people who are uninsured continues to climb.
      • Perhaps in-line with the increasing disparity between the Rich (top 1%) and the bottom 30-50%.
My observations on "high standard" Professions achieving near a uniform, on-going delivery of Fiduciary Duty to Clients are:

  • It's a war without end, every new generation has to discover their own solutions to the constantly evolving challenges. The Internet Changes Everything, including how Professions now experience Conflicts of Interest and the methods to address them.
  • Perfection in managing Conflicts of Interest, like Quality, Security and Safety, is a journey, not a destination.
    • If a Profession's Monitoring and Reporting systems are detecting nothing, they have failed.
    • Human Nature hasn't changed in the 400 years since Shakespeare, it's not changing soon.
    • The US "Medical Industrial Complex" that Relman and Angell have spoken against for 30 years versus the inexorable rise in Healthcare costs is definitive proof that without strong external intervention (from Politicians, pushed by the general public) a whole Profession can be wilfully blind to serious Conflicts of Interest.
      • Without specific Agencies with real teeth, nothing changes.
      • Simple, unequivocal definitions and tests are needed for the Qualitative Tests.
      • Absolute and rarely changed quantitative measures are needed to convert Qualitative goals to measurable, reliable data.
  • The NTSB/FAA example of separate, well-funded Investigation and Compliance, Licensing and Testing organisation staffed by selected dual-experts: they have to be both amongst the most Competent and Knowledgeable Practitioners and expert in Governance, Quality and Safety.
    • These organisations and their staff also take care to constantly monitor, test and train themselves, with periodic "refreshes", or systemic re-examination and redesign.
  • Initial Practitioner Selection and Testing and then through on-going Training, Testing and ReCertification regimes are necessary to even start to achieve high, uniform standards of "Fiduciary Duty" amongst Practitioners and Professional Organisations, along with Competency, Knowledge and Practices.
    • Initial Practitioner Selecting and Training needs to be targeted at selecting for High Performance Practitioner Traits and Characteristics.
    • Which implies they must be first researched, documented then kept current.
    • And explicitly not to default to mere Academic Prowess as the sole entrance test.
  • Fully public, Open and Transparent reporting of all Professional issues, Conflict of Interest and Practice of Individuals and Organisations is a minimum requirement.
    • Without full data, the Profession internally cannot know "how it is travelling" and be able to take corrective actions as necessary.
    • Without full public access, nepotism, cronyism and lax standards are inevitable and unavoidable. "We discipline our own, in private" is the hallmark of a Failed Profession.
      • It also invariably leads to a pernicious and pervasive Inversion of Loyalty and Duty: Professionals swap their perceived Duty to Clients to a Duty to Protect the Profession at the expense of the Public they serve.
      • This attitude of "We look after our own" is an absolute corruption of a Profession.  
    • Professions with strong Duty and Safety Cultures and full disclosure don't need expensive and embarrassing Royal Commissions or Courts of Inquiry: they are doing the job of ensuring Good, Competent Practice and reinforcing the Culture each and every day.
  • Structural elements have to be in place to prevent putting people in the way of temptation or compromise:
    • Laws and Regulations allocating Blame and Liability to individual Practitioners for Ordinary Accidents and Failures must be replaced with Indemnifying Individuals within Organisations, provided they have acted properly and followed all relevant processes and procedures.
      • Practitioners who exhibit unprofessional behaviours, should be stripped of all Professional protections and indemnities and be subject to stiffer Criminal charges and Penalties than the general public.
      • Failing in your Professional and Fiduciary Duty is not an extenuating circumstance, it calls for harsher treatment. Those taking more Responsibility must be held to higher standards.
      • Any Practitioner who self-reports Errors early on should be indemnified from censure for that event, though not for unprofessional action, such as repeating Known Errors, Faults and Failures.
      • Any Practitioner who fails to self-report or report anothers' Error should be metered out harsh penalties. The Professional Mandate requires everyone involved to "own up" to their mistakes - and to make sure everyone else does as well. "No Error goes unreported, ever."
    • Professional Organisations, and their managers, must be Criminally and Civilly liable for malpractice and failures in their Fiduciary Duties.
      • In order to Indemnify individuals within Organisations who act properly and professionally, legal liability and Onus of Responsibility have to transfer somewhere.
      • There also have to be powerful incentives for non-Practitioner Managers and Administrators to uphold the Professions' Fiduciary Duties, Competence, Knowledge and Practice standards and adherence to Quality and Performance Improvement.

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