The Language of "Influence"

"[Standard & Poor's's ratings have always been] uninfluenced by conflicts of interest."

—Spokesperson for S&P, in response to a government lawsuit saying that S&P's ratings have been influenced by their conflicts of interest. Quoted in today's New York Times

The problem here is the language of "influence." There is no disagreement over whether S&P had, and still has, conflicts of interest with companies whose bonds it rates. A rule prohibiting rating the bonds of any company with which S&P was otherwise doing business or which was paying S&P for its services, would mean that there would be no talk of influence. The payment and relationship would be sufficient evidence to require withdrawal from participation in the bond rating.

But §3.6 of S&P's rules of conduct (see below), like so many conflict of interest provisions, uses the language of "influence." This allows the company to admit it has a conflict, but insist that the payment and relationship that created the conflict had no influence on them. That is what everyone says. It is how we all see ourselves. No one can buy us, no one can influence us, we make decisions without respect to our relationship with those involved. And who can prove otherwise?

Therefore, using the language of "influence" makes a conflict provision almost meaningless. It does not prevent misconduct, and it makes it difficult to enforce against misconduct. That is why both companies and politicians prefer this language of "influence," and why it is used so often.

3.6 Standard & Poor’s will establish and maintain written policies and measures to (a) identify and (b) eliminate, or manage and disclose, as required by law or regulation or where otherwise feasible and appropriate, any actual or potential conflicts of interest that may influence Standard & Poor’s Credit Rating Activities as well as the opinions and analyses of Standard & Poor’s or the judgment and analyses of its Analysts.

Robert Wechsler
Director of Research-Retired, City Ethics

---