Kathleen Edmond, Best Buy's Chief Ethics Officer

Those of you who follow the investment pages have likely seen “expert networks” make headlines in recent weeks. A relatively new concept, expert network services first appeared about 15 years ago to help investors – particularly institutional investors like mutual funds, hedge funds and investment banks – learn more about a particular industry and thereby gain an edge in the market. For example, esteemed heart surgeons may receive several hundred dollars per hour to discuss the potential merits of Drug X or Treatment Y, all for the benefit of investors who are paying handsomely for those expert insights.  For example, Gerson Lehrman Group (http://www.glgroup.com) is a well known expert network service with an estimated 250,000 experts covering eight industries ranging from health care and real estate to energy and consumer goods.

 The expert network firms, of course, have strict rules forbidding the exchange of non-public information and their experts maintain they always know what can and cannot be shared with investors.   Nonetheless,  Federal investigators are increasingly concerned that expert networks can serve as a conduit for the transfer of insider information to investors. If true, those investors are being given a powerful – and highly illegal – advantage over other investors.

 Best Buy is not immune to the expert network phenomena as several of our employees have been approached to participate in networks on the retail sector. Much like the Mayo Clinic in the health care industry, however, we have taken a firm stand on the issue and do not allow our employees to participate in expert networks. We have even gone so far as to notify the network firms that our employees are “off limits” and should not be solicited to participate. The logic behind this decision is simple. No matter how guarded someone might be, we believe the opinions expressed by an employee in such a setting would be inherently influenced by “inside” information not otherwise available to the investing public. My questions for you:

 1)    Do you believe it is possible for an employee to express personal opinions as an industry expert and not be influenced in some way by “insider” data? Why or why not?

 2)    Some experts – particularly in the health care sector – admit to participating in networks as means of drawing attention to their fields of study. For example, a research scientist may use the network as a forum for educating investors about the disease s/he is fighting – thus attracting investment dollars to that cause. Do you see any ethical ramifications to this practice? Please explain.

 3)    Do you know your employer’s point of view on expert networks? If not, who can you ask to find out?