Legal Question in Employment Law in California

Stock ownership-a conflict of interest?

Part of the business conduct policy of the company I work for states: Any activity which even appears to present such a conflict must be avoided or terminated unless, after disclosure to the appropriate level or management, it is determined that the activity is not harmful to the Company or otherwise improper.

A conflict or the appearance of a conflict of interest may arise in many ways. For example, depending on the circumstances, the following may constitute an improper conflict of interest:

Ownership of or an interest in a competitor or in a business with which the Company has or is contemplating a relationship (such as a supplier, customer, landlord, distributor, licensee/licensor, etc.), either directly or indirectly, such as through family members.

I bought common stock in a company (MDT) in ?6, ?8?and ?9 that was not a competitor. MDT completed the acquisition of a potential competitor in Aug of 2001. They are a potential competitor because we may move into their area of business.

Now I am being asked to sell my stock, which I do not want to do. My holdings in MDT are a small portion of my total holdings. How can I proceed?


Asked on 1/11/02, 1:25 pm

2 Answers from Attorneys
Michael Kirschbaum Law Offices of Michael R. Kirschbaum

Re: Stock ownership-a conflict of interest?

While employers may legitimately have rules that prohibit activities in conflict with their's, employers may not interfere with lawful conduct away from the business that is not in conflict. The fact that there is a potential for a conflict of interest in the future is a real stretch for this employer to justify requiring you to sell your stock.

This mater should be handled by attempting to negotiate with the appropriate person. If and when a true conflict arises, such as where you own stock in a competing company (and I assume you are in a position where a true potential conflict arises), it may then be necessary to sell your stock.

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Answered on 7/09/02, 12:23 pm
Terry A. Nelson Nelson & Lawless

Re: Stock ownership-a conflict of interest?

I can't give specific advise unless representing you, but in general the company should not be able to force you to sell stock unless you have enough to be a substantial owner in the other company, or if the ownership creates a real conflict. Call to discuss details. 714-960-7584

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Answered on 7/09/02, 7:20 pm


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