| Global Investors, Inc. |
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| General Management |
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| Management Control Systems |
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| Organizational Behavior |
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Intermediate |
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11 |
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Available.
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$9.00
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I have a basic “gut” discomfort with the proposition that investment
management as a profit-making function exists only in New York.
- Alistair Hoskins, chairman/CEO, Global Investors, London
Bob Mascola, CFO of Global Investors, Inc. (GI), took a last look at
his notes as he walked into the conference room where he and the other
members of the transfer pricing task force would meet with Gary
Spencer, GI's CEO. The transfer pricing task force supervised by
Mascola was meeting with Spencer to discuss the latest transfer pricing
models that the task force members had identified. Mascola hoped the
meeting would result in a final decision about the transfer pricing
method that should be used to recognize profits in GI's subsidiaries.
Mascola knew that the meeting would be difficult. On repeated
occasions, two of the members of the transfer pricing task force,
Alistair Hoskins and Jack Davis, had engaged in heated debates about
which transfer pricing model should be selected. Hoskins, chairman/CEO
of GI's London office, believed that regional offices-or at least the
regional office he led-should be treated as largely autonomous profit
centers so that the value created by these offices would be reflected
in their financial statements. However, Davis, GI's corporate vice
president, argued that virtually all of the investment strategies used
to manage the clients' funds were designed by the research team located
in New York. Consequently, Davis believed that the revenues generated
by investment activities should be recognized in New York, even if a
few investment services were offered by a regional office. The essence
of Hoskins' reply to Davis was that expressed in the epigraph.
THE COMPANY
Global Investors, founded in 1965, was a privately-owned investment
management company headquartered in New York. A number of directors and
executives based in New York, Spencer among them, held majority
ownership of GI's outstanding stock. GI, started as a domestic equity
investment manager, had grown to manage US$160 billion for a variety of
clients, including corporations, insurance companies, public and
private pension funds, endowments, foundations, and high-net-worth
individuals.
Assignment
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?
3. How should Bob Mascola run the transfer pricing task force meeting that will include GI's CEO?
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