One of those Ethics Questions - Theory vs Practice question, opinion, another, company, example

draz

I take this from another thread to keep it smaller…
This is a typical example of unclear question/answer in my opinion:
1) Lautenschlager […] is preparing to issue a somewhat negative report on the company that will include a “sell” recommendation. […] The CEO of the company is highly upset […] Lautenschlager’s BEST course of action is to:
a. Publish the report as written, regardless of the objections by company management.
b. Publish the report with the analysis intact, but remove the “sell” recommendation.
c. Revise her analysis of the company in light of management’s objections to the report.
d. Allow company management to make revisions to de-emphasize the negative factors but maintain the “sell” recommendation in the report.
So clearly the focus is on “Independence”, not “misrepresenting” etc. But we do not know why the CEO is upset. Would you really publish as written?
d.) doesn’t sound good.
But a,b, and c *could* be ok.
c.: If objections are factual, why not revise the report? Maybe the CEO is right? Maybe he has some reasons to be upset?
b.: If omitting the “sell” recommendation, do you misrepresent something, really?
In light of getting a lot of trouble, you might try to be a bit more diplomatic, without stating the untruth?
a.: If you’re right and the CEO is not, you could stay with your opinion.
I guess the best candidates are a and c.
What is the proposed answer?

KungFuPanda

I’m sure A is the CFAI answer. But C seems best. Especially since the CEO is “highly upset”. That probably indicates some kind of material error in facts, or misrepresentation of the company in the report.

rohitdoshi

I would say a.
It is obvious that management of the company will object, but if an analyst listens to them, he would no longer be objective.

yospaghetti

> I’m sure A is the CFAI answer. But C seems best.
Yep, that’s the necessary “tell the teacher what you think he wants to her”-strategy.
:-)
Anyone know the “official” answer?
Is this really from CFAI or from Schweser/Stalla?

tikfed

> I would say a.
> It is obvious that management of the company will
> object, but if an analyst listens to them, he
> would no longer be objective.
Think about it in a real situation.
Your CEO thinks you’re an idiot.
You would NEVER publish the report as it is.
And being diplomatic without stating untruths could save your ass…

Iginla2010

“Forumreader”. I agree completelly. I also understood that the CEO the question reffers to is the ceo of the company the report is about.

Analti_Calte

It is A. This question is captured from the 49 questions posted on the CFAi site.

giants2010

re-reading it also seems to me to be the CEO of the company the research is written about. does indeed make more sense.
find this out in 1.5 minutes :-*

jbaldyga

A junior analyst would need to have some brass balls to p!ss off a CEO and lose a client for the research firm.
I’m not implying that the analyst should do anything unethical, but lets face it, if the CEO is upset, try to find out where some disagreements lie and see if it is possible to perhaps lighten the blow of weak ratios with some qualitative aspects from intangible assets, workforce, etc.