Stock Ownership by Local Officials and Conflicts of Interest
House Speaker Nancy Pelosi has come up with a new defense of a
potential conflict of interest: "I'm investing in something I believe
in."<br>
<br>
What she was investing in, as "part of an entrepreneurial package," as
she said on yesterday's <span>Meet the
Press</span>, according to <a href="http://www.politico.com/news/stories/0808/12764.html" target="”_blank”">a partial
transcript</a>, was T. Boone Pickens' Clean Energy Fuels Corp., which
despite Pickens' emphasis on wind power, also invests in using natural
gas instead of gasoline for transportation, an important goal for
Pelosi.
<br>
<br>
Pelosi is involved in determining which energy alternatives will be
supported by Congress. It's good that she is investing her money (very
little of it in this case, at least for someone with her fortune) in
what she believes in, but this makes no difference in whether she
should either sell the stock or recuse herself from involvement in
bills that might help the company. This is why high-level politicians
often put their money in blind trusts.<br>
<br>
At the local level, this is less of a problem. Many fewer industries
are involved, so there are fewer investments that might create a
conflict of interest.<br>
<br>
In addition, local government conflict provisions usually require a
minimum 5% ownership in a company, which means that ownership of
publicly traded stocks is almost never considered a conflict. But is
this the right way of looking at the matter? Of course, an
individual won't own a large percentage of a publicly traded company,
but his ownership of a stock might constitute a large percentage of his
portfolio, which is all that really matters to him. It doesn't matter
what his stock ownership means to the company. The company does not
even have to know about the official's stock ownership for there to be
a conflict.<br>
<br>
From a local government point of view, Pelosi's ownership of Clean
Energy Fuels Corp. does not constitute a conflict. It's an
infinitesimal percentage both of her portfolio and of the company's
outstanding shares. More important is whether this ownership should be
disclosed, and how its disclosure should be treated by the news media,
which couldn't care less about such things as percentage of portfolio
or ownership.<br>
<br>
As soon as a potential conflict becomes a political football, the
appearance of impropriety is created. An official should consider this
when purchasing even small amounts of stock. You can't always do what
you believe in when you're a government official, especially one with
as much power as Nancy Pelosi or a mayor. This is the sort of
consideration that has no place in an ethics code, but should be an
important element of ethical leadership.<br>
<br>
Robert Wechsler<br>
Director of Research-Retired, City Ethics<br>
<br>
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