Wednesday, March 30, 2005

HBS Case Study Input

I don't only dish out business advice, but I can also help out on those pesky business school case studies. Harvard Business School student Mark sends me the following since it relates to my particular industry:

I just finished reading a case for our Leadership and Corporate Accountability class that I thought you would be interested in. It's titled Martha McCaskey (HBS 9-403-114 by Van Dissel and BJ Margolis) and it's about a consultant (Martha) who is asked to pay a former employee of a semiconductor manufacturing firm to supply her cost and process data on their new chip. The data requested is surely proprietary, as it includes things like detailed cost information, salaries, number of people in each category, equipment, overhead allocation, raw materials, etc. A competitor has hired Martha's firm to get the data, and has offered to double the normal fee and future similar projects if they can get the info from the former employee.

I was wondering what your perspective is on this subject within the semi industry. Is this common practice? What would be the likelihood and penalties of being caught? What are the risks for Martha? As she is a consultant and not the former employee, are there legal and professional ramifications (aside from the obvious, i.e. negative ethical stigma) of taking advantage of someone's moral flexibility? Is this the kind of thing that could get around in the industry and limit future employability?

I haven't got my hands on the actual case yet, but based on this information, this looks like a great case for discussion. Stuff like this really happens a lot in the tech world - more than most people realize. Here are my $0.02 on the case:
o Obviously from an ethical perspective Martha has to make a personal decision on whether she wants to dreg up this information and be this kind of consultant. But I don't think there would be any stigma attached if it became public since her industry is sort of rough and tumble. Choir boys need not apply.

Even if her industry were a little more on the up-and-up, the sad thing you realize about business after a few years is that bad reputations are not an obstacle to getting a new job or getting promoted. The fact of life is that the bottom line matters, and people who deliver on the bottom line without breaking the law - even if personally unethical - have no problems in business, which is what I assume is going to be one of the points of the case. People talk about business ethics, but the real issue is legal/illegal (which digresses to a point about the law being "flexible" and the line between legal/illegal moving, which I talked about before).

o From a legal standpoint I think Martha is generally okay for the following reasons:
1. She is not a party to the NDA between the ex-employee and employer. I am not a lawyer, but I don't think the person who receives confidential information who is not a party to the NDA can be held liable.

2. The information would have to get back to someone who cares. Let's assume she did prepare the report for the competitor. The only way the original company is going to find out is if someone from the competitor or consultant squeals back to the company in question, which would mean someone else was breaking an NDA, so a leak back to the company itself would have to be "tainted" information.

3. If the original company did find out the report existed, they wouldn't necessarily know where the information originated from, which the consultant probably wouldn't have to release unless it came down to discovery in a lawsuit. A lawsuit is remote since it wouldn't be worth it to the original company. So there is a "plausible deniability" thing going on if someone found out ("we got the information from valid sources").

4. The only way this would be a problem is if the information in question became public domain (i.e. blogged about it, in the news, etc.), which is very, very remote. This opens up the issue of the current Apple lawsuits against bloggers, which is somewhat similar in this case to what is being released, but not exactly because in that instance the information is being publicly reported.

The other legal issue would be if the government were somehow involved (if there were a government contract involved or national security). Otherwise, I don't see any real legal risk to the consultant.

The bottom line is that the only thing holding her back would be a personal code of conduct. I personally wouldn't do something like this since I operate according to a set of ethics, plus I think business is more fun if you don't cheat. Without this code of conduct, however, I don't think there anything really stopping her from doing it and making a buck.

The only other thing I would add is that in tech, things move very, very fast. The financial information listed (overhead, costing, etc.) really wouldn't give a competitor any usable information - it would have to be technical trade secrets, marketing plans, customer lists and the like to be of any real value. Even then, if the information is more than six months old, it would be pretty stale, so the counter argument is that giving the information to the competitor wouldn't be hurting the original company that much. And the more time that goes by the less useful the information is.

Does anybody else have any input?

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