People vs. Profit

People vs. Profit

 

An independent lab went to various dollar stores and tested their products for dangerous chemicals. These stores had 81% of the products contained levels of hazardous chemicals that can be linked to birth defects, learning disabilities and cancer. Two of the stores response came back stating that they have policies and procedures for a third party testing lab to meet regulations. However, they also stated they required their suppliers to certify they have tested and meet compliance. 

The ethical issue here revolves around who is it to decide that profits for shareholders are more important than the health and safety of the human race. As Thomas Jefferson said, we have unalienable rights, absolute rights given to us by God; specifically the Declaration of Independence provides "protection from cruel and unusual punishment". Individuals are unknowingly being punished by the contamination in these items. Knowingly exposing individuals to chemicals that can cause long term injury and even death, is not how we ought to act. Money is not a motivator to violate another humans rights, based on the lessons in the Bible. One individual is not any more important than another, and their health and safety should not be negotiable for money. 

            The ethical theory of egoism would apply to the way companies are handling the allegations. Ethical Theory and Business (page 12), discusses psychosocial egoism as an explanation of human conduct, stating that individuals are motivated by to act in their own perceived self-interest. Ethical egoism states that an individual makes decisions based on the promotion of their own well-being over that of everyone else’s, which is how the companies in question are behaving (Ethical Theory and Business, page 14).

The companies in question have not reacted to the allegations in an appropriate fashion. A company that sources products from countries known to have a history of using dangerous chemicals, should act responsibility and have additional testing done by an impartial source. Accepting the certification from suppliers stating they follow the guidelines, may legally take off some of the accountability of the companies; however they are still responsible to their customers and their employees’ safety. 

The more ethical route that I would propose is that the company should request the results from the organization and have the same products independently tested to verify their stated results. If the results are consistent with the toxicity claims, they need to take steps to refine their supply base. Working with suppliers that will meet the standards set forth in the Environmental Protection Agency's The Toxic Substances Control Act of 1976. When sourcing to external countries, you can experience a variety of barriers, including communication misunderstandings. Companies should be required to perform sample testing to ensure that the product being sourced is in compliance with the applicable US laws.

If one company is allowed to “slip” by the laws, then the potential for others to begin cutting corners to save money is high. While they may profit, society may suffer.

 

Sources:

 http://www.abc6onyourside.com/news/features/top-stories/stories/Dollar-Store-Dangers-Study-Finds-Dangerous-Chemicals-in-Many-Products-77740.shtml#.VN2cwPnF-So

 http://www.bizjournals.com/louisville/blog/morning_call/2015/02/dollar-store-products-have-an-unsafe-amount-of.html 

References

 

Beauchamp, T. (1979). Ethical theory and business. Englewood Cliffs, N.J.: Prentice-Hall.

 

Ethical Evaluation of Insider Trading Scheme.

The SEC recently uncovered an insider trading ring that began in 2009 involving a high level employee at Applied Materials. Using confidential information obtained from Applied Materials and Rovi, Christian Keller advised a Barclay’s analyst to make stock purchases, prior to news releases, allowing them to collect profits, which were not legal.

The Securities and Exchange Commission defines “insider trading” as conduct that can be classified as legal or illegal. Legal conduct takes place when employees, corporate & directors buy and sell stock in their own company, reporting these sales to the SEC. Illegal conduct is explained as buying and selling stock while being in possession of nonpublic information or individuals who have been “tipped off” to the information and engage in securities trading. If it is both legal & illegal, is it an ethical issue? This question appears to be the source of many debates, as the legality of a situation does not always make it ethical or unethical.

The first issue that is noticeable is the issue of rights. If the individuals that have the advantage of proprietary information and use that advantage to their gain, they are assuming their right to succeed is higher than the traders whom are not privy to this information. Who is to decide that one person’s rights are higher ranking than other individuals? All individuals are subject to the base equal rights in today’s society, the postmodernism thought of everyman for themselves is encroaching upon our society in a negative light more and more each day.

                The second issue that can be caused is economic inequality. Individuals that have an unfair advantage can avoid large monetary losses or can gain large sums of money, dependent upon the information given, while those without that information do not have the same advantages.

Insider trading that is done in an illegal manner is unethical. There are a few ethical issues raised by insider trading, these issues are addressed in the Theory of Justice, contributed to by John Rawl.  This theory is based on inequalities, fairness and impartiality in relation to social contracts; it is a form of a rights based theory. (Ethical Theory, pg 608-609). The right to equal information in the securities market is touted on various blogs as being a first priority for those involved in the industry.  John Rawl states that social contracts should be made under a “veil of ignorance, essentially decisions should be made for the good of everyone.

Rawls theory agreeable as he theorizes that when entering into a social contract decisions are to be made without knowing what side of the issue you will be one, allowing decisions to be made that will not provide an advantage to one group over another. This is how business should be done, allowing equal opportunities to all involved. This does not mean that everyone involved will have an equal outcome; however they will go into the playing field on equal ground, and come out on top or bottom through their actions and decisions made. By using information gained in an unfair manner in order to obtain an advantage in the market, Keller and his associates were acting in a highly unethical manner.

Companies that are engaging in a market industry such as securities trading assume they have employees that are trusted to not use confidential information for personal advantage, as these acts reflect upon the company.  Companies that are publicly traded need to ensure that their employees are properly trained on their policy of confidentiality and sharing of resources as well as the legal implications faced in these rules and regulations are not followed.

In order to avoid these types of allegations publically traded companies should ensure that confidential information that could affect their stock value is only distributed to those whom MUST know. They individuals trusted with this information should be required to sign a non-disclosure agreement. Obviously this is NOT a fail all method, however it will provide a refresher to employees that they are not to use company information for personal gain; they cannot claim that they were unaware of the legalities. Although, morally this should be ingrained.

Source: http://dealbook.nytimes.com/2015/02/05/s-e-c-accuses-4-in-silicon-valley-of-insider-trading/?_r=0

Uber – Ethical Obligations to Consumers

Uber – Ethical Obligations to Consumers

Uber, a San Francisco based, alternative to tax services, is being sued for the alleged rape of a passenger that used their service in India. The suit states that Uber did not maintain basic safety procedures for its passengers. Uber advertises they have the best background checks available for its drivers; however the driver in this case had multiple arrests for rape and assault in his background. The case alleges Ubers business structure has allowed them in the past to not be liable for what happens from the time of pickup to drop off; any incidents are the driver’s responsibility alone.

What are the ethical issues at the forefront of this case? Does a company have an ethical responsibility to consumers of their product and/or service? Does profit matter more than safety? Do they have an ethical responsibility to advertise with truth and fact or with half-truths and fluff?

Corporations do have a responsibility to their shareholders; this is to turn a profit. Making money is the primary backbone of business. They have a responsibility to their employees to provide a safe non hostile workplace (Beauchamp, 1979, pg 232).  There is also a corporate ethical responsibility to consumers; this is to provide honest information that will allow them to make an educated decision (Beauchamp, 1979, pg 265). This company provided inaccurate and non-complete information to their customer, which allowed them to feel safe. The lack of concern for customer safety over profit is highly unethical and leans towards the utilitarianism school of thought, that there are no natural rights and all actions are motivated by pleasure.

I agree with the philosophy of John Locke, which is frank in its statement that there is a law of nature given to us that provides the morals we should abide by. Basic human rights are protected by the moral code given to us in the Bible, as well as the governmental laws that govern our lands. When a company offers a service, they should be held liable for the actions performed by agents of the company. The driver was not acting on his time, we was acting on the companies time.   Ethical Theory and Business discusses the reasonable expectations of a customer and the vulnerability of the customer, who does not have the full knowledge needed to make a crucial decision (Beauchamp, 1979, p265-267). It is unethical for a salesperson to withhold information that could be important to the decision a customer makes.

The company in this case is taking the necessary steps to repair the breaks in their system and ensure the safety of their customers. I believe that the strategy they are taking in this case will result in an improved product with stronger ethical implications. This is entirely contingent upon the fact that they follow thru with the plans they are making. We as human beings should feel safe in our daily lives, if we are unable to use corporations known worldwide for basic services, such as transportation, without being able to trust their advertising and claims, we are just contributing to the utilitarianism views taking over society.

Source: http://www.reuters.com/article/2015/01/29/us-india-uber-lawsuit-idUSKBN0L22NP20150129

 References:

Dunfee, T., & Donaldson, T. (2995). Toward a Unifed Conception of Business Ethics: Integrative Social Contracts Theory. The Academy of Management Review, 19(2), 252-284. Retrieved January 30, 2015, from http://www.tulevaisuus.fi/keko/KURSSITIEDOT/jo11_kalvot/DonaldsonDunfee_1994.pdf

Beauchamp, T. (1979). Ethical theory and business. Englewood Cliffs, N.J.: Prentice-Hall.

McDonald's - Virginia Employees Allege Ethical Misconduct

McDonald’s is in the news again, and this time their food is not under scrutiny. The worldwide company is coming under fire amidst a lawsuit filed this week by 10 ex-employees in Virginia, claiming they were victims of sexual and racial discrimination. This discrimination caused them to be terminated from their positions at McDonald's owned by franchisee Michael Simon. There are multiple ethical issues to be considered here. The issues of racism, sexual harassment, as well as the issue of at-will employment states and the issue of the viability of McDonalds Corporate being held responsible for the actions taken by supervisors at restaurants operated under a private franchisee.

In regards to the issue of racism and sexual harassment, these are moral issues. However, morals and ethics are commonly becoming interchangeable in today’s society. Title VII of the Civil Rights Act of 1964 prohibits discrimination based on an individual’s race, color, religion, sex, or national origin, this encompasses racism and sexual harassment. Ethical Theory and Business teaches us that these types of discrimination fall under the category of applied ethics. Racial and sexual discrimination are unethical, and a violation of human rights, however there are proper procedures to take when feeling discriminated against. Employers are responsible for creating a safe work environment for their employees. Ethical Theory and Business shows us that employees cannot disobey orders or walk out in order to avoid discrimination. Employees must file complaints through the proper channels, via their supervisor, their supervisor’s boss, human resources, or corporate human resources. In this case the employees state they contacted corporate and no action was taken, at that time they filed the law suit against McDonalds. Beyond Integrity – a Judeo Christian Approach to Business Ethics reminds us that we should respect human dignity, this includes the presence of a discrimination free workplace.

The state of Virginia is an at-will employment state, meaning an employer does not have to provide a valid reason for the dismissal of an employee, and an employee does not have to provide reasoning for leaving their position. Is this ethical? Scholar Richard A. Epstien, promotes the tradition as being fair and efficient, as discussed in Ethical Theory and Business. I would agree with this school of thought as there are initiatives in place to protect employees against wrongful termination. Wrongful termination restrictions vary state to state, however federally employees are protected from being terminated due to their race or their unwillingness to participate in sexual advances from their supervisor or boss.   

Based on the lessons presented in the texts mentioned above, it would appear that McDonald’s Corporate has not acted in an ethical fashion. (Contingent upon the validity of the allegations in the case). The corporation promotes diversity and a safe work environment. Although the locations in question are franchised owned, the amount of control the corporation holds over franchise holders requires them to have a stake in the wrong doings of their employees. For corporate to have been notified by the employees that they had been subject to unethical practices and to have not acted upon the allegations, with an investigation allows for a valid law suit. McDonalds has a published Whistleblower policy, allowing for employees to notify of any discriminatory or unethical behavior, without fear or retribution. It is my belief that if the allegations are found to be legitimate, McDonalds should be required to provide the dismissed employees with monetary damages in the amount of the lost wages incurred, and they should be reinstated to their positions in McDonald’s restaurants, not owned by the franchisee in the case.

Source: http://www.reuters.com/article/2015/01/22/us-mcdonalds-lawsuit-discrimination-idUSKBN0KV1TV20150122

Amazon – Multi-National Tax Strategy – Luxembourg – Ethical Evaluation

BUS520-B Week 2 Blog #1

Amazon – Multi-National Tax Strategy – Luxembourg – Ethical Evaluation

Amazon, Inc. (a US based company) is facing allegations from the European Union regarding the alleged receipt of illegal aid from the government in Luxembourg, in the form of a “cosmetic” tax arrangement (Fairless, 2015). The potential back-tax bill, if the case is found in favor EU, could be in the hundreds of millions of dollars.

The primary ethical issue to be considered in this case is whether the actions by Amazon constitute a case of premediated tax avoidance or was their intent to utilize the benefits of an advanced planning agreement in relation to transfer pricing. Legally transfer pricing is often used between subsidiaries or divisions whom act as separate entities and trade supplies or labor, these transfers are commonly done at market price to avoid one company losing money on the transaction (Investopedia).

Multi-National companies have been found to strategically utilize transfer pricing arrangements in order to move product to lower tax regions and avoid paying taxes on profit in high-tax jurisdictions. Is this legal? It appears to be so. Is this ethical? Not in my opinion, nor it appears the popular publics opinion.

Companies have a social (ethical) responsibility to pay corporate taxes, where they operate. Taxes go towards a countries infrastructure, their healthcare systems, education systems, transportation systems, etc. The presence of a corporation allows for jobs, the employees that work for a corporation reside in the country, thus they are directly affected by the lack of taxes that their employer pays to their government.

Additionally, in this case we need to look at the agreement between Amazon and Luxembourg. Was this a “sweetheart deal”, allowing for Amazon to receive state aid? State Aid is defined by the European Commission to be an advantage given on a selective basis to undertakings by national public authorities. By paying a fee to their Luxembourg subsidiary, that monies is exempt from corporate tax rates, which would otherwise have be 28%.

Accepting state aid allows for unfair competition gained by government support in the country of operation. This is illegal in Europe and the US. It is also unethical. It can hinder other companies in the same market from a chance to gain business, if they operate at lower margins, due to having to pay a corporate tax. Competition in a market is needed for sustainability and consumer choice. Monopolies are not legal, and with a government providing tax breaks to one entity, the entity could easily facilitate an industry take over. Reasonably this is not something that could happen overnight, but with a long term arrangement, it is feasible.

There are a few elements found in the review of the agreement that raises red flags in my opinion:

1.    The agreement was made in 2003 with no revisions or review since.

2.    The agreement was approved in 11 days by the authorities, this is an abnormally short time period to conduct the required lengthy and in depth review to determine feasibility.

3.    The royalty fee paid to the Luxembourg subsidiary is a flat fee, it is not based on sales or volume, and it is tagged as “intellectual property”.

These elements lead me to believe this is an unethical attempt at tax avoidance. Intellectual property does not have a “market price” average or indicator, no concrete product to justify the payment of. Is it feasible to believe that a logistics and warehousing company can produce over 500 million dollars in intellectual property per year? Close to $5 billion dollars over the last 10 years?

There has not yet been a resolution to this case, it is still under investigation. Amazon is denying any wrongdoing or unfair advantage gained by their agreement. I would like to see Amazon take the ethical route and begin to pay the proper corporate taxes in the country they are based. A company should provide support and give back to the local community, as that entity is taking advantage of the countries offerings, whether directly or indirectly.

Source:

Fairless, Tom (2015, Jan 16). EU Details Tax Case Against Amazon. The Wall Street Journal Retrieved from: http://www.wsj.com/articles/eu-details-tax-case-against-amazon-1421395136

References:

Transfer Pricing. (n.d.). In Investopedia. Retrieved from http://www.investopedia.com/terms/t/transferprice.asp

State Aid. (n.d.). In European Commission. Retrieved from: http://ec.europa.eu/competition/state_aid/overview/index_en.html