Columbia’s New Conflict-of-Interest Policy

Christopher Mayer, a senior vice dean at Columbia University’s business school, is one of the country’s top scholars on real estate. He has written dozens of influential papers on housing, and policymakers often seek out his views. He is also a part-time research director, and board member, at a hedge fund, Oak Hill REIT, which manages over $100 million invested in commercial real estate, like malls, hotels and office space.

Like many academics, he walks a line between the roles of public intellectual and that of private citizen, who has financial interests outside of academia. For example, though Mayer urged Congress to support the wounded housing market during the financial crisis, he says his testimony presented no conflict of interest with his side-job in commercial real estate. But when Congress later asked him to testify on commercial real estate, he declined the offer, worried that people would believe he was trying to influence policy for his own benefit. “I am EXTREMELY careful about protecting my integrity,” Mayer wrote in an email.

The potential for conflict of interest is common in the business school world, which draws heavily from the private sector and expects faculty to provide students with current, real-world expertise. But disclosure of those conflicts can be spotty. While Mayer has disclosed his outside work for the past decade, he wasn’t required to. And many people in the business school community don’t, he says. “There are many people who haven’t done things as well as they should have,” said Mayer in a phone interview. “There are people who have been in the wrong on this.” Like many other top business schools, Columbia’s current conflict-of-interest rule only requires disclosure of research funding.

But outside jobs, industry talks and positions on boards will all need to be disclosed under Columbia Business School’s new conflict-of-interest rule, starting July 1st. The business school passed the new rule last month to address public concerns about academics in the wake of the financial crisis, said Mayer who chaired the Conflict of Interest and Commitment Committee, which drafted the regulation. “When an academic stands before congress they are viewed with more credibility than a CEO, who we know is just there to make money for his company,” said Mayer. “There is a concern in the public, that some academics may be pursuing policies that they have a financial stake in.”

Columbia’s answer to that concern is to disclose the potential conflict-of-interest, rather than make policies to avoid it. “We don’t live in some ideal world where industry experts aren’t involved in outside activities,” said Mayer. “But if someone is advising policymakers, and they are sitting on a company board, you want to be able to take that into account.”

Like ethics rules at other major business schools, Columbia’s new regulation doesn’t prohibit scholars from consulting for companies with a financial stake in policy. Mayer said he fought earlier university efforts to screen outside sources of income. “If you say that people can’t do XYZ, you run the risk of the losing expertise,” said Mayer. “It is a terrible idea and the decisions [on what work is allowed] would end up being political.” Mayer and others on the committee said that keeping industry ties is essential to effectively train business leaders. The new rule will limit outside work to one day per week.

The new policy was created after the Oscar-winning documentary Inside Job sparked public scrutiny over the role of academics in the financial crisis. The film showed several confrontational interviews with Columbia business school Dean R. Glenn Hubbard and Professor Frederic Mishkin, who were grilled over perceived conflicts of interest with the financial industry. “The film brought this up as an issue,” said Awi Federgruen, another member of the faculty committee that wrote the rule. “It was a factor, but it wasn’t the only factor…it told the public that there may be gaps in what is being disclosed.” Mishkin and Hubbard have both said, in earlier statements, that they had disclosed the outside work and funding discussed in the film.

The seven-person committee, created at the start of 2011, was initially divided over whether faculty members should disclose dollars amounts for outside consulting and speaking engagements. Ultimately, the committee decided that revealing fees would be too big an invasion of privacy. As long as the public knows of the outside financial stakes, people can evaluate an academic’s credibility on an issue, committee members said. “The public can put two-and-two together without knowing if it’s five bucks or ten bucks,” said Federgruen.

But Dean Baker, co-director of the Center for Economic and Policy Research, a liberal think tank, said that letting people know outside salaries is the best way to tamp down on potential conflicts. “If people feel embarrassed about the money, the answer is to not take it,” said Baker

Gerald Epstein, an economist at University of Massachusetts in Amherst, circulated a petition, calling for broad disclosure across the entire field. The policy, if adopted by the American Economic Association, would be similar to the Columbia’s new rule. But revealing conflicts of interest, Epstein said, is not enough. Epstein would like to see strict limits on the amount of income professors are allowed to make outside of school. “Universities pay tenured faculty quite well and that should be their main source of income. That is how you keep integrity,” said Epstein. “You don’t want the tail wagging the dog.”