Many companies adopt policies that preclude key employees from owning stock in company suppliers.Companies establish this type of policy to:
A) Make it more difficult for key employees to leave their jobs to commence working for a supplier
B) Make it more difficult for key employees to share confidential trade secrets with a supplier
C) Prevent conflicts of interest that might be difficult to detect
D) Prevent conflicts of interest, even though they usually are easy to detect

Question

Quizplus · Accepted Answer

By precluding key employees from owning stock in company suppliers, companies can prevent conflicts of interest that could arise if those employees have decision-making power over purchasing from the suppliers. These conflicts of interest may not always be easy to detect, so a company policy helps prevent them from occurring in the first place. Option A is incorrect because the policy does not prevent key employees from leaving to work for a supplier, but rather from owning stock in one. Option B may be a factor in establishing such a policy, but it is not the primary reason. Option D is incorrect because preventing conflicts of interest is still important even if they are easy to detect.

Many Companies Adopt Policies That Preclude Key Employees from Owning