The Hertz Boys 6. Do you believe that there is an ethical problem with the relat

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The Hertz Boys

6. Do you believe that there is an ethical problem with the relationship of buyer and seller between Paul and Harold Hertz? If you believe there is, explain what the problem is and why it is an ethical problem. If you believe there is not a problem, explain why not.

7.   What should Charlie do about Paul and this situation?

Charlie Wilson, purchasing director for Jay Manufacturing Company, had to make a decision that would tax the judgment of a Solomon. Charlie had found that Paul Hertz, Jay’s top buyer, was purchasing components from New Technology, Inc., a firm of which his brother was vice president and chief of research and development.

Jay had never had a conflict of interest problem before, since the company bought most of its metals, plastics, and chemicals from giants of the industry or other widely held companies. Wilson was surprised that there was any family connection between one of his buyers and a supplier, but then he had not figured that such a relationship could enter the picture on Jay Manufacturing Company contracts. At a recent monthly dinner for purchasing and sales managers, Paul had introduced Wilson to his brother, Harold. "Charlie, this is my brother

Harold, the gee-whiz type of the family. He's the brains behind the control switch we're putting in the ncw 'Bluejay' line. Harold developed it for us right on our kitchen table over coffee after I told him what our problems were. It’s great being able to tap a local outfit for research and development help. This development has saved us a good 35 percent a year on that product and given us a real jump on the competition!"

The product Paul Hertz had brought in had really met a definite need and added another cost cutting laurel to Paul's already impressive record in value analysis and all-around good purchasing know-how. But Wilson began to have qualms about the situation, even though Paul's performance on the contract-and on all others-was above reproach.

He discussed the problem in conference with several fellow company executives.

Kingsby Blackstone, company attorney: “This is a serious case, Charlie. That buyer has entered a conspiracy to defraud this company by routing orders to his brother’s outfit. He probably owns a good chunk of New Technology stock besides. We should fire him and take quick action to recover damages. You have to prohibit buyers from having any interests in supplier firms."

Roger Goodbody, manufacturing manager. "You're making a mountain out of a molehill! I grew up with he Hertz brothers and they are solid citizens;. We’re darn lucky to have one of them working for this firm. Besides, only Paul Hertz could have gotten that genius interested in our problem. It's a darn good thing when our buyers can get that close to a supplier."

Charlie Wilson: "If it were anybody else but Paul, I'd be suspicious of his intentions. But I am sure he has acted in the best interest of the company, even though the situation does look a bit fishy. If we unfairly crack down on him, it will look as if we are punishing initiative. Also, if we kick up a fuss over the situation, aren't we trying to close the barn door after the horse has been stolen? I'll check into the situation a bit further and talk it over with you next week.”

Explanation / Answer

6.

I think that there is an ethical problem with the relationship of buyer and seller between Paul and Harold Hertz. There may be the case that buyer starts demanding a specific type of product that will be available with a particular seller with whom he has relationship. This will defeat the very purpose of fairness and equality in the business. The buyer has long term relationship thus he can force the Jay’s company to buy the product input from Harold’s company thus benefitting his brother’s company.

7.

In this case, Charlie should observe the order that has been ordered by Paul’s company and try to understand how those demands can benefit the Harold’s company. If any relationship is found then it is to be observed that how other buyer’s are responsive towards Harold input and on the basis of which decision about termination of contract with seller can be taken.

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