Questions, Not Answers, on Conflicts of Interest
College leaders have been criticized in some quarters for not taking conflicts of interest seriously. The largest association representing higher education took a first pass at remedying that Friday with a working paper aimed at helping campus administrators deal with real and perceived financial conflicts.
But the document from the American Council on Education, which generally shuns strong stands in favor of laying out questions campus officials should ask in contemplating their own situations -- avoiding, for example, the list of do's and don'ts contained in the code of conduct adopted under pressure last year by the National Association of Student Financial Aid Administrators -- is unlikely to satisfy those who were hoping for a full-throated statement of principle.
The "Working Paper on Conflict of Interest" was prepared by a panel of college presidents, association heads and lawyers assembled by ACE after a September meeting on conflicts of interest. The council had gathered higher education officials to discuss whether and how they should respond, broadly, to the perception that conflicts of interest were rife or spreading in higher education. The conversation and the intensified attention to financial conflicts were prompted largely by 2007's various inquiries into the student loan industry, and by the perception that some of the same conflicts of interest inherent in the financial aid world exist in other college and university operations.
After the September meeting, David Ward, the departing president of the American Council on Education, said he expected the working group he appointed to create not a list of things to do and not to do, but a list of “diagnostic questions” about potential conflicts, framed in such a way that “if the answer to [the questions] was no, that’s an indication that you might have a problem” with a particular situation. ACE's desire, he said, was to give campus officials a document to “illuminate principles” that should guide them as they confront arrangements that might seem to fall into a gray area.
The document released just before 5 p.m. on Friday, which was produced by an eight-member panel whose members are listed below, hews closely to that approach. Because colleges have such diverse structures, cultures and missions, the panel writes in its introduction, "[t]here is thus likely no one conflict of interest policy that would fit all of the institutions. Accordingly, the purpose of this statement is not to prescribe a single approach to conflicts management. Rather, this statement aims to provide tools that each institution may use to inform its own thinking about these issues."
The paper starts from the premise that colleges must, to meet their many needs while remaining financially viable, engage in partnerships and financial arrangements with outside entities, including businesses, that may create real or perceived conflicts of interest. And it notes that the environment in which the legality and, importantly, the morality of those arrangements will be judged can change over time, as some financial aid officials believe they did in the student loan world over the last few years.
"Transactions once deemed acceptable may now be the subject of questions about whether, for example, they are at arm's length," the panel writes.
While the paper generally avoids dictating what colleges should and should not do in specific instances, it does lay out a set of "basic precepts that are universal or nearly universal among higher education institutions" to "form a baseline for management of conflict of interest." Foremost among these precepts is the idea that a faculty or staff member or trustee must disclose "known significant financial interests" in an outside organization with which the institution is affiliated, and that institutional officials should review those disclosures and have "procedures to address identified conflicts."
That is as far as the committee went in laying out a common view of how colleges and universities should approach conflicts of interest; the rest of the paper lays out a long set of questions that institutions might ask in reviewing various situations, including their relationships with vendors ("Under what circumstances, if any, is it appropriate for an administrator, faculty member, or trustee to own stock or have another financial interest in a vendor?"); their conflicts policies ("Under what circumstances should institutional policy give the persons disclosing conflicts of interest discretion to decide whether a particular interest needs to be disclosed?"); and institutional conflicts involving commercial arrangements ("Does the transaction entail the actuality or perception that the institution is profiting to the detriment of students or other constituents?")
Barmak Nassirian, associate executive director of the American Association of Collegiate Registrars and Admissions Officers, said he found it "more than a little surprising that the paper doesn’t clearly enough recommend avoidance of actual or apparent conflicts where that is at all practicable, and appears to view disclosure -- even of avoidable and more appropriately avoided conflicts -- as meeting an adequate threshold of ethical conduct."
He added: "The word 'avoid' does not appear in the document, suggesting that even avoidable conflicts are okay as long as you disclose them. And it says nothing at all about the adjudication process, only that an institution should have a process for dealing with conflicts. I would have preferred to see a set of requirements that get triggered once a conflict gets identified."
Ada Meloy, general counsel of the American Council on Education and chair of the working group that produced the conflict of interest paper, said she believed the document embraces "more than just transparency" as a common principle -- such as that "personal benefit is almost always an individual conflict of interest" -- but that panel members purposely avoided stating "absolute rules" for a variety of reasons.
First, the panel wanted to respect institutional autonomy, and "not say, 'Here is a one-size fits all approach,'" Meloy said. Second, members wanted to be "careful that we didn't go off in directions that would cause the whole group to decompose" over differences of opinion on specific details. And third, ACE wanted to avoid setting out precedent that could be cited by someone suing a college and looking for "standards or commonly held activities in the trade." "If we were to proclaim that this is the absolute way things should be, that could seem as if we were saying what the rule of law should be for our institutions."
The members of the working group were:
- Steve Dunham, vice president and general counsel, Johns Hopkins University
- Sean Fanelli, president, Nassau Community College
- William (Brit) Kirwan, chancellor and CEO, University System of Maryland
- John Lippincott, president, Council for Advancement and Support of Education
- Patricia McGuire, president, Trinity University (D.C.)
- Ada Meloy, general counsel, ACE (chair)
- John Walda, president, National Association of College and University Business Officers
- Nancy Zimpher, president, University of Cincinnati