Ethics and professional conduct in business

Rambotix Company has two divisions, the Semiconductor Division and the X-ray Division. The X-ray Division may purchase semiconductors from the Semiconductor Division or from outside suppliers. The Semiconductor Division sells semiconductor products both internally and externally. The market price for semiconductors is $100 per 100 semiconductors. Dave Bryant is the controller of the X-ray Division, and Howard Hillman is the controller of the Semiconductor Division. The following conversation took place between Dave and Howard:

• Dave:I hear you are having problems selling semiconductors out of your division. Maybe I can help.

• Howard:You've got that right. We're producing and selling at about 90% of our capacity to outsiders. Last year we were selling 100% of capacity. Would it be possible for your division to pick up some of our excess capacity? After all, we are part of the same company.

• Dave:What kind of price could you give me?

• Howard:Well, you know as well as I that we are under strict profit responsibility in our divisions, so I would expect to get market price, $100 for 100 semiconductors.

• Dave:I'm not so sure we can swing that. I was expecting a price break from a sister division.

• Howard:Hey, I can only take this sister stuff so far. If I give you a price break, our profits will fall from last year's levels. I don't think I could explain that. I'm sorry, but I must remain firmmarket price. After all, it's only fairthat's what you would have to pay from an external supplier.

• Dave:Fairornot,Ithinkwe'llpass.Sorrywecouldn'thavehelped.

Avoid thinking emotionally, business is not an emotional place, there is no concept of fairness. Division Presidents are hired to maximize the profit of their division unless the company creates a different culture.

So, setting aside emotion and aspirational attributes, what are the complexities of this situation and what are the alternatives?

Was Dave behaving ethically by trying to force the Semiconductor Division into a price break? Comment on Howard's reactions.