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Ethics, incentives, and conflicts of interest: A practical solution

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Abstract

Couched in positive agency theory, it is shown that the straight-commission compensation system (SCCS) creates a conflict of interest between the agent's and the client's self-interests. Based on this, it is hypothesized that the SCCS will encourage agents to intend to act unethically towards their clients. Two hundred and forty five insurance agents in the U.S. were surveyed, with 59% responding. The results suggest that the SCCS does not significantly affect agents' ethical intentions, positively or negatively. This lack of empirical evidence may be due to the unique nature of the sample. Indeed, the company which enabled this sample appears to have found a practical solution to temper the potential negative effects of the SCCS in its commitment to selective hiring and marketing products which benefit both the client and the agent.

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Authors and Affiliations

  1. Dept. of Management and Organization, University of Southern California, 90089-1421, Los Angeles, CA, USA

    Nancy B. Kurland

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  1. Nancy B. Kurland
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Nancy B. Kurland is an Assistant Professor of Management at the University of Southern California. Before receiving her Ph.D., she spent several years as a straight-commissioned sales agent in the financial services industry. Her articles have appeared in theJournal of Business Ethics.

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Kurland, N.B. Ethics, incentives, and conflicts of interest: A practical solution. J Bus Ethics 14, 465–475 (1995). https://doi.org/10.1007/BF00872087

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