CONFLICT OF INTEREST
Big Company is a large manufacturer of health-care products that is under fire from
the government to lower costs. Big Company has an excellent reputation and is widely
acknowledged as one of the best managed companies in the country. In spite of its reputation,
however, Wall Street has reacted negatively to government efforts to reform
the health-care industry as a whole, and Big Company’s stock price has lost 30 percent
of its value in the last year. To counter the effect of possible government intervention,
Big Company has just purchased Little Company, a discount health-care
supplier. Wall Street has greeted the acquisition with enthusiasm, and Big Company’s
stock price has rebounded by more than 10 percent since news of the acquisition was
made public.
While this acquisition could provide Big Company with a foothold in a growing
part of the health-care industry, a real problem lies in the mission of Little Company.
Little has made its reputation by providing objective health-care advice to its
customers. Now that it’s owned by Big Company, customers have expressed doubts
about how objective Little can be in recommending health-care products if it’s
owned by a health-care giant. Will Little Company be pressured to recommend the
products offered by Big Company, its parent? Or will Little Company’s advice
remain objective?
As the senior executive charged with bringing Little Company into the corporate
fold, how do you proceed? What are your obligations to Big Company, Little Company,
and the customers of both? What do you owe to shareholders and the financial
community? Are there other stakeholders, and what do you owe to them? What provisions
would you include in an ethics code for Little Company?
Speaking of ethics ... =(
Please understand that no one here will do your work for you. However, we will be happy to read over whatever you come up with and make suggestions and/or corrections.
Please post what you think.
Thanks for your response. I do not want you to do the homework for me. I guess I need a starting poing.
Your starting point is the first question. Then go on to the others.
Will Little Company be pressured to recommend the products offered by Big Company, its parent? Or will Little Company’s advice remain objective?
As the senior executive charged with bringing Little Company into the corporate fold, how do you proceed?
What are your obligations to Big Company, Little Company, and the customers of both?
What do you owe to shareholders and the financial community?
Are there other stakeholders, and what do you owe to them?
What provisions would you include in an ethics code for Little Company?
As the senior executive in charge of integrating Little Company into Big Company, you are faced with several ethical considerations and obligations to various stakeholders. Let's break down each question and discuss possible approaches:
1. What are your obligations to Big Company, Little Company, and the customers of both?
To Big Company, your primary obligation is to ensure the successful integration of Little Company while minimizing any negative impact on Big Company's reputation and financial performance. This involves leveraging the strengths and resources of both companies to create synergies and achieve shared goals. It is important to maintain the trust and confidence of Little Company's existing management and employees during the integration process.
In relation to Little Company, your obligation is to protect its reputation for providing objective health-care advice, even under the ownership of a health-care giant like Big Company. This entails establishing clear guidelines and safeguards to ensure that Little Company maintains its independence and continues to offer unbiased recommendations to customers.
Regarding customers, your obligation is to prioritize their interests and build trust. By assuring them that Little Company will continue to provide objective advice, you can alleviate their concerns about potential bias resulting from the acquisition. Transparency and open communication with customers are crucial during this period of transition.
2. What do you owe to shareholders and the financial community?
Your obligation to shareholders is to create value and maximize their returns on investment. The acquisition of Little Company should be seen as a strategic move to drive growth and profitability. You should establish a detailed integration plan that outlines clear objectives and milestones, ensuring that the acquisition enhances shareholder value in the long run.
Regarding the financial community, you have a responsibility to provide accurate information and maintain the credibility of Big Company. Openly communicate the rationale for the acquisition, highlighting potential benefits and addressing any concerns that might have affected the stock price negatively in the past. Consistent and transparent reporting will help rebuild confidence and attract support from investors and analysts.
3. Are there other stakeholders, and what do you owe to them?
Other stakeholders may include employees, suppliers, and the local community. It is essential to keep them informed about the acquisition and address any concerns they might have. By providing reassurance and transparency, you can help maintain their trust and confidence. Consider the potential impact on the workforce and take measures to ensure job security and fair treatment throughout the integration process. Additionally, evaluate the impact on local economies and community investment to maintain a positive relationship.
4. What provisions would you include in an ethics code for Little Company?
When creating an ethics code for Little Company, consider the following provisions:
a. Independence and objectivity: Clearly state the commitment to providing objective health-care advice irrespective of ownership. Ensure that recommendations are based on customer needs and the best available information, rather than biased towards Big Company's products.
b. Conflict of interest policies: Establish guidelines and protocols for identifying and managing potential conflicts of interest, particularly in situations where there may be competing interests between Big Company and Little Company.
c. Whistleblower protection: Encourage employees to report any ethical concerns or violations without fear of retaliation. Provide mechanisms for confidential reporting and investigate such reports promptly and thoroughly.
d. Transparent decision-making: Promote a culture of transparency and fairness in decision-making processes. Disclose any potential conflicts and ensure that decisions are made in the best interest of customers and stakeholders.
e. Continuous ethics training and education: Implement programs to educate employees about ethical conduct, covering topics such as conflicts of interest, customer trust, and professional integrity. Regularly reinforce ethical standards through training and communication.
By addressing these obligations and incorporating appropriate provisions into an ethics code, you can navigate the integration process while maintaining the trust of both customers and stakeholders. It is essential to balance the needs and interests of all parties involved, thereby upholding ethical standards and promoting long-term sustainable growth for the company.