Business Regulation Simulation
Alumnia Inc. is a $4 billion dollar company that operates in eight countries around the world with 70% of its sales in the United States. They are located by Lake Dira in the state of Erehwon. Alumnia Inc. business interests are in automotive components and manufacture “packaging materials, bauxite mining, alumina refining and aluminum smelting. Alumuna falls under jurisdiction of region 6” of the Environmental Protection Agency (EPA) (University of Phoenix, 2002). The company was cited by the EPA 5 years ago for a Polycyclic Aromatic Hydrocarbon (PAH) discharge in nearby Lake Dira. Five years later, Kelly Bates accused Alumina Inc. of contaminating the waters of Lake Dira with PAHs thus causing her 10 year old daughter’s leukemia. “Bates also alleges that her daughter’s disease may be as old as Alumina’s first instance of environmental law violation” (University of Phoenix, 2002). These allegations were reviewed by Alumina’s legal counsel and handled to keep the company from further litigation that would only serve to tarnish the company’s reputation.
This paper will illustrate key facts, regulations and legal issues in the Business Regulation Simulation. It will address the values, conflicts among the stakeholders and ethical dilemmas with the multibillion dollar company. A legal counsel’s summary of basic issues and the action handling the environmental regulatory topic will be explored. Based on table 1, a risk analysis and alternative solutions will be examined. Lastly, this paper will be addressing ethical dilemmas identified and the alignment to Alumina’s values.
Key facts, Regulations and Legal Issues
Five years ago, Alumina was in violation of the Clean Water Act, 1972, by unlawfully discharging PAHs into Lake Dira in the state of Erehwon. “The Department of Health and Human Services (DHHS) has determined that some PAHs may reasonably be expected to be carcinogens” (Department of Health and Human Services, 2007, para. 6). The regulation of the Clean Water Act of 1972 “sets goals to eliminate water pollution. Principally, these goals are to make the nation’s waterways safe for swimming and other recreational use and clean enough for the protection of fish, shellfish, and wildlife. The law sets strict deadlines and strong enforcement provisions, which must be followed by industry, municipalities, and other water polluters” (Reed, et. al., 2005, p. 11). A clean up was ordered by the EPA and Alumina complied. “The subsequent environmental audit reported the violation as corrected” (University of Phoenix, 2002).
Five years later, “a 38 year old mother, Kelly Bates, has accused Alumina Inc. of repeatedly contaminating the waters of Lake Dira with carcinogenic effluents, and has alleged that consumption of the contaminated water is the proximate cause of her 10 year old daughter’s leukemia. Bates also alleges that her daughter’s disease may be as old as Alumina’s first instance of environmental law violation” (University of Phoenix, 2002). The legal issue for Alumina is twofold; first to deal with the allegations of corporate negligence for the release of PAHs effect on Kelly Bates’ 10 year old daughter and the second is to substantiate that the PAH levels are fine today. Alumina decided to conduct an independent study and it show that the PAH levels are 5 milligrams per liter and are within safe levels thus not in violation of the Clean Water Act (University of Phoenix, 2002).
Kelly Bates’ still looking for the root cause in her 10 year old daughter’s leukemia requested information under the Freedom of Information Act, 1966, to obtain the information on the PAH release from 5 years ago. A partial release of information was decided to protect company interests and not to disclose proprietary information. This gave time for Alumina to address community concerns and Ms. Bates. Ms. Bates has threatened to file “a million dollar personal injury lawsuit against Alumina Inc. to recover compensatory and punitive damages. Alumina’s negligent conduct, evident in the “serious violation” of environmental laws five years ago , is proximate cause of her daughter’s leukemia, bates alleges” (University of Phoenix, 2002). The legal issue is negligence. “Negligence is the failure to exercise the degree of care the law requires under the circumstances” (Reed, et. al., 2005, p. 18). Alumina’s failed to safe guard local residents by the harmful release of PAHs. In assessing the impact of the regulatory environmental on industry and organizational risks the release of PAHs clearly makes Alumina responsible for liability due to negligence. Alumina is confronted with three legal solutions; to offer her a trust fund to pay for medical expenses, seek arbitration or no negotiation and let Ms. Bates file a lawsuit.
Alumina’s senior staff chose to use arbitration. “In arbitration, disputing parties submit their dispute to a neutral third party, called an arbitrator. The parties authorize this arbitrator to make a decision that binds these parties and resolves their dispute. The act of referring a matter to arbitration is called submission. Submission to arbitration often occurs when the disputing parties agree to use this form of ADR” (Reed, et. al., 2005, p. 122). Finally, hoping this will be a voluntary arbitration in which the company can review the data and make have the third party make a determination on the case. This should make Ms. Bates feel better because it is not a company resource making the determination but an independent third party. This also protects the company because “generally, an agreement to submit an issue to arbitration is irrevocable, and a party that thinks the process is not going well cannot withdraw from the arbitration and resort to litigation” (Reed, et. al., 2005, p. 122). This is a win-win for both parties in this case and a genuine ethical course of action. The 10 year old daughter leukemia patient received the money for the medical expenses and for an education fund. Alumina received a confidential settlement that averted negative publicity and save money by not going through a lengthy trial.
Values, Stakeholders and Ethical Dilemmas
Alumina Inc. values being a partner with the community in which they conduct its business but to remain profitable and to protect trade secrets. The stakeholders are the stockholders, senior leadership, line managers, employees, customers and communities in which Alumina has its businesses. In terms of the senior leadership; the Chairman Roger Lloyd rules with an iron hand, Chris Blake is the Chief Operations Officer which is personable but cutting at times, Diane Richards the Public Relations (PR) manager who out the best PR spin for Alumina Inc. and Arthur Todd who serves as legal counsel to protect the company. Each of these senior managers provides the decisions and direction for Alumina Inc.
In terms of ethical dilemmas, the senior leadership had several ways of dealing with the situation. At the fundamental level, ethics is about choosing between what is right and wrong. It is apparent that each senior manager has his or her view on how to remedy the situation. The team was presented with two choices; one way could have been to arrange for a private investigator to examine her background to find disparaging information. The second choice would have been to approach Ms. Bates to test her resolve. In the section, ethical dilemmas identified and the alignment to Alumina’s values these will be discussed in more detail.
Legal Counsel’s Summary of Basic Issues and Action Handling the Environmental Regulatory Topic.
Arthur Todd in the simulation was responsible to give legal advice to the senior management. His advice was sought on three topics. First, he offered counsel on “organization actually violate or break any laws, rules, or regulations” (University of Phoenix, 2002). Second, he offered counsel on Ms. Bates requests for records and/or reports from a governmental agency pertaining to the organization whether or not it should release of any of the organization’s information. Thirdly, he offered counsel on the factors that should be “considered in deciding whether the organization should defend itself in court, attempt negotiations, or seek alternative methods to resolve the dispute” (University of Phoenix, 2002).
In response to the first issue, Todd Esquire offered that it is a complex situation and Alumina Inc. should do its due diligence to investigate all clams and to substantiate them in an organized and ethical manner. The results of the inquiry may not be favorable to Alumina Inc. but they must remain in faithful to the truth and to address any broken laws or regulations in a timely manner. In response to the second issue, the “Freedom of Information Act (FOIA) U.S.C. § 552, ensures public access to government records subject to certain exemptions and exclusions” (University of Phoenix, 2002). Alumina Inc. must comply but is entitled to keep trade secrets confidential. Lastly the third issue, Alumina Inc. has to consider the financial costs, the time and publicity and confidentiality.
Risk Analysis and Alternative Solutions
In making changes to any business or business process, a risk assessment needs to be conducted and mitigation techniques need to be examined. In table 1, a risk analysis and alternative solutions are discussed. The alternative solutions are providing full disclosure, partaking in the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) and investigating into the sales of securities by Alumina Inc. that misled stockholders to buy stock due to the environmental issue of five years ago. Each of these items have risks/probabilities, consequence/severity and mitigation techniques.
The first alternative solution is that upon Ms. Bates’ claim, Alumina Inc. takes a high ethical stance and makes a full disclosure of the PAH levels five years ago, the remediation and the current levels. Probability of occurrences is Medium and it places the company at high risk. The consequence of this action could lead to additional lawsuits and the decline of company reputation thus leading to lowing the company’s stock. The severity of this action would be high and the action would have a profound effect on the company. To mitigate damage, would be to release information that would be needed to resolve the case between Ms. Bates and Alumina via a FOIA request but not over expose the company. The second alternative solution is to respond to Ms. Bates’ claim, to use funding from the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA), 1980 to restore the land to its original condition prior to the release of PAH. The probability of occurrences is high and the risk is medium. This strategy would be a good way to partner with the federal government to continue the cleanup effort at Lake Dira in the state of Erehwon, which will in turn continue to improve the company’s image.
The third alternative solution would be for Ms. Bates could hire an investigator to look in the sales of securities by Alumina Inc. that perhaps misled stockholders to buy stock due not to a full disclosure of the environmental issue, five years ago. The probability of occurrences is low and the risk is low. The consequence of Alumina misleading the stock holders would be criminal and could lead to hefty fines. The severity of this action would be at a low risk due the vast amount of evidence that would need to be proven. If this were to arise, Alumina Inc. should work with Ms. Bates to show that the company has been above board with its customers 5 years ago and to the present.
Addressing Ethical Dilemmas Identified and the Alignment to Alumina’s Values
With the issue of ethical dilemmas identified and the alignment to alumina’s values, the team was presented with two choices; one way could have been to arrange for a private investigator to examine her background to find disparaging information. This option would have caused Ms. Bates to prove her allegations and to defend her character. It would have been the wrong thing to do especially in light of the truth that PAHs were released and could have affected her daughter. The media would have seen this as a PR stunt and to hide the wrong doing. The second choice would have been to approach Ms. Bates to test her resolve. This action would be wrong ethically by trying to intimidate her into quitting or to quite her down. The best ethical choice was to conduct arbitration. “In arbitration, disputing parties submit their dispute to a neutral third party, called an arbitrator. The parties authorize this arbitrator to make a decision that binds these parties and resolves their dispute. The act of referring a matter to arbitration is called submission. Submission to arbitration often occurs when the disputing parties agree to use this form of ADR” (Reed, et. al., 2005, p. 122).
Finally, hoping this will be a voluntary arbitration in which the company can review the data and make have the third party make a determination on the case. This should make Ms. Bates feel better because it is not a company resource making the determination but an independent third party. This also protects the company because “generally, an agreement to submit an issue to arbitration is irrevocable, and a party that thinks the process is not going well cannot withdraw from the arbitration and resort to litigation” (Reed, et. al., 2005, p. 122). This is a win-win for both parties in this case and a genuine ethical course of action and aligned to Alumina’s Values. Conclusion
This paper completed its goal by illustrating key facts, regulations and legal issues in the Business Regulation Simulation. It addressed the values, conflicts among the stakeholders and ethical dilemmas with the multibillion dollar company. A legal counsel’s summary of basic issues and the action handling the environmental regulatory topic was explored. Based on table 1, a risk analysis and alternative solutions was examined. Lastly, this paper addressed ethical dilemmas identified and the alignment to Alumina’s values. References
Department of Health and Human Services. (2007). ToxFAQs for Polycyclic Aromatic Hydrocarbons (PAHs). Retrieved September 19, 2008, from http://www.atsdr.cdc.gov/tfacts69.html
Reed, O.L., Shedd, P.J., Morehead, J.W. & Corley, R.N. (2005). The Legal and Regulatory Environment of Business., New York: McGraw-Hill.
University of Phoenix. (2002). Business Regulation Simulation [Computer Software]. Retrieved September 19, 2008, from University of Phoenix, Simulation, MBA/560 - Enterprise Risk Web site.