Power of a Contract

IHD was an international hospital company with hospitals in three Central and South American countries. Cliff, IHD’s chief operating officer, had worked for the corporation for more than eight years and invested countless hours making the hospitals profitable. IHD was a privately held company with big plans but minimal financial backing. Cliff had built and was supervising ten hospitals that offered general acute care. The hospitals differentiated their care from that of their competitors by offering an “American”-style clinic practice, hiring only US-trained physicians, and obtaining Joint Commission accreditation. Over time, this strategy was successful.

Cliff was dedicated to helping his company succeed. For instance, when he had to terminate a CEO in one of the larger hospitals, he could not find the right replacement immediately, so he moved to the location for six months to take the reins until he felt most of the major problems had been addressed and a competent CEO was found. He also traveled extensively and was on the road about 40 percent of the time, visiting different hospitals in all three countries. Cliff was the linchpin that made the company successful. At least this is what he was told many times by the majority owner and CEO.

Cliff had a good relationship with the CEO. They frequently met to talk about the hospitals’ operations and challenges. The CEO also gave Cliff the highest possible evaluations, and significant bonuses when money was available. Cliff felt he could trust his boss.

In Cliff’s ninth year with IHD, the company began seriously considering divesting the six hospitals it owned in one country because of the activities of corrupt officials there. This concerned Cliff, as it would leave him only four hospitals to run. While these discussions were ongoing, Cliff was approached by another US company that was buying a system of 11 hospitals in Chile and asked if he might be interested in becoming its divisional CEO and supervising its international facilities. After doing due diligence, and given the uncertainty with IHD, Cliff could see that this would be a great opportunity for him, as he would have a significant increase in salary and prestige.

Before accepting the offer, Cliff decided to meet with his boss to let him know about the planned move. He explained the circumstances, the offer, and his plan to resign and take the new position. The CEO responded by thanking him for his efforts but then pulled out Cliff’s employment contract, which included a noncompete clause. The CEO threatened to sue Cliff to enforce the contract and even enjoin the other company if he accepted the position, claiming that IHD would lose all its investment in him if he left.

Cliff was shocked that the CEO would treat him this way. The contract did have a noncompete clause for areas surrounding the company’s hospitals, but Chile was a long way from any of its current markets. He met with an employment attorney for advice and was told that the noncompete clause was probably not enforceable, because of the geographical distance involved. However, the lawyer told Cliff that a recent client in a similar situation had been sued, along with the hiring company. Rather than fight in court, the hiring company terminated the client’s offer of employment, which left him without a job. Cliff now had a dilemma. He needed to continue to work, but he felt betrayed by his boss.

Case Studies:

The student will complete each case study scenario and answer questions from the case studies outlined in the assignment using the guide below. One reference (within the last four years). Address all five areas below.

1. Introduction

• Present an overview of the key problems and issues in the case.
• Provide a thesis statement that summarizes your analysis in one or two sentences.
• Background, key facts, and issues

• Provide background information, relevant facts, and the most important issues.
• Tie to class materials, making sure to include how these issues impact the organization and individuals in the organization.
• Alternatives

• Outline two possible alternatives.
• Discuss the critical constraints.
• Explain the strengths and weaknesses of the alternatives.
• Proposed solution

• Recommend one solution.
• Explain why this solution was chosen.
• Support this solution with facts and class materials.
• Provide personal experiences, if applicable.
• Recommendations

• Determine and discuss the specific strategies needed to accomplish the proposed solution.
• If applicable, define what further information is needed.