When Perception Is Reality: Blurring Public and Private Sectors : City: Mayor Riordan is right to bring in new voices to advise his Administration. But even the appearance of conflict of interest must be avoided.

Richard Riordan was elected mayor of Los Angeles to put the city back on its economic feet. Toward that end, he is appointing business people to positions of authority, adopt ing businesslike approaches to mu nicipal finance and considering privatizing many city services. Along the way, he has blurred the line separating the public and private sectors--raising questions of ethical propriety and of conflict of interest.

Part of the problem of bringing these two worlds together is now being explored in discussions between the mayor’s office and the Los Angeles Ethics Commission over the legal status of volunteers and of privately raised money in the mayor’s quest to reorganize city government. The task forces are being put together by William Ouchi, a UCLA management expert and Riordan adviser. His salary, as well as those of other members of his staff, are paid through private donations.

Usually, the vehicle for citizen input in L.A. city government is through service on commissions. Commission members, by law, must disclose how their private interests relate to their commission work. The procedure allows us to recognize potential conflicts of interests.

The Riordan task forces will issue public reports and recommendations. Like the Christopher Commission and the Cowan Commission, their members are appointed by the mayor and their costs paid for privately.

But there is an important difference between Riordan’s task forces and the commissions. The study of policing methods and of ethics to guide political behavior--the missions of the Christopher and Cowan commissions, respectively--did not, presumptively, hold out the possibility of economic rewards.

But task-force members who end up urging the sale of Los Angeles Airport, for example, may benefit financially. Sweetheart deals between the business world and City Hall are not unknown in Los Angeles history.

To be sure, an infusion of new ideas on how to run the city is needed. But the boundaries of volunteerism in government must be defined to embrace the standard that even a question of a conflict of interest risks credibility--a more important priority in government than efficiency will ever be.

The Riordan Administration faces an added burden because the mayor comes out of the private sector and defeated a candidate who stood for inclusion. While it is natural for Riordan to turn to his business associates and the constituents who elected him, there is also an expectation, because of the office he holds, that he needs to involve others. Communities that did not support him legitimately ask whether he will be their mayor as well.

The more enduring question involves the relationship between the public and private sectors. There is a strong tradition that business is more efficient--and government would be better served if it behaved more like business. The other tradition believes the function of government is to ensure the fair distribution of goods and services, and that unfairness--or the appearance of unfairness--threatens the integrity, indeed, the legitimacy of government. Normally, we don’t face up to the fact of how antithetical these traditions are. Yet, Riordan would meld the two, arguing that much is gained in the process.

That may be true. But fairness means giving everyone the same chance by setting up rules, and that inevitably leads to bureaucratization--because rules reflect general needs, and almost everyone has an individual problem.

Los Angeles is overrun by rules and decision-making authorities. Government needs to be simplified--but not at the expense of fairness.

We need a more efficient government, especially in this time of economic stress. But the Riordan Administration, so far, seems insensitive to the differences between the public and private sectors.

They may well fear that disclosure will have a “chilling effect on the willingness or ability of persons to come forward and offer help,” as one top official put it. But even he went on to say, “Perception is more important than reality in this business.” Running city government, without acknowledging the importance of credibility, risks running it into the ground.

How do you bring outside views--both from the top and the bottom of the economic ladder--into government? How do you reach out to community leaders in business, or even at the community level, without jeopardizing the sense that those not asked for input could give it, if they chose? There is a difference between expressing an interest and having a conflict of interest. Let’s hope that the discussions going on between the Ethics Commission and the mayor’s office will draw that line clearly and find some way of institutionalizing vehicles for participation that are fair and credible.