Conflict of Interest in Corporate Finance Harvard Case Solution & Analysis

Conflict of Interest in Corporate Finance Case Study Solution 


The case illustrates the importance of identifying the conflict of interest in a particular situation where both the parties involve in some situation that would benefit them. In the situation, it seems that both acts unethically and perform the illegal way to benefit for their concern. Therefore, there are various examples of such conflicts. However, the targeted situation under the particular case is the conflict raised in the activity of performing the loan agreement in an illegal manner.

The scenario defines the unethical actions performed by the related parties in order to benefit for short term. A relevant example of the corporate finance issues involved in the agreement made by the parties that would either perform for their own interest or try to violate the agreement with some concerns(Shah, n.d.). Under the case, a person who is engaged in a loan agreement with the bank in order to purchase the particular property and make the rent agreement with the other party to take the profits on a monthly basis.

Conflict of Interest in Corporate Finance Harvard Case Solution & Analysis

However, the intentions of the person are to approve the loan agreement through making the feasibility report of the certain property and give to the bank for approval. The issues arise if the bank would not approve the loan that could not enable the party to enjoy the certain benefits over time. So, in order to reduce the risk, the person would likely contract with the financial planner because his duty is to create such reports that are suitable for approval from the bank.

Therefore, the financial planner would be able to perform the feasibility report based on his demand for the fee he charged for it. Thus, if the situation involves an inability to pay the fee to the planner according to his demand and time, then it can be said that an intimidation threat would arise and indicate the increasing level of conflict of interest. On the other side, if the person would demand a proper feasibility report for approval whether the report is performed on the illegal way then it can also indicate a conflict of interest because the financial planner and the person are desperate to approve the report for investment in the property.

So, the first issue is the person’s interest involved in the related issue because he has to approve the report otherwise his long-term benefit would be eliminated. On the other side, the financial planner is also desperate to provide the accuracy level of the report to the bank because he is eager to receive his fee. If his report would not be approved, then the person might not pay the fee to the planner.

Now, this particular issue would arise and indicate intimidation threat to the financial planner because the person would not be satisfied with his work and might not pay the fee. Therefore, the particular situation clearly shows that the conflict of interest is a common practice in the corporate concerns. Any of the selected parties might involve in the certain situation and create the conflict that would not be able to overcome easily.

Problems in the conflict of interest

There are various forms of conflict of interests in the corporate environment, but the current situation shows that three forms are executed in the scenario. The conflict of interest is through the self-interest, intimidation and the advocacy threat. The situation is elaborated with the highlighted forms of threats..................

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