Global Investors

Case Summary:

This case illustrates a transfer pricing problem in a service setting, an investment management company. The issues and solutions are not as obvious as in a manufacturing setting where one division produces parts that are transferred to another division for further processing.The case shows a broad range of issues that can be raised when negotiating transfer pricing. These include cost allocation methods, managers' interests and perceptions, organizational roles and conflicts, taxes, ownership structure and manager compensation, and ethics. The case also illustrates that there are often no obvious, clean solutions to transfer pricing problems.

Case Questions:

1. What transfer pricing model is in the best interest of Global Investors, Inc.?
2. If management evaluation and compensation were the primary purpose of the transfer pricing system, how should the choice of the transfer pricing method be made?