Ethics Rules

How to Keep Professors Honest

105845229 Mishkin Bloomberg
Former central banker Fred Mishkin sparked a rethink for economic analysts, but did they go far enough? Source: Bloomberg

When it comes to Germany’s biggest case of tax fraud in decades, it wasn’t just the usual banking suspects that did wrong. A number of law professors also played a rather dubious role in the so-called “cum-ex scandal,” a form of illegal dividend stripping that cost the German taxpayer tens of billions of euros in lost revenue.

Law professors were specifically hired by bankers to write expert reports and even publish academic articles claiming that the tax tricks, which involved buying and selling millions of shares around the time dividends are paid out, were legal. They made no mention of their financial conflicts of interest. But then, there was no law or code of ethics requiring them to do so.

The financing may have been secret, but the problem wasn’t. Back in 2013 the German Science Council warned that the rise in consulting work was jeopardizing the academic independence of legal experts. They cited the German association for economists, which had added rules on conflicts of interest to its ethics code in 2012, as a model of good practice.

It took Hollywood to really shake up the profession on both sides of the Atlantic.

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