Question

Humongous Inc. is a large publicly traded manufacturer of healthcare products. It has a reputation as one of the best-managed companies in the U.S.A. However, the company recently came under fierce criticism by the government for charging exorbitant prices to consumers. Investors have responded negatively to fears that the government would reform the health care sector and make an attempt to reign in prices. As a result of these fears, Humongous’s stock price lost 30% of its value in the past year.

To try to appease the government and counter possible government intervention, Humongous just purchased Teeney Corp., a discount healthcare supplier. Investors have responded positively to this acquisition, pushing Humongous’s stock price back up by over 10% since news of the acquisition became public.

While Humongous Inc.’s acquisition of Teeney Corp. could provide Humongous with a foothold in a growing part of the discount health care sector, a real problem lies in the mission of Teeney Corp. Teeney has built a successful business by providing consumers with unbiased, objective health care advice and guiding them to the best prices available. However, now that it is owned by Humongous, Teeney’s customers have expressed doubts about whether Teeney can remain objective and unbiased in recommending the best health care products at the best price.

Assume that you are a manager charged with bringing Teeney Corp. into Humongous Corp and helping the two companies to integrate. Please answer the questions below. Please make sure to break up your answer into paragraphs, starting a new paragraph whenever you start a new idea.

Are you facing an ethical issue? Why or why not? Do Teeney’s customers have reason to doubt the future objectivity of the company? Why or why not? If this is a problem, what steps can you take to mitigate that problem? (This answer could be about two paragraphs).

As a manager charged with bringing Teeney into Humongous, what are your ethical and legal obligations to Humongous? To Teeney? To the customers of both? What do you owe shareholders? Are there other stakeholders? If so, what do you owe them?

Answer 1

Note: This response is in UK English, please paste the response to MS Word and you should be able to spot discrepancies easily. You may elaborate the answer based on personal views or your classwork if necessary.

(Answer) If I were a manager at Teeney, there would be an ethical dilemma only if Humungous would make it so. There would be two possibilities after the takeover, one would be where Teeney would retain its company principles and the other would be where Humungous would cause Teeney to change. If Humungous lets Teeney have the same ethical principles, it would take a simple release or announcement to the customers and stakeholders to assure them that Teeney has stayed the same. With time, the ethical work by Teeney would simply speak for itself.

Another scenario is where Teeney would have to change to the precepts of Humongous. This is where it would cause an ethical dilemma to assure the public that Teeney still offers low prices when in fact the truth would be just the opposite.

If Teeney retains its old principles and the divisions in principles are maintained between the sister companies, there is no reason for the customers to doubt the company. However, if Teeney changes to better fit the standards of Humungous, the customers would eventually realise that they are actually not getting the cheapest products and medical advice that they could possibly find. This is when Teeney will have given into the ways of Humungous and the objectivity of the company would be at stake.

If Teeney changes for the worse, there could be no steps taken to mitigate the problem as deception in business is eventually published. However, if Teeney manages to retain its principles, it would require a simple assurance to the stakeholders and customers that Teeney still provides the same services. Perhaps a local press release and a budgeted marketing campaign would be enough to keep the business stable for as long as the customers might see for themselves that the service is still the same.

What is ethical isn’t always what is good for business. As a manager of Teeney, the first priority would be the stakeholders and customers at Teeney’s. In this case, it would be one’s ethical duty to provide these consumers with the truth. If Teeney has absorbed the business model of Humongous, then it should be hinted in the campaign and announcements that follow the takeover. If Teeney has managed to retain their old business model, the truth, in this case, would be good for business as it would be a reassurance to the customers that the prices would still be lucrative.

As a manager of Teeney, one’s duty would firstly be towards the customers and stakeholders of Teeney and then towards the parent company – Humungous. In all levels of one’s priority, the delivery is that of the truth. Therefore, depending upon the new business model, whatever the truth may be would have to be eventually delivered to the consumers.