> An undisclosed conflict of interest is always a problem.
Can you help me understand why this is? If a known conflict of interest may or may not be a problem for the downside party why does that change if the conflict is unknown?
I can see how it can become a problem, and how the downside party is at a disadvantage but I’m not understanding why this is always a problem.
Also, this is the classic "it depends" in consulting.
Example where this went bad:
- "Acme Co." has an offshore/outsourced dev group in India called "Offshore Co.". Offshore does all of their software development, maintenance, infrastructure, etc.
- CTO who is employed by Acme wholly owns Offshore Co.
- PE Group ("PEG") buys Acme Co. and takes a controlling interest
- PEG decides Acme should do something strategic.
- CTO disagrees with strategic direction
- CTO operates Offshore Co and decides to hold the company hostage and directs his resources to stop maintaining the code, infrastructure, etc. anymore unless they do what the CTO says
PEG/Acme could simply stop paying Offshore/CTO but since they don't know how the code works, etc. they basically don't have a choice.
Can you help me understand why this is? If a known conflict of interest may or may not be a problem for the downside party why does that change if the conflict is unknown?
I can see how it can become a problem, and how the downside party is at a disadvantage but I’m not understanding why this is always a problem.