Susan, the CEO of ABC Company, which was involved in the production and sale of hair care products, decided to hire new employees to develop new product lines for a planned expansion into the dog shampoo arena. She was concerned, however, that the employees specializing in canine products might leave at some point, taking company secrets with them for use in competition with ABC. She, therefore,
required that the employees sign contracts containing covenants not to compete. Susan also consulted her in-house counsel, Sam, regarding the effect of some new regulations involving the use of certain chemicals in shampoo and conditioner. Sam told her, however, to ignore the regulations until some type of investigation of the company was started. Sam says that more than likely no one will ever check to see whether or not ABC is in compliance. Susan disagrees with his advice and decides to seek other counsel. Refer to Fact Pattern 1-1 . Assuming that Susan seeks to be a legally astute manager, which of the following is true regarding the advice given by Sam to ignore the regulations pending an investigation?
a. Sam is correct that it is unlikely that any investigation will ever occur and that the regulations may be safely ignored.
b. Sam is correct only if ABC has not had past investigations because if past investigations have occurred, it is more likely that the company will be the target of future investigations.
c. Sam is incorrect but only because safety regulations are concerned.
d. Sam is incorrect because a legally astute manager will take a proactive approach to regulations.
d
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