Steriods and the Spirit of the Law

Professor’s Silver evaluation of the steroid scandal in sports in Chapter Five, highlighted some recent cases. Steroids are harmful and the results they produce can be quite addictive. His conclusion that these athletes were not following the spirit of the law is a true depiction of the situation. You can not tell me that these athletes were unaware that what they were doing what skirting the system. Sport leagues have created these rules in order to create a fair playing field and to protect their assets. The athletes should take this more seriously.

I agree with the creation of stricter and more clearly defined rules to prevent these situations. With this said, I have never understood why Congress felt it was necessary to get involved in this scandal. I believe that this is something that should have been handled by the league. Perhaps the government should focus on preventing the corporate scandals that actually impact our financial lives.

Corporations have and will continue to bend the rules as long as our government allows it. Especially when the government allows deferred prosecution agreements in the place of a conviction. This creates a culture that is almost encouraged to bend to rules and test the limits.

The Parable of the Sadhu

This was an interesting article (page 287 in the textbook) that discussed how a group trekking up the Himalayan Mountains encountered an “ethical dilemma” and how their decisions are similar to corporate ethics. Briefly, a group of multi-national individuals embarked on a trip of a life-time up the mountain (presumably Mt. Everest). Along their journey up, another group’s member comes down the mountain and “dumps” a partially naked and hurt Sadhu (Holy man) at their feet. This individual angrily states “I’ve done what I can and you care for him” as he heads back up the mountain to continue his journey. Now this group is faced with an ethical dilemma. Provide minimal support (clothes, food and water) and continue up the mountain or turn around and return back to base camp and provide the sadhu with the proper care. One individual decides that this journey (an experience to achieve personal satisfaction) was more important that the well-being of the stranger. Another individual (who was suffering from the elements himself) attempted to help the Sadhu as best as he could. When these two individuals meet up, he asks his companion “how do you feel about contributing to the death of a fellow man?” Nobody knows for sure if the Sadhu is dead or alive. No one was willing to accept the total responsibility for the Sadhu, but did what they could as long as it was convenient and “passed the buck”.

This story illustrated to me what I believe is so pervasive in our corporate culture; that many individuals, when in a stressful environment, often make decisions that will damage (affect) them the least, regardless if it was the ethical decision to make. This is especially true in a group dynamic. If the group needs to make a difficult choice, it is hard to find that individual who is willing to risk everything (career, goals, bonus, etc.) to do the right thing. What usually happens is that each individual does their share to “get by” and hope that some else will make the ethical decision for them. In light of all the corporate scandals, it seems that many people turn a blind eye or believe that someone else will do the right thing, but in the mean-time, many people’s lives will be impacted.

What would you do if you were in this group? Would you go to the “top of the world” or help a stranger in need?

Hoop Dreams...

In a recent discussion that I had with a University President, we talked sportsmanship. He said that in a basketball game, if a ball is clearly out of bounds by your own team, but the players on your team are pointing to the other team in hopes of influencing the referee’s perception, there is a problem. Is this view of ethics too stringent?

If you think that this is not too stringent a view, what does it then say about politician’s level of accountability for the unfounded finger pointing that they engage in during election campaigns? We’ve been talking about the ethical behavior of for profit firms in this class. What about the ethical accountability of each of us in our daily lives…in our daily interactions with all those around us? Isn’t looking at the ethical behavior of companies like KBR or Enron like looking at the symptoms’ instead of the cause.

We’ve talked about the revolving door of government and corporate America in the context of public officials selling out the interests of Americans for their personal interests. But what are we doing about it at the individual level? It may be appropriate to talk about Machiavelli and his work suggesting that what is right is dictated by who is in the position of power (idea that might makes right). The idea of a tyranny of the majority (JSM) would seem to be all but impossible in a society in which big money, special interests, and politicians seem to control the playing field? It seems to be lies upon lies told by these groups in their efforts to control the game? Is it really possible that they really believe that what they’re doing is truthful? Has truth lost relevance?

What would you do if a player from your favorite team walked over to the ref on the deciding point of the game and argued that the ball was actually out on him and that the other team should get the ball? How would you honestly react? Does it even matter?

Agents- The face of an Airline?

I came across an article in CNN.com titled “Confessions of an airline agent” in which a anonymous former airline agent relates some of his/her experiences as an agent and traveler and some of the things the airlines allow to happen in order to cut costs. For example, they are limiting training to new agents, “leaving inexperienced agents on the front line to deal with passenger complaints”. Now, I understand why is it so hard to reason with agents in case of delays. Usually, the agent is the last person informed of what is going on, which is the reason most travelers are left in the dark when there are schedule changes.

The airlines need to refocus their strategies to make room for customer satisfaction. Some of the things they need to work on are updating their systems, improving their luggage handling methods, and adding Internet connectivity at the gate to have the agents better informed. I think it is unfair that the airlines are leaving the agent helpless to face screaming disgruntled travelers. The number one responsibility of the airline is service, which includes customer service and that can only be achieved by training their employees & by giving them the necessary tools to assure the customers expectation are met. Also, travelers need to learn that the agents are also human beings that are not entirely responsible of malfunction of the airline.
Source: http://www.cnn.com/2008/TRAVEL/04/28/airline.agent.confessions/index.html

Is the earth getting warmer?

Apparently not last winter.

Americans living in the Midwest who had seen several waves of ice and snow last winter could be forgiven for wondering whether global warming is real.

And they might be right. University of Oklahoma geophysicist David Deming points out that in 2007:

Snow fell in Buenos Aries for the first time since 1918;
Snow fell in Baghdad, Iraq for the first time since 1908;
Johannesburg, South Africa, had its first significant snowfall in 26 years;
Closer to home, an April freeze killed 95 percent of South Carolina’s peach crop;
Denver, Charlotte, North Carolina, Meacham, Oregon, and St. Cloud, Minnesota, all set record lows last winter;
And the Canadian government claims it had the coldest winter in 15 years.

Maybe that’s why Al Gore released his global warming film “An Inconvenient Truth” . . . in the summer.

Chapters 5 & 6

This weeks reading was based on corporations not following the ‘spirit of the law’ when it comes to taxes. Just a couple quick points I thought I would share.
First of all, I agree with the overall problem of corporations “cheating” when it comes to taxes. I would accept this practice if they were public about it and brought to the attention of Congress how our tax laws are flawed. Also, If we expect companies to adhere to the ‘spirit of the law’ then we must also adhere to it, or at most, make our politicians do it. Especially the ones making the laws. An example is Ted Kennedy and the Kennedy family.

Ted Kennedy is one of the strongest promoters of the estate tax law. He says, “The estate tax is the most progressive of all federal taxes” and “It would be terribly unfair to tax work while giving inherited wealth a free ride” -- June 8, 2006. The Kennedy family has long been part of American politics yet they “avoid the heavy burden of estate taxes by creating numerous trust funds” – New York Times. The facts are through a web of trust funds, the Kennedy family paid only $135K of estate taxes on a $300 million estate which is only 0.04 of the nearly 50% average estate tax rate. So how could we expect corporations to lead by example when our lawmakers don’t?

Another point of the book is how companies should pay their fair share of taxes. But what is this fair share? The Government has certain fiscal policies and responsibilities for which they need to tax people to cover the budget – granted. What if the government is corrupt and has no sense of duty in regards to NOT spending? Why should we pay for this irresponsible spending? This year, July 23 (according to the Adam Smith Institute) is ‘Tax Freedom Day’ for the US. This is the day at which point all Americans and corporations on average have earned enough money to pay their share of taxes. That means for the first 204 days of work this year, all the income has gone to the government. I think corporations and we have a duty to bring to the attention of our government the unfair tax laws. The only way to do it is by circumventing the existing laws so the government sees that the public does not accept the current ones. A bill was introduced in Congress back in 2003 called the “Fair Tax Bill”. It’s been 5 years and it hasn’t even been voted on yet. This is a democracy but if nobody listens to the people, how can we change the unfair laws?

Hospitals Turning Patients Away

Yesterday, The Wall Street Journal contained an article entitled, “Cash Before Chemo: Hospitals Get Tough.” The genesis of the article is that non-profit hospitals are requiring patients to pay up front before services are rendered, from chemotherapy to surgeries, due to the large amount of outstanding debt from patients. The patients impacted are primarily those currently uninsured and underinsured. The prepayment amounts per patient were staggering, ranging from $75,000 to $300,000. Most non-profit hospitals have missions that center around serving the indigent population, thereby making this new business practice a complete contradiction to their guiding principles. In addition, this practice aids is the hospitals bottom lines, by ensuring a positive cash flow. According to the article, “Federal law requires hospitals to treat emergencies, such as heart attacks or injuries from accidents. But the law doesn’t cover conditions that aren’t immediately life-threatening.” This gives hospitals a loop-hole to deny services to people fighting cancer and needing other non-emergency surgeries.

While I understand that hospitals, even non-profit hospitals, need to be compensated for the services provided, there needs to be a compromise between paying $100,000 up front for services to not receiving the services at all. I should add that my father has spent the past two weeks in the hospital; therefore my opinion may be jaded. He was admitted by the paramedics and in my mother’s attempt to hurry; she left her health insurance card at home. My father received services under the Federal requirement and later it was determined that the hospital had his insurance card on file. I am appalled that hospitals have adopted this practice. I find it completely unethical and bad business.

http://online.wsj.com/public/article/SB120934207044648511.html?mod=2_1566_topbox

Despite record level gas prices, Shell and BP post big profits

I was quite annoyed when I saw the article titled “BP and Shell post big profits in era of record oil prices” on the usatoday.com website.

I reside in Newark and work in Philadelphia and am sometimes required to make the commute by car. A round trip is approximately 100 miles, potentially resulting in a gas bill of over $350 per month. Judging from the amount of traffic I see on the roads each day, I am only one of many hundreds of thousands (or rather millions) of commuters that are subjected to these high prices.

While it is perfectly understandable that the additional cost associated with the high oil prices should be passed on to the consumer, it does seem as though companies like BP and Shell have increased their profit margins on their products. This seem very unethical given the current economic conditions.

The current high gas prices have been blamed for slowing the economy. In order to counter the slowing economy, the federal government has gone as far as to issue a $168 billion stimulus plan in the form of tax rebates. People like senators McCain and Clinton have gone as far as to call for a tax break on gasoline for the summer.

Never the less, the 'economy' is pretty good at BP and Shell. In spite of millions of Americans feeling the pinch of the increased gas prices and the slowing economy, companies like BP and Shell are free to exploit the situation and record huge profits.

I cannot help but wonder if the driving force behind the anti bio-fuel movement aren't the big oil companies. The ability to make huge profits even in a bearish economy is not something that any company would want to relinquish.

http://www.usatoday.com/money/companies/earnings/2008-04-29-oil-earnings_N.htm?loc=interstitialskip

Penalties of the Moral Rationales for Following the Law

Dr. Silver,

In your book, the first sentence of chapter 5 states:

“Corporations are not required to follow the law when it requires them to do deeply immoral things, such as to participate in genocide.”

I want to raise the question of the penalty a company must pay if they do not follow the immoral laws. I will argue that the more immoral the law, the higher the penalty.

For example, if you run a cruise ship company and the law states that you are not permitted to feed your guests dinner on Tuesday’s, this is a minor immoral law that a government would probably just slap a small fine on you.

But what if the law was more severe, the penalty would be more severe.

For example, in 1939, the St. Louis cruise ship was faced with a morale and ethical dilemma. This ship housed about 1000 Jews who were escaping Germany to go to Cuba. Cuba officials and law makers decided not to allow the entrants of the Jews even though all of the Jews had the proper papers and a ticket which they paid for. After being rejected in Cuba, the captain sailed for Miami where the US Coast Guard also said no to the entrants. The captain, faced with the dilemma of should he break the US law and enter the territory or just sail back to Germany. If the captain broke the US law and entered the US territory, he would probably have had his boat sunk and all killed or a German Nazi official on the boat would have had him killed. The penalty for not following this immoral law was death.

So in the end, the St. Louis sailed back to Germany where about half of the Jews were killed during the Holocaust. Everyone should watch the movie Voyage of the Damned.

So my question is, at what price does human thought become simply a matter of survival during immoral law times? My answer would be that sometimes it is not realistic for companies or business people to act ethically when the immoral law is so extreme that it interferes with your survival.

EPB vs Comcast

It was in the news last week that there is a court suit being filed in Chattanooga, Tennessee by the Comcast Cable Corporation that claims an unfair advantage is being exploited by a local power company, Electric Power Board or EPB, as it is transitioning to the communications sector. EPB plans to lay fiber-optic cable lines making access to the high speed internet easier for everyone in the area in addition to the electric utility services they already provide. They plan to use a loan from their utility division to promote the communications division. Comcast feels that this low-cost loan will provide an unfair commercial advantage which will violate Tennessee state law.

Local concerns focus on the possibility that a failed project on the part of EPB could cause rates to rise in the future to cover possible losses. Comcast is already well established and provides decent service to its customers, but many feel that arbitrary rate hikes make a new provider with faster service desirable.

Does Comcast have a legitimate case or is this using the law, rather than the spirit of the law, to serve its own financial advantage? Certainly there are legitimate concerns about the welfare of the community if the EPB communications division does not have a realistic picture of the kind of investment and operating expenses necessary to run a large scale operation. If Comcast is acting benevolently to protect the fledgling company from overextending itself, than perhaps the act can be considered moral in its kind intention. But if this is an attempt to use the law to choke out a competitor for strictly financial gain, then the issue must be reexamined with a different lens. Out-competing is a fine way to do business, but if your services are not sufficient and new services are requested, it seems immoral to look for legal roadblocks to do the dirty work of stopping a new competitor from entering the market.

Is it right for EPB to exploit the opportunity for a low-rate loan within a public utility company if it is in apparent violation of the Tennessee Cable Act? The goal is to provide the citizens of Chattanooga with better opportunities and lower service rates, but if the program fails there could be more damage done than good. The utilitarian ideal of desiring the greatest good seems moral, but what if EPB is only concerned with its own profit margin and not with the potential pitfalls of a failed project. If the communications wing flounders, they can still make their revenue by increasing electricity rates. Without more details it is hard to see who has the moral high ground, but we can see that once again, the media and communications industries are very difficult to control with the letter of the law.

The story of Lamborghini

In the year of 1963, Ferruccio Lamborghini was earning big bucks from selling his tractors that he decided to pep up his garage with a Ferrari 250 GT, so he went and purchased this superior sports car. While maxing out its performance on the lush Italian roads he noticed a problem with the clutch system. Being the gentleman that he is, he personally confronted Enzo Ferrari with the issue, Enzo ignored his request and sent him away telling him to rather drive his own tractors. Infuriated, Ferruccio went back and tried to fix the problem himself. He then discovered that the clutch system was manufactured by the same company who provides the clutches for his tractors. So, he installed a more efficient clutch from his tractor warehouse and fixed the problem.
After this incident, Ferruccio lost respect for the Ferrari brand and decided that he could build more powerful and effective sports cars with his skills and expertise. With the help of an ex-Ferrari engineer he designed a sports car with a V12 engine and sleek design now popularly known as the Lamborghini.
This example shows the amount of inspiration and self motivation a particular unethical behavior can influence a person's perceptions and actions.

Textualism and the Supreme Court

Dr. Silver’s discussion of the spirit of the law in Chapter 5 reminded me of a case decision that was announced today (Monday) by the US Supreme Court. Although it is not really business related, the topic of the spirit of the law seems very evident. In the case Democrats and related groups argued that a new Indiana law was unconstitutional because it denied suffrage to people who are poor, old, or members of minority groups. It did this by requiring that any potential voter provide explicit photo identification prior to voting. Since members of these groups may find it harder to obtain the ID, it effectively denies them the right to vote. The Democratic Party argued that the very intent of the law (i.e. the “spirit”) was to reduce the number of potential voters of these groups, who typically vote democratic.

The Supreme Court voted to uphold the law. Justice Stevens (who frequently votes on the liberal side of the court) was in the majority and noted that the justifications for the law “should not be disregarded simply because partisan interests may have provided one motivation for the votes of individual legislators.” Assume for a moment that the motivation (spirit) of the law was in fact to simply remove potential democratic voters. I would argue that this is morally unacceptable because it denies the nature of our liberal democracy (universal suffrage). However, what Justice Stevens is saying is that even if this were true, the law is still acceptable even if it’s original spirit is corrupt because it serves another useful purpose, which is to prevent voter fraud. Steven’s interpretation would seem to be an example of the textualism that Dr. Silver describes in the book. (This also seems to be an example of utilitarianism.)

This case would seem to have implications for business lobbyists and the laws they promote. Say a pharmaceutical company has a domestic factory for producing an expensive drug. A competing drug is introduced by a second company where a portion of it is manufactured it in a poor country that lacks a strong regulatory structure. It passes all the FDA tests, and is even perhaps formulated and quality tested domestically, but the first pharam company influences a law to be passed that restricts the sale of drugs with components that originate in countries with poor regulatory structures. Even if it were proven that that the first company only acted to protect its business interest, and was not even concerned with protecting the consumer, the basis for this case might allow this law to be considered acceptable. The spirit and motivation for the law is immaterial; the fact that it plausibly protects consumers from substandard drugs is what makes it acceptable.

I’m usually a conservative person who would not have a big problem with presenting an ID when I vote. I do express some unease, however, if the INTENT of a law in immoral even if it serves a useful purpose. I believe in justice and I think that there is some room for understanding intent as well as outcome.

Global Equilibrium Out of Balance

A recent study of ice cores over a hundred thousand years old has negative indications about our atmosphere. According to scientists, a natural balance exists between carbon dioxide emissions and the planet’s ability to absorb them. Earth is no longer capable of maintaining this balance. The imbalance is caused by excess carbon emission into the atmosphere. This may be considered as a cause of the climate change in recent years. This study of ice cores has attracted much attention to criticism based around global warming.
The natural balance is a finely tuned process that has evolved over thousands of years. Human activities now produce carbon dioxide somewhere around 14,000 times faster than nature. This pace began during the industrial revolution and has increased ever since. Leading causes of carbon dioxide emission include the burning of gas, fuel and coal. The planet and atmosphere will naturally absorb all of the excess carbon dioxide produced, but it may take hundreds of thousands of years to do so.

Unethical Office Pools

Every year lots of men and women across the country find out if they won money in their office Super Bowl pool. Those who lose have a chance to recoup their cash in pools for the NCAA March Madness, Academy Awards, the World Series, and perhaps even the Presidential election. For every season, there is a chance to bet and win at the office, and the winnings can be as high as five figures. Office pools involving cash are common, exciting, and potentially lucrative. But they can violate corporate policies and the law. So the question arises, are these office pools ethical?

It has often been debated that office pools do encourage office morale resulting in greater productivity. The supporters of these office pools feel it’s all just harmless fun. Office pools build morale and camaraderie. For example, at the beginning of football season, we kick in a few dollars, then follow our team over the coming weeks and months. Most of us lose. A few of us win. What's the harm in that? Even if there happens to be no legal or policy issues at stake, the harm has to do with how stakeholders would view the business if on-the-job gambling activities were revealed. For example, if the stakes are high, the result of the pool could create disharmony in the workplace, and the problems could escalate.

But the fact is that is unethical to be part of any betting pools at the work place. The office simply isn't an appropriate place for gambling. It's called a workplace for a reason: It's the place where we're supposed to work. Things that interfere with doing our job should be done before or after work. If even a small percentage of fellow employees, board members, and shareholders is likely to be troubled by the practice of on-site betting, that alone is sufficient cause for concern. Some stakeholders may have religious objections to it. Others might be concerned that employees will not give their full attention to their work. A third group may simply view gambling on the job as unseemly. Whatever the objections are, they deserve to be taken seriously.

Office pools are also unethical due to the lost productivity at the work place. As a result, during the time of March Madness, some companies block ability to stream videos. Companies don’t want its employees sitting at their desk watching games. Moreover, streaming videos uses up a lot of computer network resources and eats up bandwidth, hurting business operations. It is estimated that $1.7 billion is lost in wasted work time over the 16 business days of the tournament if workers spend just 10 minutes a day on March Madness activity. Also, up to 37.3 million workers participate in office betting pools. This year, for the first time, every single game of the NCAA March Madness was streamed online. Additionally, the little red "boss button" on the NCAA Sports.com streaming video site came in handy to many. Many NCAA basketball fans were toggling between the game and the fake business charts that the site kindly provided, just a click away in case the boss walked by.Another argument that office pools are unethical has to do around the taxes involved with the cash winnings. For example, we are legally required to file a federal tax return each year where all your income needs to be reported. A very small percentage of the employees involved in these pools report their winnings as part of the taxes. The FBI estimated that $2 billion (mostly not reported in taxes) changes hands in just office-run March Madness pools each year.

The workplace has no room for March Madness or any other betting pools. But the reason has nothing to do with productivity or computer use. All these are considered office pools. And office pools are, by definition, gambling.

Who and How to Survive?

After reading, I was reminded of Charles Darwin’s words, “It is not the strongest of the species that survives nor the most intelligent, but those most adaptive to change”. In addition, I think the survivors should follow the spirit of the games. Several thoughts came up to my mind.

1) As we discussed in the last class, people see the problems and realize both government and corporation need to work on them. However, questions such as who/how/when should initiate the change still puzzle me. I assume the peak and bottom points in the chart over the blackboard were very critical in the history where changes were the must. Should we always wait to that point? How patient we are supposed to be?

2) After reading Chapter 5, I was asking if it is possible when every company follow the spirit of law, people need not change the laws, increase the cost for implementing and management. Is that Utopia? In another word, does that really exist?

3) To some extent, I could understand the profit-motivated company’s dilemma. On one hand, they should put profit first, earning hard for their shareholders. On the other hand, they should be able to see long-term picture, respond to the whole society where they are rooted. Sometimes, following the spirit of the law would bring lower profit. It seems to me that if all people, not just the corporation, can see the situation well and appreciate more, the problem could be easier.

4) Is there any example companies that put profits second came in first? Is that true behind every successful company, there is a dark story?

Wal-Mart

The case of Wal-Mart was interesting given that they went over the ruling of the council and requested a citizen’s opinion. I am not sure that I agree with Professor Silver’s evaluation that this was wrong. Obviously, Wal-Mart felt this ruling was unjust and wanted the citizens to decide. As discussed in class many times, not all laws are right and there needs to be a significant change in order to improve the laws. Generally, this comes given a crisis but this was enough of a crisis for Wal-Mart to initiate the vote.

In my opinion, there cannot be a better way to fairly decide an issue than letting the citizens decide. Often times our representatives can be easily influenced and lose sight of what their citizens want. I understand that Wal-Mart’s PR power far out-weighed that of the private citizen groups; but if there is an issue that people do not want then it does not matter how much money Wal-Mart has the measure will not pass.

I agree with Professor Silver that it is impossible for citizens to be aware of all policy matters. But I do, however, feel that it is the responsibility of every citizen to be aware of the issues for which they vote. If your vote is not based on information, then in my opinion there is no point in voting. The severity of this issue should be understood by all citizens.

Housing Bailouts and Taxpayers Obligations

An article in Fortune presented a relevant and very concerning proposal that Congress is currently reviewing. Based on our discussions in class this week and also in coordination with Professor Silver’s literature, I thought the topic of housing bailouts and taxpayers obligations would be appropriate for a Blog. In this article dated April 23rd, a growing concern of many American’s is whether Congress will pass legislation requiring taxpayers to bailout suffering mortgage borrowers. This angers me for numerous reasons, most importantly, the fact that I have the credit and funds to effectively pay my mortgage knowing full well from the beginning that buying a house is a big commitment and that I would be solely responsible for paying back my debt. Why should homeowners, such as myself, be penalized and made to support those borrowers who should not have been able to purchase in the first place?

Sure, I realize that banks are also tangled in the root of the overall problem and should have more strict standards on who to lend money too, but I do not think they should be entirely held accountable for individual decisions.

I think this type of intervention will only encourage people, who may have less than average credit and funds capable to handle a mortgage, to take unwarranted risks in the belief that the government will bail them out or rescue them if they end up getting in way over their heads.

Additionally, the article mentions the importance of a free market and letting the economy run its course without interference of the government. Although the economy is struggling, I think minimal obstruction of the government is key – constant government meddling only sets a precedence that rewards bad behavior. I would agree that the market needs to sort these issues out gradually and that the less government interaction, the better.

To stand for what you are

I intend to make my presentation on a few organizations in my country which are doing a good job at value creation for their shareholders, customers, employees and overall society but are not doing what they are expected to do. The very nature of these organizations called “co-operatives” is to serve a particular sector.
A co-operative is defined as an autonomous association of persons united voluntarily to meet their common economic, social, and cultural needs and aspirations through a jointly-owned and democratically-controlled enterprise. A cooperative is a legal entity owned and democratically controlled equally by its members. The defining point in a cooperative is that the members have a close association with the cooperative as producers or consumers of its products or services, or as its employees. Cooperatives are based on the values of self-help, self-responsibility, democracy and equality. Membership is open, meaning that anyone who satisfies certain non-discriminatory conditions may join.
In Nepal, many co-operatives are behaving more and more like any other financial institution (banks and finance companies). Loans are decided before memberships and there is no feeling of community for which co-operatives stand. Although some co-operative may claim to be established to develop a particular sector, say agriculture, less than 1% of their customers might be from this sector. There is a concern about their sustainability if they act as they are typically expected to by the governing body- the Central Bank.
Are these co-operatives doing a greater good to their stakeholders by behaving more like a financial institution and less like a co-operative? May be a Utilitarian would agree, but what about standing for what you are? That, we will discuss during the presentation, I hope!

Reference:

http://en.wikipedia.org/wiki/Cooperative

Tax Shelters, Free Riders, and Treason?

The readings from the manuscript leave me contemplating the American preoccupation with finding a good “tax shelter” in a new light. It also invites me to look at companies like Halliburton and KBR, as well as Tyco - and many others using off-shoring - from a critical perspective in which we must consider their actions in relation to the purpose of our country's tax laws. Why do we pay taxes?

Some of the basic examples of the purpose of taxes include the security and defense of the nation, the enforcement of law and public order, protection of property, economic infrastructure, public works, and the operation of government itself. Taxes are also used toward funding of public services which include education, health care systems, social security benefits, unemployment benefits, and public transportation. Other public infrastructure needs funded by taxes include energy, water and waste management systems.

It is an easy argument to claim that the elimination of just a few of these basic government functions would leave the people of the U.S., and all those firms for which the U.S. is home, in a situation of vulnerability.

While the cases presented in the manuscript, and those we discuss in the class, are the more extreme examples of egregious profit mongering, I think it would be fair to look at even less egregious “tax sheltering” behavior - those in which corporation’s (and their agents) behavior are for the purpose of sheltering profits to enhance their bottom line – as examples of free-rider practices in which these firms gain all the benefits of a stable liberal economy, while clearly acting directly to avoid paying their fair share. One may even go so far as saying that these behaviors – in that they damage the ability of the U.S. government over the long-term to provide and create the very conditions that the nation requires to remain safe both in terms of its economy and its national security – are acts of treason.

The “agents” of these companies include all those (individuals, groups, and corporations) who willingly aid in a corporation’s purpose to avoid paying their fair share. These entities take advantage of their unequal access to decision-makers to bias the laws - of the very national economy which allowed their prosperity – in a manor that not only inflicts damage on their nation, but cheats the nation and its people from payment for the privilege of these benefits.

French Vacation Leaseback

I found the ethics discussion on the leaseback schemes to be interesting. I had read an article recently on a related topic. In the UK it is common for people to have self-invested personal pensions (similar to the proposal put forth by George Bush a couple of years ago during the social security “crises”). These Sipps as they are called allow individuals to make personal investments that provide tax rebates in return for limited ability to access the money until an age limit is met. Very similar to a 401k.

It is not permissible to make investments in personal property with the Sipp. Only commercial property is allowed. However a loophole has been found around this restriction. In France and Spain there is a government supported method for a legal leaseback. This method encourages people to purchase property that is intended to be used as a hotel or rental unit in order to increase tourism. Besides the rental income the buy makes, he also does not have to pay the French VAT tax, with is currently 20%.

So a buyer in the UK purchases the French vacation villa with his SIPP, receives the UK SIPP contribution tax benefit, receives the UK rental income SIPP tax exemption, receives the UK capital gains SIPP tax exemption (if the property is sold), receives the French VAT relief, and in 20 years has a nice vacation home. Considering that he only has to make a down payment to make the purchase and can finance the rest, this provides a really nice way to make a good investment.

Ethically speaking I am not sure the leaseback is really a problem here since the French law is specifically intended to increase investments in vacation properties. The buyer is using it for its intended purpose. From the SIPP standpoint, the article I read implied that the SIPP is not intended to allow investments in personal property, but in effect this is what is being allowed though the loophole. The property is commercial for a while but is really personal property which can be enjoyed as such after it is paid off.

Professor Silver's Book Readings

Wow! Way to go Professor Silver! I just completed reading the last page of Chapter 4 and couldn't have been more surprised at the contents of the readings, let alone the shenanigans hoisted on the American taxpayer and voter by corporations as the have now jumped completely in bed with our government.

If I've learned anything from these readings as well as from my studies in the MBA program, it is that I will be much more astute at reading the financial pages of the Wall Street Journal and other papers that focus on business and enterprise in America and globally.

Though each of the cases were enlightening, I could not have been more alarmed by the role that major accounting firms and the practice of accounting in general plays on how skilled (or not so skilled when caught) these corporations have become in getting around the legislative and tax systems of this country. You would think that with all of the billions of dollars these corporations are making, paying a fair share of taxes or allowing the average worker, customer, employee, etc., their fair share of justice and/or earnings would be a 'drop in the bucket'. However, Professor Silver's writings have demonstrated that the fact of the mater is that corporate and government greed is incestuous, widespread, and dangerously disruptive to the entire American economy if we are not careful.

Take for example, the legislation outlined in Chapter Three on: Influencing the Law. Professor Silver makes a clear argument when he points out the fact that many pieces of this legislation was implemented, not for the protection of Americans but for the protection of large corporations. In an attempt to lock in their political gains in order to withstand future democratically-based efforts to regulate corporations, these same corporations are manipulating law by way of the relationships they have built between companies and government to secure windfall profits for years to come. I was deeply troubled by the case presented on the Medicare Prescription Drug Act of 2003.

I vividly recall visiting Canada in 2003 and seeing for myself that the same prescription drugs I had to pay upwards of $500 in the US, could be purchased in Canada for less than 1/5 the cost. No wonder drug companies closed that loophole. They used propaganda advertisement to state that it was done to secure safety in drugs. How can they say that when our own FDA is so overworked and over-loaded with cases, they don't have the time or manpower to inspect our own food and drugs or those coming to us from other overseas nations such as China?

I could go on and on about how revealing the cases were about the U.S. corporate culture and how little we know, or pay attention to, in the ways and to the extents corporations will go to secure profits. It raises more questions than answers.

Are Murdoch's Actions Ethical or just Good Business

In an article I recently read in FORTUNE, Marcus Brauchli, managing editor for the Wall Street Journal has resigned and questions are being raised as to why?

http://money.cnn.com/2008/04/22/news/newsmakers/wsj_managing_editor_shuffle.fortune/index.htm?postversion=2008042214

Brauchli is considered the best in the editorial business but when Murdoch purchased Dow Jones & Co which owns the Wall Street Journal, he also established his own regime. It is not clear as to whether Brauchli was asked to resigned or did so on his own accord. But, looking at his career and credentials, this was the perfect job for him and a tough job to get elsewhere.

Murdoch is rich. Simply, he is considered one of the most shrewed and savvy business men of our time. The ethical dilemma raised by this occurrence is how Murdoch (or any takeover) moves into a company, takes over, and transforms or layoff. Personally, I think it is all part of business. Murdoch plans to buy Newsday from the Tribune Co. News Corporation plans to combine the operations of Newsday and its New York Post. So, Murdoch probably didn't think Brauchli was suitable for a transitioning job. I am sure Murdoch has plans to merge the Wall Street Journal with something else in his portfolio under New Corporation.

So I ask you, is this an ethical case? I think not, but public perception sees the pushing out of established employees as morally wrong. Business correct, morally wrong.

Dr. Silver, are you more familiar with the Murdoch deals with News Corp? This is a tough company to track the inside happenings.

questions after reading the tax cases...

Indeed, corporations must accept the taxing and regulatory authority of the governments in which it actually conducts business. If they don't, in the short run, corporation might gain profit from saving state tax. But in the long run, state government won't have sufficient resource to continuously develop the place, which will eventually result a bad consequence for these corporations.
However, since this kind of tax incentive system has been in US for a while, and no obvious economic harm related to this system. I wonder if there is also some good consequence balanced the bad effect of it. One possibility is that corporations spent the profit they save on the tax on the expansion investment in the state where they really conduct their businesses. The extra investment could encourage the economic development of the place, and offset the negative impact of tax income loss.
I understand it is a pure assumption. And my underlying question is how the world can improve if the corporation stop doing that? If we don't have the answer, it is very difficult to stop corporation from keeping avoid tax as much as possible!
Other more practical question, did we consider ourselves unethical when we tried to save some money from the tax? Should we have to change ourselves after we realize that we should not only follow the tax law but also its spirit?

Unethical engineering

Dozens of consumers worldwide are injured, or merely surprised, when their cell phones explode, the result of counterfeit batteries that short-circuit and suddenly overheat.

On July 1, 2006, it became illegal in the European Union to sell electronics that contain more than a very small amount of lead, mercury, cadmium, and a few other hazardous chemicals. These new Reduction of Hazardous Substances (RoHS) regulations present a golden opportunity for electronics counterfeiters to re-label and re-package lead-containing electronics to look like they meet the RoHS requirements.

What is electronics counterfeiting? It is kind of counterfeiting, where someone makes a cheap imitation of an expensive product and name it same. This can be also seen at crowded street market in New York City .According to the estimates these practice are responsible for up to $100 billion a year in revenue.

Counterfeit electronics is case of unethical engineering. Someone with technical expertise to know what parts are in demand and how to fake them is profiting illegally and immorally from counterfeiting of this kind. Counterfeiting happens all over the world, including the United States, but the huge chunk of all electronics manufacturing is done in Asian countries like China, India, Thailand etc. http://www.spectrum.ieee.org/may06/3423.

United we stand

Reading the case about the pension default done by United Airlines reminds me of one instance when American Airlines tried and saved $40,000 in 1987 by eliminating just one olive from each salad served in first class. This is just a very minute amount of extra savings they experienced that year, as compared to the volume of the pension default, but it specifically highlights the fact that these airline companies take such extreme steps to perform cost cutting strategies by staying in the loop and making sure that their stealth techniques are unnoticeable. But this pension default incident by United, as according to me, can be considered as a serious offence. Exploiting the funds that are readily available, which do not solely belong to you, and trying to invest them in projects that have risk involved without acquiring permission from all the legal users is a very unethical move.
The main reason why United went forward in performing this task of exploiting the legal loop hole is because, when they invest if they fail (which they did) then they would not be held responsible for paying back the employees the money that they were supposed to receive, but could easily shift the weight of the problem to the Federal unit of PBGC who handles issues of pension default possibilities of to be bankrupt companies.

Thoughts on case readings.

I am amazed how smartly the companies find options to go around the law, as I read from the chapters from Prof. Silver’s book. Although we did discuss about United Airlines and Sinclair in the first half of our semester, I found the case for Limited Brands Inc. really interesting. I observe how the links between the company, its subsidiaries and retail operations have been optimized in order to make the tax payments as minimum as possible. It sounds interesting that at step one, the parent company sells the intellectual property to its DE subsidiaries because the state has no income tax for corporate activities that relate to intangible assets of the company. At step two, the retail operations in other states pay back to these subsidiaries in the form of large royalties and end up making less income and hence paying fewer taxes. So eventually the company is able to get the maximum into its pockets while playing around the law in different states. And legally this sounds appropriate because the state laws, “as written” are still being obeyed. Not only this, the companies could go to an extent of shifting taxes through their international operations as in the case of a company that starts as a subsidiary in a low tax nation and later turns into a full fledged parent company owning all the related IPR. As Prof. Silver wrote, the company now would be under no pressure to abide by the U.S laws for taxes. I sometime fail to understand that why would these giant companies try to evade taxes if they are making a sizeable income which demands those taxes to be paid. I think if one intends to eat a larger piece of the pie, one should be able to pay for it..!!

The case of the BUS vs Andrew Jackson, whereby Nicholas Biddle’s attempts to influence the media by “paying newspaper editors to run pro-Bank editorials giving his own views a widespread airing as well as the appearance of being endorsed by disinterested newspaper editors” strikes similarities to the Sinclair Broadcast case where Julian Sinclair Smith intended to alter political opinion through an immoral manipulation of the media prior to the 2004 Presidential election. This appears to show the prevailing temptation to control mass media through legal and financial manipulation of the system in the United States. Maybe the dissemination of unbiased new sources via the internet help prevent this type of injustice in future generations, or maybe internet journals and blog sites will only muddy the waters of true journalism.

We have the responsibility to control what television programs, newspapers, and magazines our families are watching and subscribing to, but there is a higher responsibility of major media outlets to protect the virtue of news without bias or misinformation. In the case of the BUS, a fair and balanced report in the newspaper supporting both Biddle's argument and President Jacksons would have clarified the issue rather than mislead readers. In 2005, CBS had a very public firing of a news crew that also provoked the resignation of Dan Rather, who served as the correspondent for the piece in question, from CBS News for airing potentially forged documents questioning George Bush’s service requirements in the Vietnam War era. While the actions of the CBS network in preserving journalistic integrity were necessary, was the story any worse than the anti-Kerry ads that the Sinclair group was promoting? Perhaps this story would have been accepted as a counterargument to the Swift Boat ads if the documentation could have been supported. If this were the case, the Sinclair group could have presented both segments on its stations to remain neutral. Bias is a natural tendency and doesn't seem to be very immoral, but there is a problem when biased people have a disproportionate control over media outlets and refuse to share the spotlight for debate.

Providing fair and balanced information is a moral responsibility of any company or individual with the capacity to communicate with a very large audience. By virtue, it must be treated with the utmost respect in order to preserve a government that is to be run by the people. “[The First] Amendment rests on the assumption that the widest possible dissemination of information from diverse and antagonistic sources is essential to the welfare of the public”. This quote from chapter 4 of the text is a great summation of the spirit of the law in providing open and unrestricted access of information for all people. Maybe we will see a truly open media with the future of internet media, but I have my doubts. American history shows us what enterprising individuals can achieve when submitting only to the legalistic view of the laws.

Junk-Food Ads

The discussion in last class reminded me of the topic about banning junk food advertisement for kids. Research shows that nine in ten food ads aimed at kids sell high-fat, high-salt, high sugar, or low-nutrient foods. This finding actually came from a study of 27.5 hours of children’s programs that ran on a single Saturday morning in Washington, D.C.

(http://www.cbsnews.com/stories/2008/04/01/health/webmd/main3987942.shtml?source=RSSattr=Health_3987942)

This concern is not new to people. In 2007, CCFC (campaign for a commercial-free childhood) and CSPI (Center for Science in the Public Interest), together with Kellogg agreed upon nutrition standards for foods advertised on media. In addition, Kellogg agreed not to advertise to children under 12 in schools and preschools. http://www.shapingyouth.org/blog/?p=489

As we all can tell, these changes in marketing are not easy for companies in the food industry, but very important for the society. I was thinking in a free market economy, is it ok (or necessary) to regulate the ads? Should we wait for the changes from the companies themselves? (However, maybe at that time everyone has obesity) The ethical issues in a profit-driven company or environment are hard to solve to certain extent. If “I am” the only one in the market considering ethics, “I” probably would be the first one to leave the industry.

Meanwhile, ads are ads only. They don’t reach out our pockets for money to buy the products. People probably should develop more control and more appreciation of the quality life themselves at the same time, although I know it’s hard.

Two items-in brief

1. The discussions in last class about using 'overly thin' women in advertisements and how it escalates the issue of eating related disorders like anorexia etc. It made me think of how women are used in advertisements no matter what the product an immaterial of the products use for women. Example: The Axe deodorant ad (You wear axe; women see you (semi)naked and vice versa!)

Ethical question, why are under dressed women flaunted in these ads? Advertisements were once used to inform customers about the product and create awareness. Not anymore. Sexuality by itself is not a bad thing, but when its trivialized and women are stereotyped it makes me wonder how much have we evolved as a business and what progress have we made from the days of objectifying women.

2. It is common knowledge that pharmaceutical companies jump hoops to get drugs approved by the FDA. They are under the closest possible scrutiny by the FDA before their drugs move into the market after the 10 years they spend in the pipeline. Most of the time is devoted in testing for safety and effectiveness of the drug besides side effects of the drug. Hence two things that go on in this rigmarole fail to convince me on an ethical level. Why are the studies/research for side effects and safety funded by the company itself? Why are pharmaceutical companies allowed to release the findings of studies/research as late as 2 years after the drug hits the market, even if the findings suggest negative side effects?

The other week I watched Charlie Rose interview George Soros. He’s a successful billionaire through investing and speculation but also commits to philanthropy and his own philosophy. He was there to promote his new book, The New Paradigm for Financial Markets, the Credit Crisis of 2008.

He spoke against the “market fundamentalism”, promoted by the Thatcher/Reagan era of decreased taxation and limitation of government regulation of business. This is the driving argument of Milton Friedman. Expecting the market to “self-regulate” or “self-correct” is simply irrational, he said. He criticized Greenspan who addressed the market at times as “irrational exuberance” but then did nothing to address this forthcoming recession.

He believes government is responsible for fiduciary oversight. They have to step in as an ethical platform to stop businesses from this irrationality. For him, the consequences of or “market fundamentalism” are both the IT and subprime mortgage bubble. He doesn’t support Bernake’s estimate that it will get better next year and predicted that both the UK and US are in for further trouble ahead followed by the Euro-dollar and the China market collapse because of its heavy dependence on exports. He predicted an emerging new world economic order with the dollar likely to lose its standard as the international currency.

Obviously, he paints a discouraging future but one that seems realistic and likely to continue. Professor Silver provides a historical and coherent picture of several events that influenced this current state of affairs. I would like believe that the pendulum is about to swing toward building stronger communities for education and a long term commitment “of the people, by the people, for the people” (Abe Lincoln) but we’re all too busy not paying attention.

Walmar case in reading

In our reading of Chapters 3 & 4, there was a discussion on Wal-mart and whether they acted ethically in the Inglewood case. I argue they did. In question was the way Wal-mart sponsored an initiative to circumvent local regulations. Also in question was the fact that it over funded a campaign to allow Wal-mart to build in that area.
On the first charge, Wal-mart had no choice but to use all possible routes to build given that there existed a bias within the city council in refusing the permit. The bias comes from people believing that Wal-mart does not treat their employees well or pay high enough wages. Also, there may have been some union influence in the city council that brought them to the decision. The truth is Wal-Mart's average wage is around $10 an hour; nearly double the federal minimum wage ($5.85 according to the Department of Labor). If Wal-Mart weren't an attractive place to work, they wouldn't find themselves with thousands of applications for the hundreds of jobs created with a new store. Wal-mart used an existing law to put an issue on a ballot for the public to vote on and I see nothing unethical about that.
On the second charge, they spent so much more money than their opposition; I argue that, although true it does not show the whole picture. Most of the money was spent on advertising in some way or another. The opposing groups held rallies with community leaders, including Jesse Jackson whose influence and the amount of press he receives goes well beyond the spending of dollars. Jesse Jackson abused his influence on the majority black population in Inglewood, using figures such as Martin Luther King and Cesar Chavez to thwart Wal-mart.
Wal-marts defense in the situation was “It looked like an opportunity for Wal-Mart to redevelop an area that doesn't have a lot of jobs. Today, there is nothing there that is creating economic value. There are no jobs there. There are no better prices. There is no better assortment. The only thing that was created was a safety zone for people to charge higher prices and to take advantage of the very people who can't afford to be taken advantage of.”
Seems to me that it is irresponsible for the government to ban Wal-mart from the area. I say let them build and if the people in the community do not like the lower prices and the addition jobs, let them shop elsewhere. If no one shopped there, they would have to close and no harm done. However, I do not believe that would be the case, I’m sure they would thrive just like in any other community because it is a good business. I wish people would just say they hate Wal-mart because they are too difficult to compete with instead of creating other reasons.

Comments on working around the "spirit of the law"

Of the many points discussed in this class, the ones that get to me the most are those involving corporations going around “the spirit of the law”. In Silver’s Chapter 4, entitled Violating the Spirit of the Law, he provided many cases including ones we’d talked about in class several weeks ago (i.e. United Airlines pension default, the Sinclair Broadcast Group issue, tax shifting). Although we had talked about these before, I read them again this weekend and recalled just how frustrated I was to hear about these originally.

It is upsetting that corporations can take part in large-scale activities to act in their own interests and neglect other parties (employees, shareholders, etc.), usually in the name of profits. I am not sure when or how these activities will ever stop. I do agree that companies should really use the U.S. legal system to push through changes that (they believe) need to be made, as the system intended, but I just have a hard time seeing how that will happen anytime soon, when the government itself is so intertwined with those very companies.

I know that voting is a mechanism that the American public has to elect officials that they believe will make the right choices for the good of the public, as in handling corporate activities, but I feel like even if citizens vote for the “right” people for office, it won’t make a difference in the end; it seems that the lobbyists and other pressures internal to the government will end up swinging regulations in favor of corporations anyway.

Ethical issues in online gambling

In recent years there has been an explosive growth of gambling opportunity and activity on the Internet stirring controversies around the ethics of internet gambling. Internet gambling differs from other forms of gambling in that there are few if any regulations to assure the fairness of games or establish the responsibility of game operators, most of whom operate from servers located outside the United States. Unlike gambling activities that are subject to state and federal regulation, there is no control on the hours of availability, age of participants or type of games offered. An unscrupulous operator can merely close down a site or move its base to another country if challenged. Hackers can potentially interfere with the process by manipulating the online games, as well as stealing funds by accessing the credit card numbers used in the gambling. In addition, Internet gambling, unlike many other types of gambling activity, is a solitary activity, which makes it even more dangerous: people can gamble uninterrupted and undetected for unlimited periods of time. Regular or heavy users of the Internet have been found more likely to participate in Internet gambling than other users.

There are many kinds of online gambling which are easy for anyone to access. The selection varies from online casinos, to sports books to even electronic stock trading. Although all these websites are enjoyed and even abused by many people, there are also several controversies on the issue. One being the issue of the government earning 0% tax money on all online gambling. The other problem is the groups who think it should be illegal because of moral reasons. A major concern is with regulation of the age of gamblers. It's often impossible for webmasters to know the ages of people visiting their site, potentially allowing underage kids to be exposed to the gambling websites. Another issue that concerns regulators is addiction. This is more of a concern with online gambling because of the quickness and ease of the gambling.

Fraud is another big reason why regulators question ethics around internet gambling. Internet gamblers can't be assured the games they play are legitimate and they can't be guarenteed a payoff. Some websites just take people's credit card numbers, and some don't have proper machinery. Another loss results from the decrease in revenue in the solid casinos in the state borders, causing not only the state to lose even more tax income, but also devastating the actual casinos and it's employees. Online gambling also opens a giant can of worms, in that it gives gambling access to millions of people who otherwise would not have access. One of the logical conclusions of having more gamblers is having more gambling addicts.

Finally, online gambling promotes fraud and cheating. Critics claim that online gambling sites have already become a haven for hackers and con men. Most internet gamblers purchase credit online through the use of their credit cards. Skilled hackers would have mountains of credit card numbers to illegally charge to. Another dilemma to online gambling is that it makes cheating easier. While cheating obviously constitutes a breach in ethics, it also can cost casinos millions. Casinos have thousands of cameras to monitor cheating onsite, however it is almost impossible to monitor a player as he bets out of his home.

Let’s banish the water advertisements!

After the last class some nagging questions were still bothering me. To me, it seems very dangerous to start to think about the idea of prohibit commercials, websites and other sources of information, just because we don’t agree with them.
Anorexia as well as overweight can kill, but do you know that water can kill too? As well as the advertisements with very thin people can influence the other (special kids), the water companies strategy to advertise to kids can also be dangerous, seeing that they don’t say that the excessive consume of water can be fatal.

http://www.sciam.com/article.cfm?id=strange-but-true-drinking-too-much-water-can-kill

http://www.aquapod.com/?CID=BAC-DPAPcomBanner-sPromo06&sz=sPromo&brand=DP

To me it seems to be the same, why people don’t complain about the water companies too?
As other examples to prove my point of view I am listing two website easy to find (just Google the right words) that I don’t incentive you to look. The fist one teach how to committee suicide and the second one how to build a bomb.

http://en.wikipedia.org/wiki/Pipe_bomb

http://en.wikipedia.org/wiki/Suicide_methods

What I am trying to illustrate with my post, is that we can not use dictator methods against the freedom of opinion.
I am not going to build and detonate a bomb because I saw how I could do it, as well as the suicide methods, which will not incentive me to kill my self. If you say that they can be useful to someone who has these ideas I agree. But to me the problem is TO HAVE THE IDEA. My family taught me what is good and what is bad and is not because I don’t like or agree with something that I can not learn about it.
If you agree that extremes body dimensions ( I don’t remember the exact name used in class) could be a bad influence to your kids, or could influence them to do the same, why don’t you talk with them first? Why don’t you try to show way this could be bad? Why don’t you create another site showing your point of view (ex: http://www.suicide.org/)? Instead of trying to banned the things that you don’t agree with.
We can not (and should not) deprive people of having access of information but we can (and should) teach what we thing is the correct and the best. The person chooses are based on their character and on the way they have been educated and not because of the information that they have access.

Pilots

An article in the New York Times entitled “Delta and Northwest in $3 Billion Deal” details the events that occurred in the merger of these two large companies. This merger has created the largest airline company in the world. Of course, this act alone is not enough to be considered an ethical issue. It’s when the details are deluged that the ethical implications are apparent.
According to the article, “The Delta-Northwest agreement came despite failed efforts to get pilots at both airlines to agree on how to combine their own ranks, an issue that could lead to labor unrest and disruptions to flight operations in the coming years. Northwest pilots immediately said they would oppose the deal.” And in fact they have opposed the deal and were left out of the negotiations. The issues of turmoil are the pay rate and agreement of who should have which seniority level.

I would think even given the merger situation that the companies would be fair in negotiations. I don’t think that it is ethical that the Northwest pilots are going to receive less compensation than an equivalent Delta pilot. This just creates unrest and disputes among employees. Of course, the employment at will factors into this situation. So if the pilots don’t like it then they can go somewhere else. But I still think it would be ethical to create a standard for which all pilots are subject to.


Reference: http://www.nytimes.com/2008/04/15/business/15air.html?_r=1&ref=business&oref=slogin

Everyone is blogging these days. At least, everyone in our Ethics class is blogging these days. I recently read an article about a stay-at-home mother who made big bucks by turning into a blogger mom. Heather Armstrong has become one of the most influential bloggers with her blog Dooce.com standing at No. 59 amongst the Web’s Top 100 blogs. Even her husband quit his job to managing advertising for the site. Together the couple generates an estimated $40,000 a month in revenue from huge companies like BMW and Verizon. Clearly, blogging has become a full time job for some.
When all corporate and entrepreneurial companies need to adhere to some degree of ethics, I think even bloggers have to conduct in an ethical way. I wondered if blogging is same as being a journalist and if bloggers have the right of bias. I came across some literatures that claim that blogging can be used as a means of journalism but it is not journalism. Does that mean a blogger do not have be constraint herself or himself in any way whatsoever? A blogger and also a doctoral fellow at University of North Carolina, raises several ongoing debates on the blogging issue. He calls his project C.O.B.E. (Code of Blogging Ethics) and has listed a few ethical guidelines for bloggers (professional and otherwise). Hopefully, his outlines will be helpful for our team of bloggers at BUAD840!

References and links:
1. “The blogger mom, in your face”, Work & Family by Sue Shellenbarger, Wall Street Journal
2. Blogging Ethics by Martin http://blogethics2004.blogspot.com/
3. Is blogging journalism? Posted by Dana Blankenhorn
http://mooreslore.corante.com/archives/2005/04/29/is_blogging_journalism.php
4. Blogging as a form of journalism http://www.ojr.org/ojr/workplace/1017958873.php

Delta/Northwest Merger

After much anticipation, Delta & Northwest airlines have agreed to a merger deal that would unite the Nation’s number 3 and 5 airlines. This is potentially dangerous for the passenger’s pockets since they will have more control over industry prices. Should the government restrict the deal? I think not. Considering that the greater good of the industry is at stake, the government should try to find and help these two carriers achieve a deal that will make the profits sustainable without raising prices.
I think these two carriers can find synergies that will make the operations more efficient by using their combined knowledge and targeting more markets. They currently operate in two different regions, therefore, they will not be able to raise prices in either region if the merge. The problem will be if the have to lay off employees or change labor cost. The different articles that mention this subject argue that the merge will cause pilot salaries to change and that Northwest pilots will not be able to agree with the proposed salaries. The deal will not be fair for the pilots of Northwest that have more seniority. It seems like there is some discrimination happening against the more senior pilots. If they can resolve this issue and find a suitable deal for both work forces, I think the deal should go through and enable these companies to try to become profitable. It will be better to have one bigger company than having two companies that could possibly go out of business.

The Absurdity of “Alternative Fuels”

Last week, congressman Markey of Massachusetts was asked “these oil executives, they’re enjoying record profits while we’re paying record prices. You and a lot of Americans say that’s wrong… What can you possibly say or what can happen at these (congressional) hearings that will change things?”

Markey’s reply: “these unjustifiable profits are reflected in how little some of these companies put into renewable energy resources to find an alternative to oil, and the incredible profits which the companies report and it’s time for them to come to explain to the Congress, but more importantly to the American people, what they plan on doing on alleviating this enormous attach upon consumers and upon the American economy, which oil prices represent.”

First off, this business about taking their profits and putting it into renewable energy resources is what is happening in the private sector. There are all kinds of people trying to come up with alternative fuels and ways of creating and using energy. Big Oil is doing it. Last year, Government gave hundreds of billions of dollars in grants to people to find this stuff out. But the point is there isn’t one. We are nowhere near finding something to replace oil. So now everybody hates oil, oil is evil, it’s dirty, it’s destroying the planet and creates obscene profits for these fat cat oil execs…but there isn’t anything else.

As long as there is a free market, we will find the alternative, but lets say for example that today Exxon or some XYZ widget company puts out a press release, “We have developed an alternative source of energy. We have come up with an oil substitute. It really works, really great, it’s going to initially cost $25 a gallon” What? Do you think if somebody announces an alternative to oil today it’s going to be cheaper than oil? Where is the thinking on that? What about all the R&D costs, and testing costs. We will never be able to, in our lifetime, come up with a replacement for oil, in the quantity that we currently use oil. Think of what the process is going to be to manufacture that much. Where are the factories going to be? Where are the warehouses going to be? Do you realize how much oil this planet creates and continues to create? And we’re going to wave a magic wand and come up with something that replaces it? We are going to be able to manufacture billions of barrels a week? What if the process to manufacture this stuff creates pollution or takes more energy to produce? To think that it’s just-around-the-corner possible, and that it somehow is going to be more plentiful and that it is going to be cheaper and cleaner and have no pollution characteristics. There is no utopia. I think it is irresponsible for a member of Congress to sit there and discuss the concept of replacing oil as though it is possible, imminent, and these guys at Big Oil are not doing their share to find it.

The guys at Big Oil don’t set the price. They buy the oil at (as of April 2008) $2.66 per gallon. Refinery and distributions cost $0.18, profit is $0.28 and Taxes are $0.65. The government makes more than twice the profit on a gallon of gas than the oil company. And they don’t do anything to earn it! It’s free money. If you want lower gas prices, ask for lower taxes. Ask for more refineries to be built in the US, more drilling of our own oil reserves to make us less dependant on foreign oil. Big Oil is not the problem; it’s the Government (mostly one side J)

The Democratic Presidential Campaign

I have been watching this presidential race since it's beginning and have had great concern about the treatment of the candidates by the media, before the people have an opportunity to vote in the primary. We are all aware that ratings matter in a race as close as this and that television personalities will keep anything going just to get us to watch -- that's acceptable.

What I find to be ironic and unacceptable is how reporters, in general, are appearing to excuse Hillary Clinton's behavior much more than Barack Obama and Senator McCain's throughout this race. I don't think that anyone watching the political shenanigans of Hillary and Bill Clinton have to go very far to find lucrative examples. No wonder independents think that Democrats are such a divided and awkward bunch.

Before her character was exposed, I truly admired her. Not because she was an excellent example of strong woman, a senator, a mother, and a faithful wife, but because she had style, class, intelligence and was very independent. That was before the lies, exaggerations, false accusations, name calling, finger-pointing, etc., and all of the other attitudes displayed by her that are very similar to those displayed by a child when he or she does not get his or her way.

In every face-to-face, in every media blitz, in every state where the races have been won, and in every media blitz AFTER the voters have spoken, the media has no choice but to be fair and give props to the candidate that has won the most votes. Clearly when we look at the methods used to win votes by both Hillary Clinton and Barack Obama, we see demonstrated completely opposite approaches. Barack's message has been consistent, clear, and loated with facts from day one -- yet he is painted as the inexperienced candidate. Hillary Clinton's rhetoric has been filled with eloquent word-smithing, euphamisms, charming anecdotle and lofty goals -- once she becomes president, but very little substance.

Yet, Hillary's actions are being dubbed as excusable while anything Barack Obama is accused of (whether he did it or not), is blasted across the newspapers and other media for weeks on end as if he acted that same as she and no one blinks an eye.

A prime example, the Saturday before I left for my business trip, it had just been revealed that Hillary and Bill Clinton's fortune was revealed in their tax returns and was upwards of $109 million dollars. Yet, the week I return, she is touting herself as being ' the candidate for the blue-collar working class' while calling Barack Obama an 'elitist.' Correct me if I'm wrong, but when was the last time Hillary visited a blue-collar town where the average Joe had $109 million dollars in his or her bank account? Was it when she was a little girl growing up in Scranton, PA? Meanwhile, though Barack's tax returns reveal far less, she calls him an 'elitist?' Also, did we hear anything at all about all of this money in the following week? I should think not.

It doesn't matter to me which of the candidates wins the race -- all's fair in love and war, right? I just don't understand how Hillary and Bill Clinton are getting away with tearing up the character of the entire Democratic party by dividing it from within, while the REAL fight (between the Democratic nominee and the Republican nominee) hasn't even begun.

She should have an opportunity to continue through her campaign in Pennsylvania. But after that, I hope that she can resume her class, style and a sense of dignity by stepping aside. If she wins with the character she portrays, what does that say about Americans?

To Patent or Not to Patent?

According to Wiki, a patent is a set of exclusive rights granted by a state to an inventor or his assignee for a fixed period of time in exchange for a disclosure of an invention. The profit from patent could promote innovation in my understanding. Companies spend lots of money and energy to develop new products and new technologies. Patent protection is a reward to all the effort. Once the patent expires (such as in pharmaceutical industry), this advantage will go away.

Another popular case is Microsoft. It’s long debated that Microsoft should (or should not) disclose its source code of its software. It’s obvious that once released to anyone (such as government), it would possibly be open to its competitors.

Ethic questions are raised here. Firstly, is it really beneficial to the overall technology development in the society, when patent is introduced? Utilitarian view would probably disagree with that, while shareholder theory believers would support patent which could bring in more profit to investors. If the patented information is open to everyone, some advanced technique or cheaper drugs could be available for consumers. Some companies try to defend its patent seriously so as to defeat other products in the market and earn as much as it could during the patent protection period. Customers have to pay for that.

On the other hand, companies, especially R&D intensive ones, such as pharmaceutical companies, do need patent to reward their expense. It’s kind of a dilemma in my understanding. If something could be done about patent law, who can make and how to make the change is another issue.

Competitive Behavior and Game Theory

I recently read an article in this month’s Scientific American magazine that seemed to touch upon some aspects of the issues that Dr. Sliver discusses in the into to his book. Specifically Dr. Silver made some analogies between the corruption in sports cheating (using hormones, etc) and business ethics. The article also touched up the sports problems and discussed them in the framework of game theory and why people do the things they do. Game theory mathematically analyzes the behavior in the interactions between two or more people (or companies). It’s a very important theory in many fields, especially economics.

It’s not possible here to go into a detailed breakdown of game theory and how it might applied to competitive behavior between companies, consumers, and the government (nor am I qualified to do this). Suffice it to say that the concept of escalating competitive behavior between two or more parties is almost a fact of nature rather than something special to the business environment. The dilemmas and types of choices made here are equivalent to choices made in many competitive situations. In my opinion it shouldn’t should it be surprising that companies would ramp up their competitive behavior. Hire a lobbyist? Who wouldn’t in order to get an advantage? Hire 10 more? Again – who wouldn’t? Why is this surprising? It’s the same reason why the US and Russia had 10’s of thousands of nuclear warheads aimed at each other.

The only conclusion that the author of the SciAm article came to was to install very harsh penalties in order to influence people’s behavior in regards to illegal drug use. One confirmed use of a steroid is grounds for dismissal from the sport – forever. And penalize his or her team harshly too. However installing these types of regulations for US companies is a political non-starter and moreover it’s probably not wise given the nature of the global economy. With these thoughts in mind it seems like we will always live with some kind of environment where competition and ethical behavior are always in discussion. It’s a fact of nature.

The Spine as Profit Center

Spinal-fusion surgery is an extremely expensive surgery, but become more popular in recent years. An estimated half-million Americans had this surgery in 2006. The ethical issue is whether doctors could invest in medical device company and use their product at the same time.

“Federal regulators have voiced concerns about growing popularity of the investment arrangements, which would potentially violate antikickback laws if doctors receive stock or are otherwise compensated to use or recommend certain devices.” From my understanding, it is allowed that doctors invest in the companies which supply doctors’ devices because they didn’t receive stock for free. However, this kind of relationship is easy to influence doctors’ judgment. The more surgery they do, the more profit the company they invest make. Eventually, the doctors can get a large dividend by increasing usage of the devices.

Most medical device companies are private, which mean they do not disclose their investors. It is hard to find out whether your doctors have personal interest in the surgery and the treatment or device they insist to install is just for your own benefit. Even though some hospitals insist their doctors have to disclose this kind of information to their patients. If I am a patient and my doctor told me that he/she has invested in the device he/she is going to use, my only choice will become to accept it or switch to another doctor. I will never ask doctor to use another brand of device. Things happen during the surgery and you might never know why. However, it is still better to know more. At least, we could have one more choice.

My final project will focus on the relationship between doctors and drug or medical device industry. Any suggestion or opinion is welcome. Thanks all in advance.

some other cases relatived to environment pollution

case one:

Woburn is ten miles north of Boston and was originally settled by the Massachusetts Bay Colony in 1640.Today Woburn has approximately 36,000 residents and an economic base founded on its long history of chemical manufacturing and leather tanning.

In contemporary history, Woburn was the scene of a high profile water contamination crisis. During the mid to late 1970's, the local community became concerned over the high incidence of childhood leukemia and other illnesses, particularly in the Pine Street area of east Woburn. After high levels of chemical contamination were found in City of Woburn’s Wells G & H in 1979, some members of the local community suspected that the unusually high incidence of leukemia, cancer and a wide variety of other health problems were linked to the possible exposure to volatile organic chemicals in the groundwater pumped from Wells G & H.

In May, 1982, a number of citizens whose children had either developed or died from leukemia filed a civil lawsuit against two corporations, W. R. Grace and Company and Beatrice Foods. Grace's subsidiary Cryovac and Beatrice were suspected of contaminating the groundwater by improperly disposing of trichloroethylene (TCE), perchloroethylene (Perc) and other industrial solvents at their facilities in Woburn near Wells G & H. In April, 1985, the same citizen's group brought a civil lawsuit against a third company, Unifirst Corporation. In a controversial decision with Judge Walter Jay Skinner presiding over what many considered a bungled trial (the judge ruled the jurors should answer questions which the jurors and many others considered confusing) Beatrice was acquitted and Grace only paid 6.6 million, most of which went to the lawyers and lawyer fees.

case two:

The DuPage County Board chastised a company with a local presence Tuesday, condemning a decision by BP North America to increase harmful chemicals discharged into Lake Michigan.As part of a $3 billion expansion of its Whiting, Ind., refinery, BP won permission to release more ammonia and suspended solids into the lake. But this could require additional water treatment in a county where 750,000 residents obtain drinking water from the lake, said board member Jeff Redick.

Environment pollution problem has become the world’s problem. Companies have social responsibility to adopt environmentally behavior.

source

http://en.wikipedia.org/wiki/Woburn,_Massachusetts
http://www.chicagotribune.com/news/local/chi-greenhouse_12feb12,1,4526757.story

The Ethics of Leaking

In today's society, we are always hearing new stories about companies that are doing things wrong or government doing things illegally. How does the public find out about this information? The answer is leaks. In reading about recent insider leaks, I came accross this article:
http://www.scu.edu/ethics/publications/ethicalperspectives/leaks.html

I found it very interesting that this author questions the ethics of the person who is leaking the information. The question he poses is: Is it ever ethical to leak information and is it sometimes an obligation?

This is a great question and the answer is, like many topics on business ethics, it depends. The leaking of information of the government agents who breached the passports of Obama and Rice a few months back was not ethical. For example, here is an excerpt:

"All three stories generated huge quantities of news coverage and babble on talk radio. Lost in the heat was an examination of the ethics of leaks and leakers. Was the leaker of Foley's e-mail exchange guilty of serious ethical breaches, especially because the messages dealt with sexuality? Did the leak of part of the NIE enlighten all of us or only the terrorists? Did George Keyworth, a longtime member of HP's board violate confidences and his fiduciary duty by talking to reporters about company business?"

I feel that leaking information has become part of America's DNA. It goes back to the question of whether the person leaking the information understands the basic human principles of what is right versus wrong. It is a tough question to answer holistically and would love to discuss this in class because it is a hot issue in American business right now and a major producer of all relevant scandals. Let's discuss in class if we have time.

Find Something Better to Do...

When it comes to most choices between supporting big business or supporting the average voting public, I almost always take sides with the public. But when I read about the protesters marching into the lobby of the Stearns New York building, I have to say that I was on the other side of the line. The protesters are reacting to the bailout help offered by the federal government to preserve the stability of Wall Street giant Bear Stearns while failing to help out the struggling homeowners during the mortgage meltdown. The protesters have lumped JP Morgan and Bear Stearns together as culprits in the current housing crisis and planned to teach the children of the corporate workers how awful and ashamed they should be of their parents.

"We will go to their neighborhood, we will educate their children on what their parents do. They should be ashamed," NACA founder Bruce Marks said of employees at both banks.

May free speech be preserved forever, but please let us turn the volume down on the screaming protestors who so myopically focus on their own problems that can’t be fixed right now. A collapsed Wall Street will cripple everybody, not just the ARM holders. To keep things in perspective, there are riots all over the world because people can’t afford basic food staples for their families. I’m certain there are plenty of better things that we Americans can do to save the world besides dress up in yellow and storm a bank lobby asking for handouts.