Is this illegal or unethical???

Discussion in 'Growing and Managing a Business' started by hurrieup, Oct 29, 2011.

  1. hurrieup

    hurrieup
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    What do you call a person who owns a company, works for another company, and hires the company they own to do work for the company they work for???
    My first question,is this legal
    My second question is what would this be called
    And my last question would be where would I be able to research this specific interest??
    Thanks in advance...
     
  2. Dorfy

    Dorfy
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    It's called business, and happens all the time in the UK.
    The Glazers own Man Utd, as Manutd they employ other companies they own to do catering, security the lot, and it makes the glazers loads of money, perfectly legal in the UK
     
  3. Gary Barzel

    Gary Barzel
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    There is nothing illegal or unethical about this at all. As long as no one is cheating someone else, or scamming someone else here there's no reason why it can't be done. Also if the company he owns does great work and provides whatever the company he works for needs, why should it make a difference at all who owns the company?
     
  4. DaveB

    DaveB
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    This does happen all the time but you still must always consider conflicts of interest. In the situation you describe business could get ugly quick. For example:

    -Employee A who works for someone else but is in charge of signing deals and paying out contracts
    -Employee A only hires his own company and at an unreasonable rate and sub par work despite it not being in the best interest of the company he works for because he knows he can hide it from the bosses

    You have to tread very lightly when it comes to these types of business positions. I do not believe what you have described is as cut and dry as the above posters mention and Dorfy skipped over the entire fact that the person you describe works for someone else and is not the owner of all parties involved. This type of business scenario can get illegal and unethical very quickly but of course it would be situation specific and more details would need to be revealed.
     
  5. ArcSine

    ArcSine
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    This situation calls for the "When in doubt, disclose" rule of thumb.

    Hurrieup, the scenario you've described is acceptable IF the owners of the hiring company have been made aware of the employee's ownership interest in the hired entity, beforehand.

    This would hold true even if the employee doesn't have a full ownership of the hired company, but still has some financial interest therein.

    There might even be some disclosure requirements in the case where the employee was also a significant owner of the hiring company. If I have accepted outside investment capital in a company which I own (call it "ArcSine Corp."), it's likely that the investment agreements require me to disclose to my investors any related-party arrangements in which I've hired another company I own (or have a financial interest in) to perform services for ArcSine Corp. It's part of my fiduciary duty to my investors.
     
  6. hurrieup

    hurrieup
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    why should it make a difference at all who owns the company?[/QUOTE]
    By having this advantage this person is not just "cheating someone else" they are cheating everyone else trying to compete for bid's on contract's.I also didn't add that Mr.X is a silent owner of this company.I was pretty sure it was not illegal I was just hoping I was wrong because to me it's a very dirty advantage, unfair like cheating or back dooring.My main question is does this have a title like moonlighting, featherbedding etc... I know these terms are not associated with this situation but im looking for a title to this specific senario.All comments have been helpful and appreciated thanks again
     
  7. daytrader

    daytrader
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    lol it sound right to me as these companies are sure competitors but i actually find the person smart.
     
  8. ArcSine

    ArcSine
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    With respect to your second and last questions, it goes by various names, but a familiar one is conflict of interest. COI is itself a subset of a broader topic called the Principal - Agent Problem, Agency Theory, or Agency Costs.

    See here for the Wiki discussion of COI, and more to the point of your situation, scroll down to see "Self dealing" under the Types of conflicts of interest section.
     
  9. firstchoicecar

    firstchoicecar
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    Yes I think that is legal,All in the business,unless it is a contract.
     
  10. xanderlangley

    xanderlangley
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    This happens in many organizations. The only way to curb this is by binding the employee in to a legal contract having this clause of not working with other company.
     
  11. Denishverma

    Denishverma
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    Its seems B2B - Business to Business
    A person have own company and hire some company and get work from other company etc etc.
    There are many reasons behind it - to show what exactly?
    - What kind of business he/she doing - If its consultancy then its natural thing- He must doing his/her service to some company and hiring some employees or new companies?
    - Other franchise based company which they hire some new companies- small size companies actually. So, its not illegal in this case.
    - Most important thing is that- if the company doing all legal way like documentary and all things - whatever they are hiring new companies and getting contract from other companies then its not illegal- because its ethical way actually.
    But in case, if he is not paying Taxes and other documentary work - then its called pure illegal.

    For all information - you must consult a business lawyer - which can help you to understand all business concepts.

    Thank you
     
  12. MrPolarZero

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    I think its not illegal or unethical. It's just doing business. Before you do so you need to inform the company that you work for before doing this to avoid conflict.
     
  13. td2011

    td2011
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    I understand where you're coming from, this sort of business does seem quite underhand. Sometimes business just works this way and as long as it's not illegal then it can't really be stopped.
     

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