A Marketing Strategy Planning Approach - Case Study Example

The legal and ethical issues surrounding Solyndra The legal and ethical issues surrounding Solyndra The California based company Solyndra was the manufacturer of solar panels and solar cells. The company has faced stiff competition in recent times and forced to cease its business activities in 2011 even though the company was expected to do well because of its superior technologies to manufacture solar equipment (Lott, 2011). On September 1, 2011, the company has filed for Chapter 11 bankruptcy, and laid off all employees (Bathon, 2012). Solyndra has caught newspaper headlines recently because of some legal and ethical issues surrounding its operations and activities. Obama administration was doing everything possible to encourage renewable and environmentally friendly energy sources such as solar energy. It is believed that solar energy will replace all conventional energy sources in future because of its potential to provide green energy or clean energy. Obama administration does not want to see the closure of energy companies, especially the energy companies dealing with solar energy. Therefore, Obama administration has recently sanctioned a half-billion dollar loan to the failing solar energy company Solyndra. Many people believe that the decision to support a company like Solyndra is illegal and unethical. The concerns of the ordinary people related to the $535 million financial aid to Solyndra was proved to be right after the collapse of the company in 2011. The collapse of Solyndra has left the taxpayers liable for all $535 million (Solyndra, the White House, and the Most Dangerous Conflict of Interest of All, 2011). The Solyndra scandal is a perfect example to prove that politically motivated illogical decisions may cause immense harm to the taxpayers or ordinary people. This paper analyses the legal and ethical issues involved in the decision of Obama administration to support Solyndra. Reasons cited by Solyndra for its failure in America Solyndra accuses Chinese companies for its failure to prosper in American market. The company believes that the governmental policies are not good enough to counter the challenges from foreign companies in the solar energy market. Solyndra argues that Chinese companies or solar panel makers are conspired to fix prices and flood the U.S. market with solar panels at below-cost prices forcing it out of business. Solyndra has already filed a1.5 billion lawsuit against Chinese companies (Bathon, 2012). It is a fact that Chinese made products are cheaper than products manufactured in other countries such as America. In China, manpower cost is extremely less compared to that in America. Therefore, Chinese companies can sell their products at cheaper rates in American market. Companies like Solyndra cannot compete with Chinese companies unless the American government put some mechanisms to control the activities of Chinese companies in America. Because of the above facts, Obama administrations tried to support American companies such as Solyndra with the help of financial aids. However, many people in America believe that the decision to support a failing company like Solyndra with the help of taxpayer’s money is illegal and unethical. Legal issues surrounding Solyndra scandal The Obama administration justifies its decision to assist Solyndra based on The Emergency Economic Stabilization Act of 2008 which says that the government can assist ” the Treasury to buy mortgages and other assets that are clogging the balance sheets of financial institutions (Summary of the Emergency Economic Stabilization Act of 2008, 2008). This act was actually aimed to assist the U.S. financial system rather than private companies like Solyndra. Daly (2011) mentioned that the Treasury Department in America had many concerns about the violation of federal laws while they sanction loans for Solyndra since Solyndra is a private company. As per American Federal laws, it is illegal to provide loan assistance to a company in which the government has no stakes. Under such circumstances, the treasury department believes that the government should not aid this company financially. At the same time, it is a fact that governmental policies are causing problems to the private companies like Solyndra. American government is trying to attract foreign direct investments as much as possible. Moreover, the administration cannot disallow Chinese companies from operating in America because of the free trade agreements between China and America. It should be noted that a lot of American companies are currently operating in China. Therefore, any actions taken against the Chinese companies in America would cause problems to the American companies operating in China. All these factors forced Obama to assist local companies with financial aids in order to counter the problems generated by Chinese companies. As per the existing federal laws in America, it is possible for the government to provide assistance to Non-profit organizations and institutions such as semi-public, public and private institutions of higher education and hospitals, Native American Indian Organizations, and any other semi-public and private nonprofit organizations (CFDA, 2006). However, Solyndra is neither a public company nor a semi public company, but a pure private company. It is illegal for a government to utilize taxpayer’s money in non-productive sectors or sectors that gives nothing in return to the taxpayers. Solyndra can argue that the company is helping the American public since it is trying to solve the problems generated by conventional energy sources. It is a fact that solar energy exploitation would help the public to reduce the reliance on conventional energy sources and thereby reduce various kinds of pollutions. In other words the activities of Solyndra would help the taxpayers indirectly. However, Solyndra is a profit making company which was operating primarily based on profit making motives. Under such circumstances, it is illogical for the government to argue that helping private companies such as Solyndra would help the community in one way or another. Taxpayers believe that aiding Solyndra investors ahead of taxpayers is totally unjustified. Ethical frameworks other than free market ethics related to Solyndra scandal According to Perrault al. (2008), the objectives of a business can be defined in terms of social processes and organizational processes. In their opinion, social processes are activities that are intended to obtain the objectives of society such as connecting producers and consumers) whereas organizational processes are activities intended to obtain organizational objectives such as production of a good and its selling in the market. However, it is difficult for a profit making organization to achieve both the objectives at the same time since the objectives of the society and that of the business may quite often travel in opposite directions. In other words, it is difficult for an organization to behave ethically and still able to make profits. At the same time, it is difficult for modern companies to continue with unethical business practices and still able to survive for a longer period. The Solyndra scandal is an example to prove the above point. The company tried to convince the government and the public that the competition is forcing the company to perform poorly rather than anything else. However many reports were pointing towards other reasons rather than the cited ones for the failure of Solyndra. According to Perez (2011), the failure of Solyndra was caused not by Chinese companies and stiff competition in the market, but by the visionless policies of the company. He has pointed out that Solyndra was shifting their focus from their core area of business to other segments such as smart grid technologies, energy efficiency technologies, battery storage and transportation. In fact, Solyndra was not a company that is big enough to do many things at a time. The company failed to recognize that smaller companies have limitations in doing new things before they achieve a considerable size. Strong belief in corporate social responsibility and sustainable development are essential for modern companies to succeed in the market. Solyndra failed to demonstrate neither of the above mentioned requirements for the survival of a business in the modern world. They tried to cheat the public and the government with the help of exaggerated claims and arguments and ended up in bankruptcy. The lessons from Solyndra clearly indicate the meaninglessness in providing governmental assistance to profit making private companies. It is the duty of the government to make sure that the taxpayer’s money is utilized only for the benefits of the public rather than for the benefits of private companies. The role of philosophy of economist Milton Friedman in Solyndra scandal According to Milton Friedman, good economic policy strengthens democracy and, thereby, freedom. For instance, a monetary policy that creates inflationary pressure and high interest rates can lead to the breakdown of democracy, as factions battle for government relief. Friedman sensibly argued that economic policy should create a level playing field (Kane et al., 2006). Milton Friedman is often referred as the father of economic freedom. He argued that the increased state spending and tax rise would result in economic growth decline. Milton Friedman was a strong critic of Keynesian economic principles. He has promoted a macroeconomic policy known as "monetarism" in order to solve many of the economic problems in America. As per the views of Friedman, a steady, small expansion of the money supply is necessary to improve the economic conditions in a country (Doherty, 1995). The executives of the Solyndra Company were aware of the influence of Milton Friedman’s economic principles upon the policy making bodies of American government. Even though America was facing severe economic problems in the 2008-09 period because of global recession, the executives of Solyndra believed that the government will assist the private companies. As a result of that Solyndra has applied for a massive loan even though they were not much confident about the future of the company or the repayment of the loans. Government on the other hand was quick in responding to the demand of Solyndra. Instead of analysing the financial abilities and future prospects of Solyndra, the officials sanctioned the loan immediately. The rest is history. Solyndra faced bankruptcy and it was forced to close down in 2011 creating a lot of problems to the investors and the taxpayers. Conclusions The American government or the Obama administration behaved illegally and unethically while taking decision to assist Solyndra. The government never bothered too much about investigating the claims of Solyndra while sanctioning the taxpayer’s money to this company. In fact the decision to assist Solyndra was politically motivated. The Solyndra scandal clearly indicates how private companies can influence governmental policies in illegal and unethical manner. References Bathon, M. (2012). Solyndra Lenders Ahead of Government Wont Recover Fully. Bloomberg. Retrieved from http://www.bloomberg.com/news/2012-10-17/solyndra-lenders-ahead-of-government-won-t-recover-fully.html CFDA (2006). Introduction And How To Use This Catalog”; pg. III; Types of Assistance. Retrieved from https://www.cfda.gov/ Daly, M. (2011). Solyndra: Did Energy Department break the law? The Christian Science Monitor. October 14, 2011 Doherty, B (1995). "Best of Both Worlds". Reason Magazine. Retrieved from http://reason.com/archives/1995/06/01/best-of-both-worlds Kane T. Beach, W.W. and Peak, A. (2006). Milton Friedman, the Father of Economic Freedom. Retrieved from http://www.heritage.org/research/reports/2006/11/milton-friedman-the-father-of-economic-freedom Lott, M.C. (2011). Solyndra — Illuminating Energy Funding Flaws?. Scientific American. Retrieved from http://blogs.scientificamerican.com/plugged-in/2011/09/27/solyndra-illuminating-energy-funding-flaws/ Perez ,S. (2011). Why Did Solyndra Fail So Spectacularly? Retrieved from http://techcrunch.com/2011/10/04/why-did-solyndra-fail-so-spectacularly/ Perrault, W.D., Cannon, J.P and McCarthy, E.J. (2008). Basic Marketing: A Marketing Strategy Planning Approach. 16 th ed. Boston: McGraw-Hill, 2008. Summary of the Emergency Economic Stabilization Act of 2008, (2008) The Washington Times. Sunday, September 28, 2008 Solyndra, the White House, and the Most Dangerous Conflict of Interest of All, (2011). Retrieved from http://ethicsalarms.com/2011/09/18/solyndra-the-white-house-and-the-most-dangerous-conflict-of-interest-of-all/ Read More