Issues Surrounding Solyndra - Term Paper Example

The legal and ethical issues surrounding Solyndra Introduction Solyndra is a solar energy manufacturing company founded in the year 2005 by Granet. It focused in the manufacture of tubular solar panels which were very competitive in the solar industry market (David 2008). Its processes were well flowing for the first five years. On 31st Aug 2011 when it filed for chapter 11 bankruptcy, 24 calendar months after receiving half a billion dollars loan grant from the US energy department & an additional $25.1 million revenue enhancement break from Californias Alternative Energy Advance Transportation Authority (CAEATA), Solyndras woes began. The loan was granted to assist the company in meeting then financial requirements for constructing an additional manufacturing plant. The administration stopped the additional capital inflows the Solyndra a step that made them close down and more than a thousand employees lost jobs (Anderson, 2012). Production activities stopped, and the company had to explain what made them make such a decision. As the management explained, there was a persistent increase in the production cost while the prices of the solar panels were decreasing. These could not tally and, therefore, the company ended up making huge losses. The cause of the fall in prices of solar panels was that Chinese developers had come up with cheaper ones which served the purpose of the Solyndra’s. According to the Washington post (2011), “the foreign manufacturers were supplying cheaper solar panels due to government subsidies a move that made the market prices of the solar panels to decline forcing Solyndra to reduce their prices for it to remain competitive”. Another problem that was lightly disclosed that the company had delayed accounts receivables that they failed to collect in the correct time. The foreign competitors had better terms of sale since they used to extend their customers’ payment terms (Anderson, 2012). There was no compliance with the good terms in the side of the Solyndra’s customers. There was an attempt to get the company back to business where one of the shareholders provided $75 but that was in vain. The loan processing was made possible as a result of an energy law that was passed in 2005 to authorize the department to issue federal backed loans for innovative projects that helped in reducing air pollution. The study intends to evaluate the legal and moral issues that relate to the circumstance of Solyndra. Legal and Ethical Issues Surrounding Solyndra Solyndra was thoroughly investigated by the federal criminal investigations through the office of the Attorney office as well as the department of justice of the United States. Legal issues Legal issues to be addressed included the involved the company finances, contracts, payment of private investors and laying down of employees. The federal officials were accusing the company officials of misrepresentation of the company’s financial position in pursuit of loans or an accounting malpractice in place (Washington post, 2011). The other legal issue was about the contract that the company was entering in to. It was noted that the company was carrying out an arrangement with a trustee to be taken over. The company refused to discuss that matter which would have made them remain in business. Furthermore, the issue of paying back the private investors upon dissolution of the company was found to be against the 2005 energy law. The other legal issue was raised by the company’s employees where they sued the company for laying them off without being given a notice of 60 days. They also demanded their 60 days payment, and their contributions towards health benefits and 401(k) and severance pay (Anderson, 2012). Some of the laws that were overlooked within the Solyndra case were the energy policy act of 2005 that expressly states that “DOE (Department of Energy) shall see executive agency and therefore the Secretary of the Treasury before granting any deviation within the loan," they unnoticed this law after they selected to award personal investors their dues before they did therefore for personal investors (Anderson, 2012). The other law taken by the star company was the evasion of taxes by filing for bankruptcy so they may keep many bucks of internet in operation losses that will be employed in the reorganization (McGrew, 2012) The ethical code abused was that one among honesty wherever by Solyndra failed to inform the DOE regarding its monetary woes, it absolutely was well-tried that the corporate was within the straits before obtaining the restructured loan once it absolutely was discovered that one among its chief financiers, George Kaiser, an outstanding campaigner of President Obama, provided 75 million dollars to assist in elevating Solyndra to an exceedingly higher status in February the management needed uplifting (Trivedi, 2012). The specific laws that apply to the issues include the Energy Policy Act of 2005 and the Workers Adjustment & Retraining Notification (WARN) Act. The energy policy stated that the Department of Energy (DOE) is supposed to consult the Treasury’s secretary prior to exercising any loan granting activity. The energy section rushed to release the money to the enterprise. The company also did not obey this law since they wanted to follow the interests of private investors who were very influential. WARN on the other hand states the procedure that should be followed in case there is laying off of workers (Woody, 2011). It provides that in the case of laying off a worker, the company should give a 60 days’ notice. Moreover, it stipulates that the employees should be paid for this period since they are expected to be reporting to work (Woody, 2011). Ethical issues The processing of the loan for Solyndra was done through the influence of a person who is believed to have taken part in the presidential political campaign and was a giant shareholder in the company. He was a financier in the campaigns and his powerful clout worked its way to ensure the loan was released. Due diligence considered and it would have been ethical to ensure it was put into consideration. There was also an influence from the energy department as it instructed the managers of the company to hold on to business until the 2010 elections were concluded (Anderson, 2012). This is also ethically wrong since a business entity should not be working under political influence. The department also seemed to be protecting the company on its financial position since they did not agree with the allegation that the company had financial problems. The government is not supposed to influence some industries in such a way that a financially dumb company keeps on operating no regardless of their financial hitches and lack of transparency. The company also acted in an unethical way when they filed for bankruptcy since it is known that they did this in pursuit of tax evasion. It is unethical to fail to pay taxes for the reason of benefiting themselves. Lastly, the company officials failed in honesty because they did not disclose the true financial position to the Department of Energy. They should have told the department that they are in a financial crisis which is an ethical code. Milton Friedman’s philosophy that applies to this situation Milton Friedman was an economist whose philosophies advocated on free markets and was against the government intervention in the business markets. He insisted that most of the market hustles and failures are brought about by the presence of the government. He argued that, if the government leaves the markets to operate on their own, there will be efficiency in the market that would help all the businesses prosper. He used to make television presentations to show a substantial difference between the market and the government. Through the television shows, he also explained the prevailing significance of free markets in the economy. From his insight, countries followed his advice by ensuring privatization of state corporations (Global Public Square, 2011). In the Solyndra case, if the government did not intervene in any way, the capitalists and other business experts would have worked hard to ensure that the company does not fall. Also, the taxpayers’ money would not have sunk since the government would not have pumped the more than half a billion to the company for financing development for a new manufacturing plant. The $75 million that belonged to one of the shareholders would not be lost either. A moral framework that applies to the case of Solyndra is one during which the government ought to not interact industries like initiate corporations as a plunger. The government’s operation in matters of energy or business is to form a moral framework that levels the taking part in field for all players concerned in it; thats each fuel dissipated renewable energy begin ups and regulation them equitably and having each be to blame for the adverse effects that come back of their activities, be it contribution to heating or misuse of grants for inexperienced energy experts. This is something the administration is able to do by enacting a cap and trade market or carbon tax, policies (Woody, 2011). These ethical and legal actions of the bankruptcy of the company had the most effect on the executives of Solyndra. These executives pleaded in front of the house board, that some of their senior staff of Solyndra have worn an action and deed so as to have their bonuses repaid to them in the amount of $370, 000 regarding the company’s full insolvency is achieved (Woody, 2011). Most of the investors of the company said that they didn’t have any kind of government interference on carrying out the activities of the Silicon Valley energy firm that would have handled the storms they were going through (Bowman, 1990). Thus, the day after a senior manager of the energy department told to discuss the companies plea for $535 million, a senior adviser defended the solar company own reputation in the exchange if white house assistant. Steven J. Spinner who was also a major investor for President Obama group and also an investor in Silicon Valley helped the government to invest in more clean technology companies. His wife used to work for Solyndra, a solar-panel manufacturer industry and their applications regarding the government loans as well. Only government is the one who can help them to overcome this obstacle and continue their business operations of solar panel manufacturing (Anderson, 2012). Conclusion This study sought to analyze the Solyndra in the legal and ethical perspectives. It had described the company’s business activities from the time it started up to when it closed the doors. It has evaluated the legal and ethical issues that relate to what the company has gone through. In introducing the company, the study found that the company had a great political influence that made it suffer financially after some time. It faced stiff rivalry from Chinese solar manufacturing enterprises that made the solar prices drop. Even if the production costs were going down, their decline was outdone by the low levels of prices in the market. This falling short of finances made the company to get finances from the government through procedures that overlooked the basic legal and ethical tenets. The company failed to follow the basic requirements of the Energy Policy Act and Workers Adjustment and Retraining Notification act (Woody, 2011). This non-compliance made the workers to take a legal action against the company to seek compensation. The study has evaluated the tenets of Milton Friedman’s view on the issue of free markets that suggest that the government should keep off from the markets. Lastly, study provides a course of action that would have been taken to prevent such demise of companies. References Anderson, M. (2012). Bankrupt Solyndra Caught Destroying Brand New Parts. Retrieved from http://sanfrancisco.cbslocal.com Bowman, L. (1990, March 7). Bills target Lake Erie mussels. The Pittsburgh Press, p. A4. David B. (2008). "Cylindrical Solar Cells Give a Whole New Meaning to Sunroof". Scientific American. Retrieved 13 June 2012. From http://www.scientificamerican.com Global Public Square (2011) “Milton-Friedman magic” 11th October 2011. Retrieved from: 2011/10/11blogs.cnn.com McGrew S. (2011)”Solyndra to Declare Bankruptcy”. Retrieved from NBC Bay Area. Washington Post, (2011). “Solyndra loan deal: Warning about legality came from within Obama administration”, 7th October 2011. p18, Woody, T., (2011). "Solyndra: Pay Some Investors Before Taxpayers In Solar Flame Out”. Retrieved from: 14 June 2012.from http://www.forbes.com Read More