Case 1 Conflict of Interest - Big Company is a large

Case #1 -- 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% 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% 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.
Questions:
1. Will Little Company be pressured to recommend the products offered by Big
Company, its parent? Or will Little Company’s advice remain objective?
2. As the senior executive charged with bringing Little Company into the corporate fold,
how do you proceed?
3. What are your obligations to Big Company, Little Company, and the customers of
both?
4. What do you owe to shareholders and the financial community? Are there other
Stakeholders and what do you own to them?
5. What provisions would you include in an ethics code for Little Company?