Bias and Conflict of Interest

Topics: Conflict of interest, Fiduciary, Board of directors Pages: 2 (797 words) Published: September 21, 2008
In order reduce healthcare costs; a Fortune 500 company opted to implement a self insured health program. This program is basically a high deductible insurance ($50,000 to $75,000) program which the company would pay the deductible, before transferring responsibility to a 3rd party insurer. The company contracted with Aetna for this program. Subsequent to this contract, a Sr. Vice President of Aetna was appointed to the board of directors of the Fortune 500 company. He was also appointed to the Audit committee which is a subset of the board of directors. Responsibilities of this financial auditing committee include review of the financial integrity of company’s accounting and review of its health insurance programs. SEC rules and regulations require each publicly traded company to have independent members on their board of directors and committees. SEC also requires publicly traded companies to have their audit committee’s filled with independent directors. Per the letter of the law, this clearly was not the case. The Board of directors of the Fortune 500 company felt that there was no conflict of interest with having Aetna’s Sr. VP on their on the board of directors because the Fortune 500 company’s business only represented 2% of Aetna’s business. This company’s officers and directors was sued by a “shareholder derivative action” for breach of fiduciary duty per SEC Regulations. During the process of suing the company, the Judge refuses to certify lawsuit because amount in controversy amounted to less than 5% of profits of the Fortune 500 company. He also had significant preference towards these types of suits and felt that they were frivolous. This judge is an elected official. The single largest contributors to the judge’s election campaign were Aetna.

A conflict of interest is a situation in which someone in a position of trust, has competing professional or personal interests. Such competing interests can make it...
Continue Reading

Please join StudyMode to read the full document

You May Also Find These Documents Helpful

  • Conflict of Interest Essay
  • Essay on conflicts of interest
  • Conflict Interest Essay
  • Conflict of Interest Essay
  • Conflict of interest Essay
  • Conflict Interest Case Essay
  • Principals-Agents' Conflict of Interest Essay
  • Bias Research Paper

Become a StudyMode Member

Sign Up - It's Free