CONFLICT OF INTEREST
Big Company is a large manufacturer of healthcare 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. Despite the firm's reputation, however, Wall Street has reacted negatively to government efforts to reform the healthcare 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 healthcare 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 give Big Company a foothold in a growing part of the healthcare industry, a real problem lies in the mission of Little Company. Little has made its reputation by providing objective healthcare advice to its customers.
Now that it's owned by Big Company, Little Company's customers have expressed doubts about how objective it can be in recommending healthcare products if it's owned by a healthcare 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?