Is it legal for a large company contracted with a smaller company to offer the COO of the small company a wage and benefits package?

I work for a small air ambulance company that is privately owned by 1 person and has a COO and a couple of managers then the rest

are hourly employees. Our company contracts with a huge, publicly traded air medical organization to provide us with pilots, aircraft,

maintenance, etc. Recently, the COO of our small company has been given a regional management position within the large company

with full salary, benefits, etc. while he maintains his salaried position within the smaller company. Is it legal for a large, publicly traded company to employ the manager of the company they contract with and make a large sum of money off of? From the outside, many people consider it a conflict of interest and it appears as though the large company is paying to keep the contract because of the money it brings in. Outside of legality, it does add a huge safety risk because the employees of the smaller company cannot get any adequate solutions to problems with the larger company due to the the COO’s position.

Asked on March 20, 2017 under Business Law, Mississippi

Answers:

SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 3 years ago | Contributor

It is perfectly legal. There is no such thing as a "conflict of interest" in the law for private businesses: they are allowed to have conflicts, to offer employment or other compensation to the employees or owners of other businesses to get or keep business, etc. Government employment has conflict of interest rules; there are certain rules against private businessesoffering bribes to government officials; and certain companies *voluntarily* adopt conflict of interest rules--though if they don't follow their own rules, there really is no mechanism to enforce them. But that's it in terms of regulation in this area. Private businesses decide how they want to do business, and that can include ethical conflicts, since the law does not enforce ethics or morality on employers.


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