Zack Zack Price is the CEO of Mesquite Munchies, Inc. (MMI), a group of four suc
ID: 2747734 • Letter: Z
Question
Zack Zack Price is the CEO of Mesquite Munchies, Inc. (MMI), a group of four successful restaurants in the Southwest. One member of the MMI board of directors, Sydney Carton, has a daughter, Camille Carton, who has just started Camille's Coverings, a business that supplies restaurant linens. Carton has approached Price to explain Camille’s business. Camille's Coverings has adopted an environmental emphasis in its operations as a way of countering the industry trend toward the use of paper products in restaurants. Sydney Carton initially recruited Price as CEO, was instrumental in having the board select Price, and is one of Price’s strong backers. Carton supported Price when other board members were impatient with his new procedures, policies, and changes. Ordinarily, when someone approaches Zack Price with information on a new supplier, he takes the information and refers it to the purchasing/supply area or refers the person directly to the manager of purchasing. In this case, Zack personally presented the information to MMI’s purchasing manager, Ellie Washburn. Zack offered Ellie the Camille's Coverings brochure and card and explained, “She is Sydney Carton’s daughter. She graduated with a degree in marketing from the State University last June and now has her own firm. See what you can do. Our contract with Sara’s Settings is up for renewal. Maybe we can do something.” Briefly discuss what might be "good" or "not so good" about these facts.
Explanation / Answer
As the CEO of MMI, Zack Price has certain legal duties as well as responsibilities. Zach Price has a fiduciary duty towards the owners and shareholders of MMI. The main fiduciary duties are duty of care, the duty of loyalty and the duty of disclosure.
The duty of loyalty means that the CEO has to always consider the best interest of the company and its owners/shareholders. Business decisions should be taken in order to generate more value and to generate incremental value. Business decisions cannot be taken on the basis of personal interests.
In this case, Zack Price is clearly favoring Camille's Coverings, a firm owned Camille Carton. Camille Carton is the daughter of one of MMI board of directors. Zack was recruited by Camille's father and Mr. Carton has always supported Zack.
As the CEO of MMI, Zack has created a situation of advantage for Camille Carton. The business decision that is being taken here is not being taken keeping in mind the best interest of MMI. Rather, it has been taken to oblige Mr, Carton and to return the favor. This is wrong and Zack should have considered parameters like cost, quality, credit terms etc. (which he has not done in this case). There should be a proper comparison with Sara’s Settings in terms of price, quality, etc. The supplier that meets the specifications of MMI should be selected.
So, Zack is clearly trying to further the case for Miss Camille Carton's firm and this is a conflict of interest. Zack is not keeping in mind the best interest for the owners of MMI. These are the "not so good" elements of the case.
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