Determine the nature of the investor’s actions
The investor actions are well within the business ethics. From the word go, his intention is to purchase a business that is on the verge of collapse and using his business management skills, turn it round and hopefully make a handsome profit once he sells it. This would be the goal of any investor and as such, the investor in the case provided has clearly spelt out his goal beforehand. Having identified Cabinet Manufacturing Limited, a firm faced with financial difficulties, the investor then seeks the services of a business consultant so that he can assess how worthy Cabinet Manufacturing Limited is as an investment.
This is a crucial move because it would help the investor to determine whether the business would be worthy of his time and money and since he is not a business consultant, he has sought for professional help in the form of a business consultant. The investor then goes ahead and authorizes Harris, a business consultant, to approve the buying of the company’s shares, if at all his investigation indicate that this is a good purchase.
Harris recommends that the investor should also engage the services of Danzil, who happens to be a consulting engineer, so that he can assist with determining the condition and value of the company’s equipments. The two discover that Cabinet Manufacturing Limited is a viable business opportunity, as long as the manufacturing processes can be improved further and the equity-to-debt ratio of the company changed. Danzil and Harris establish a corporation and present an offer to purchase the firm to the present owners. They inform the investor that the business is worth $ 3 million but they present the owners with a purchase offer of $ 3.1 which is accepted before the investor can make a second offer. Upon realizing that Harris and Danzil also happen to be the principle shareholders of the corporation whose offer was accepted, the investor decides to sue the two for damages.
The plaintiff’s arguments
In bringing charges against Harris and Danzil, the investor could argue that the two took advantage of his situation to gain information about Cabinet Manufacturing Limited and upon realizing its business potential they decided to make an offer to purchase it themselves. The investor could also argue that the two business consultants knew all along what the intentions of the investor were, and that they failed to inform him of the actual value of the firm’s shares so that they could gain a competitive advantage with their improved offer. In addition, they presented their counteroffer to that provided by the investor (which was slightly better by the way) within a very short time, without giving the investor time to make a second offer.
Defendant’s arguments
The defendants could argue that their actions were within the legal framework because they provided the investor with all the information that he needed to know regarding Cabinet Manufacturing Limited. In addition, they could also argue that like any other investor, they saw an opportunity and decided to pursue it. In any case, the current owners of the business were at liberty to accept or reject their offer. They did not prevail on the owners to accept their offer and in any case, they had won after competitive bidding.
The decision
The two business consultants, Danzil and Harris, were supposed to advise the investor on whether it would be worthwhile to invest in Cabinet Manufacturing Limited. Through their valuation, they were supposed to advise the investor accordingly. However, they got interested in the business when they realized that it would be a lucrative investment and decided to make their offer as well. To this end, their actions were unethical as they did not advise the investor on the true worth of the company, which is why his offer was rejected. They also approached the real owners without the knowledge of their client and this amounts to breaking of client-consultant confidentiality.