Philip Anderson Case
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1. Which of the investment alternative:
Provides the highest returns to the client?
Provides the highest profits to Stuart & Co.?
Alternative C provides the highest returns to the client. It has the highest average annual total returns over last 5 years (net of management fees). And its load or commission is moderate.
Alternative B provides the highest profits to Stuart & Co. It has the highest management fees, which direct benefits Stuart & Co., and the highest load or commission.
2. Which alternative should the top management of Stuart & Co. want Philip to recommend to his client? Is the companys control system designed to ensure that choice?
The top management of Stuart & Co. would want Philip to recommend Alternative B to his client, since Alternative B Can bring in maximum profits to the company.
The companys control system designed to ensure that choice. The management implement results controls. The demand on branch managers to push specific products is in-corporated into their annual sales budgets. And reword system also exists. So, if employees generate good results (selling specific products), they would get bonuses. It may cause employees to be concerned about the consequences of the actions they take.
3. If Philip recommends the highest profit choice (for the company), is he acting unethically?
Personally, I dont think that recommending the highest profit choice (for the company) is acting unethically. Because achieving maximum profit of a company is the ultimate goal of a company. And clients also can see a return on the investment from that choice. So, Philip is just doing what he should do.
However, from the perspective of clients, Philip doesnt act ethically. Obviously, clients hope that they can get help from Philip to achieve maximum return on investment. The goal wouldnt be achieved if they listen to Philip to invest on the highest profit choice (for the company). In this way, Philip is acting unethically.
All in all, Philip works for the Stuart & Co. primarily. So I dont think he is acting unethically.