CONFLICT OF INTEREST

Question

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?

Answer 1

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.

Answer 2

Thanks for your response. I do not want you to do the homework for me. I guess I need a starting poing.

Answer 3

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?