Conflict of Interest

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Posted by Jung Lowe on August 14, 1997 at 14:44:24:

We have some thoughts on your Decision section, from the viewpoints of
consultants and management since our activities may involve either
function in separate projects.

IB-EM as Consultant: Our Client is a relatively small manufacturer in a
niche market and requires the revenue derived to survive. Client has
had a long term relationship with us and we value this trust by accepting the
new assignment to help expand its business. At this point in time we have
already started and completed about one-third of budgeted work on every
significant area or subject matter of the total assignment by, "...doing
a market analysis, helping them re-define the segments, understand their
competitors' positions, and assess whether and how the technology might
be applied to other, untapped markets." Our policy is to refuse any
assignment from a direct competitor of Client. Therefore, we ought to
decline a new and similar assignment from the largest manufacturer and
explain that pending work projects would create various conflicts of
interests. The largest manufacturer's inquiry and its confidential
information received by us ought not to be disclosed to Client at
Only after the present assignment is completed and accepted by Client,
then we may consider acting as a broker for Client regarding its sale to the
largest manufacturer.

IB-EM as Small Company: We have had a long term relationship with
Consultant who is undertaking a very important assignment because the
findings could affect our survival in the niche market, and possibly
lead us to some new dynamic markets vital for our future expansion.
Consultant should primarily keep our interests in mind while working on the
assignment until we accept the findings. Thereafter, Consultant would be in an
ethical position to approach us and discuss the sale or merger of our company.

IB-EM as Large Company: We contacted Consultant because of its
generally good reputation. We disclosed some of our company's confidential
information to Consultant during preliminary discussions about the scope
and depth of the proposed assignment, and expected such information
would not be disclosed to any direct competitors at this time. Since
Consultant's policy clearly is not to accept assignments from competitive
companies, we understand that Consultant declined our assignment due to
pending work projects that would create various conflicts of interests.
We assume the work projects could involve one or more competitors in the
niche market and even potential new application markets. Since we are the
largest manufacturer in the niche market our legal obligation is to avoid
unfair competition and adhere to antitrust rules, so the refusal by
Consultant is probably going to help us avoid future problems arising
out of this project.

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