Law and Business Ethics - Essay Example

? Law: Solyndra Case Study Affiliation with more information about affiliation, research grants, conflict of interest and how to contact Introduction: Solyndra is a California based solar panel manufacturing company, which manufactures, designs and sells solar photovoltaic (PV) schemes, composed of mounting hardware and panels for large low-slope commercial rooftops. The panels give best output when mounted horizontally and packed closely together. Therefore, the company claims to cover considerably more of the classical roof area and generate more electricity per rooftop than a conventional panel. Solyndra company currently encounters several ethical and legal issues and, therefore, they have incorporated into their system some specific laws or ethical codes to overcome the situation. Legal and ethical issues in Solyndra correlate with each other in the company’s daily functioning. To address the problem, they offer a significant framework for the practice of business and for the relationship of the company with the customers. A manufacturing business establishment is an organization in the secondary sector that processes various natural resources to produce a particular product. Several ethical issues come into play in such organizations, which are much more than in other businesses in diverse sectors. The main reason is that manufacturing involves consumptions of natural resources and labor that require numerous ethical decisions for directors and managers to make. There are several key issues to think about when looking at the ethical performance of manufacturers, especially for solar panel, which necessitates handling of toxics substance in manufacture and removal. They also need to consider the aspects of waste management and disposal. Besides, sustainability of product (energy and carbon footprint payback time), employees’ rights in manufacture supply chains (child labor, too much overtime and overtime pay less than legal minimum, longer working hours, maternity leave, sick and marital leave, pregnancy, marital position and discrimination based on disability, minimum wage and social insurance.) etc are to be considered. The management will also have to take into account the company’s participation in any kind of controversial activities that may be prejudicial to the society where it operates. Ethical and Legal Issues in Solyndra: Since the year 2005, ethical and legal issues in Solyndra, a solar-panel manufacturing company, have been negatively affecting its overall functioning. In the recent times, business environment has become more competitive and challenging. Therefore, business firms must try to overcome the competition and other challenges to increase overall profitability. Solyndra, however, suffered certain setbacks primarily due to the fact that their manufacturing process remained highly complex, requiring specialized equipment which were expensive. Thus, their production costs have escalated. Besides, the price of traditional solar panels slumped sharply, which entailed a steep fall in the demand for their products. All these negative trends culminated in heavy financial loss to the company, resulting in their bankruptcy. 1) Bankruptcy’ is the one of the main issues that Solyndra faces currently. This problem has both legal and ethical perspectives. The basic ethical problem in bankruptcy in the company is that insolvents have promised to disburse their debts but at the same time they cannot keep their promise at the given time. Solyndra has obtained a large amount of loan even though could not keep up with the falling solar expenses. However, the loan was urgently needed by the company for installing new solar technologies. Thus, they received a loan guarantee of $535 million from US Energy Department for protection against bankruptcy and pleaded for an extension. Solyndra is the first renewable energy business establishment to receive a federal loan in the year 2009. They went bankrupt the previous year and laid off 1100 employees, leaving taxpayers on the hook for above $500 million. “Bankruptcy draws a distinction between secured and unsecured creditors, with the latter at serious risk of being unable to collect amounts owed by the debtor” (Insurance Issues Related Bankruptcy, 2009, pg.3). Solyndra turns out to be one of the administration’s most expensive fumbles subsequent to its bankruptcy and was raided by FBI agents looking for proof of possible fraud. This caused a major scandal in the business world. 2) Finance related problem is another legal issue faced by Solyndra. “Solyndra LLC had such steep financial problems in late 2010 that the company violated terms of its loan-guarantee agreement with the Department of Energy and technically defaulted on its $535 million loan, according to people familiar with the matter” (Solomon, 2011, para.1). Fraudulent dealings in financial of the company are the major issues in the company. An independent inspector general, who has observed the investment of the company, concluded that the management had steered money to families and friends. 3) Unfair working condition is the other ethical issue faced by the Solyndra. Normally manufacturing companies are expected to give fair working conditions for their employees. However, being responsible towards workers and providing them a congenial work environment entails higher labor costs with the company has not been able to afford. Fair pay and advantages for job are essential elements of a fair workplace. Another significant ingredient is the provision of a nondiscriminatory work atmosphere, which again may have expenses involved for training and diversity management. These are some of ethical issues that created concerns for the company. In order to overcome the legal and ethical issues in Solyndra, the company incorporates ethical codes and specific laws to overcome this situation. A code of ethics is a formal declaration that acts as a directive for how people in a particular business establishment should act and take decisions in an ethical way. 90% of the Fortune 500 organizations, and approximately half of all other organizations, have their own ethical codes. Such codes normally address issues as behavior in the direction of competitors, conflict of interest offering and acceptance of gifts, privacy of information and political contributions. Codes of ethics needs to be monitored frequently to determine whether they are complete and and practically feasible for taking ethical business decisions. Managers should consider codes of ethics as a tool that should be meticulously applied in order to encourage ethical practices more effectively and efficiently. “Organizations with an established and published code of ethics have in place review processes and appeal procedures to guard against malicious or self-serving use of the code for individual benefit” (Code of Ethics Examples, 1996, para.2). Sometimes, people may think why ethics is considered as a vital element of management practice. It has been said that ethical codes can makes managers to be ethical with a good business sense. Without being ethical, organizations cannot be competitive either at the national or international level. While ethical management practice may not essentially be connected to specific indicators of financial profitability, there is no unavoidable conflict between ethical practices and a firm's prominence on making a profit. The system of competition demands adherence to the values of truthfulness and fair dealing. The Solandra’s failure to follow these principles has been a major cause of their dilemma relating to ethics. The employment of ethical business practices can enhance overall corporate health in three important areas as under: Productivity: The employees of an organization are affected by management practices adopted by the management. When management follows ethics in its actions towards stakeholders, it will positively affect the employees. For example, if the organization decides that business ethics needs a special attempt to ensure the health and welfare of workforce and follows it, employees will be happy and content, which in her will increase their productivity. Many companies have set up employee advisory programs (EAPs), to assist the workers with, financial, work, family or legal problems. If the management of Solyndra takes such action, such programs can be a source of improved efficiency for Solyndra. Ethical Management: Managing the affairs of the company by strictly following all guidelines on ethics boosts corporate health and this will affect all stakeholders, including suppliers and customers, positively. Customer base of the business expands substantially when the organizations have a good public image. The main problem in Solyndra is their failure to create good public image. Their ill repute dissuaded many customers from entering into any deals with them. Regulation from Public Agencies: When a company acts unethically, the general public will force legislators and other government officials to regulate such companies or to impose further regulations. Solyndra has discarded ethics by fraud in the financial statements. This creates a negative impression in the minds of government authorities as well as general public, which has adversely affected the company. The following ethical codes need to be considered for Solyndra: 1. Ethics of Finance Finance being a delicate discipline technical issues such as the most favorable mix of debt and equity financing, evaluation of alternative investment projects, dividend policy, the valuation of futures, options, swaps, and other derivative securities, portfolio diversification etc need to be focused on. “Often it is mistaken to be a discipline free from ethical burdens” (Velentzas, 2010, pg. 789). However, economic situations that could not be explained by the theories of business cycles alone bring ethics of finance to the front position. Solyndra needs to revamp the of their finance development to address their present crisis and make it more transparent. 2. Law and Business Ethics Milton Friedman argues that “corporations have the obligation to make a profit within the framework of the legal system, nothing more” (Velentzas, 2010, pg. 801). Thus, Solyndra will need to make sure that all their action fall within the periphery of legal validity and conform to ethical principles. Adherence to a strict code of ethics can only salvage their situations. Managers in the most Business organizations usually try hard to promote ethical practices. Creation, distribution, and frequent improvement of a company's code of ethics is one of the crucial steps in order to establish an ethical workplace. Besides, to ensure ethical practices within the organization, the management can start a special office or department in the organization with clearly defined responsibilities. By giving appropriate training to the work force, Solyndra can promote ethical practices within the organization. Training programs need to be designed to promoting ethical practices with adequate orientation on legal aspects of significant areas of their operation. Such course do not try to teach what is ethical or moral but attempts to give business managers specific ideas on how they can use their critical thinking to determine how certain action might be ethical. Business ethics is a vital component of business leadership, as well as one’s concern for good behavior. It is an obligation to consider the well-being of other human beings and employees. Solyndra’s management should demonstrate the willingness and ability to replicate on values in the course of their business's decision-making process, in order to understand how decisions and values affect various stakeholder groups. Besides, they should institute specific codes of ethics to establish how managers and workers can use these guidelines in day-to-day operations of the company. The management should also work for achieving fairness and justice within the boundaries of sound management practices. Reference List Insurance Issues Related Bankruptcy. (2009). Marsh. Inc. Retrieved from Code of Ethics Examples. (1996). Your Dictionary. com. Retrieved from Solomon, D. (2011). Solyndra Said to Have Violated Terms of its U.S Loan. The Wall Street Journal Business. Retrieved from Velentzas, J. & Broni, G. (2010). Ethical Dimension in the Conduct of Business: Business Ethics, Corporate Social Responsibility and the Law. The “Ethics in Business” As a Sense of Business Ethics. International Conference on Applied Economics- ICOAE. Retrieved from Read More