Autor: yppi 05 January 2010
Words: 1804 | Pages: 8
Running Header: BUSINESS REGULATION SIMULATION PAPER
Business Regulation Simulation Paper
University of Phoenix
MBA/560 Enterprise Risk
This paper identifies the key facts, regulations and legal issues in the Business Regulation Simulation regarding Alumina, a global multibillion company. It identifies several of Aluminaâ€™s values and stakeholders and discusses the conflicts among the competing stakeholders according to the simulation. In addition, a summarization on the basic issues on how the internal counsel handles the regulatory issue. Three alternative solutions are also discussed using the risk analysis matrix and summarizes how these align with Aluminaâ€™s values.
Business Regulation Simulation
In a global environment, businesses have many business risks and one of them is federal governmental environmental regulations. Businesses have to comply with regulations mandated by the government t or face penalties that can cost the company immensely and sometimes closure. These regulations assure that companies comply and not cause major catastrophes that can affect the environment or cause harm to human or animal populations.
The Business Regulation Simulation, featuring Alumina, a multi-billion dollar aluminum maker with subsidiaries in manufacturing automotive components, packaging materials, bauxite mining, alumina refining and aluminum smelting with its businesses in eight countries around the world, experienced legal issues that were very public. The Alumina organization falls under the control of the Environmental Protection Agency of region 6. This company, had a penalty imposed five years previously from the EPA and were now faced with a new legal issue or claim of environmental endangerment to the community with accusations from a local resident that the company caused her child of ten years to contract leukemia, a cancer illness directly related to the companyâ€™s toxins.. These issues were carefully reviewed, handled and resolved using their internal legal counsel and public relations staffs to re-establish its reputation and keep the company from further litigation (Simulation, 2007).
Key Facts, Regulations, Legal Issues
One of the key facts was that Alumina was found to have high concentration levels of Polynuclear Aromatic Hydrocarbons (PAHâ€™s) in their environmental expulsion standards after an evaluation by the EPA five years earlier. Since Alumina was out of compliance, a clean up was ordered by the EPA and Alumina acted in accordance to correct the problem and a subsequent test was in compliance (Simulation, 2007).
This was an excellent course of action which helped Alumina establish itself as a responsible and environmentally friendly company. Any business that has emissions that are not processed accordingly to regulations, run the risk of ruining the environment can and therefore, the EPAâ€™s cleanup was in order.
Alumina understood that PAHâ€™s had to be monitored and cleaned up. They also understood these organic compounds are produced when materials containing carbon and hydrogen are burned. The PAHâ€™s are harmful due to their carcinogenic mutant substances (http://www.propex.com/C_f_env_pah.htm).
The environmental regulation is considered the most severe of governmental regulation of a business because of the costs involved for its rigid compliance. The penalties are strict because the government requires that businesses be responsible and ensure the preservation of the environment by complying with the EPAâ€™s regulations. This avoids a company from experiencing further punishment.
Since Alumina had concentrated levels of PAH during the EPAâ€™s testing, this regulation fell under the code of federal regulations (CFR Title 40: Protection of Environment) Region 6 which handles the states of New Mexico, Texas, Oklahoma, Arkansas, and Louisiana. The EPA develops and enforces its federal regulations enacted by Congress and is also responsible for researching and setting national standards. They issue permits to businesses, monitor and enforce compliance and can issue sanctions or demand compliance environmental quality established by the federal government (http://www.epa.gov/epahome/aboutepa.htm).
Alumina Inc.â€™s legal issues were the threat of a potential damaging lawsuit brought on by a local resident, a 38 year old single mother by the name of Kelly Bates. She accused Alumina of repeatedly contaminating the waters with carcinogenic effluents from its industrial processes. In addition, she also claimed that her ten year old daughter had acquired her leukemia from consuming the PAH contaminated water that Alumina had discharged five years earlier when the EPA had found them to be in violation of the environmental laws (Simulation, 2007)..
This was a legal issue that had all the elements of a large scale scandal and bad publicity, however, its managing staffs approached the problem straightforward and worked closely with their legal counsel to downplay the accusations and do more research to assure their PAH levels were in compliance before moving forward.
Values and Stakeholders; Ethical Dilemma
Because of Aluminaâ€™s massive empire responsible in complying with environmental regulations and issues, it strives to place high values on the communities where they are located locally and globally. Their objective is to maintain environmental statutes by complying with all regulations and not cause environmental damages that may cause human and monetary losses.
Stakeholders are obviously the shareholders, its managing teams, employees, customers and the communities it affects environmentally. The Chairman, Roger Lloyd, is a hands-on tough leader, Chris Blake, the Chief Operating Officer who is second in command, Diane Richards, Public Relations, and Arthur Todd, Legal Counsel are the members of the corporate managing team and decision makers.
Because of the damaging accusations from Ms. Bates, the organization had several ways to resolve them. They had an option to destroy her publicly by having her prove her accusations; however, this would have caused a lot of negative publicity, media frenzy and costly litigation. Another option was work things out with Ms. Bates even though they believed their company had not been at fault for her daughterâ€™s illness. An ethical dilemma was at hand and Alumina had to decide what was best for their organization and at the same time work on damage control and negotiate with Ms. Bates.
Overall, both sides had a win-win situation since Alumina decided to pay medical bills and allot money in addition to providing a college fund in case if Ms. Bates daughter could grow up with the leukemia in remission (Simulation, 2007).
Counselâ€™s Basic Issues on Regulatory Issues
The Business Regulation Simulationâ€™s legal counsel, Arthur Todd, was responsible to give advice and professional opinion on all governmental regulatory compliance issues. Its managing team headed by the Chairman had to make decisions that would help them resolve any problems they faced. Behind closed doors, however, they debated on the regulatory issue and the potential lawsuit. On several issues, they strongly agreed on the same solution, however, legal counsel did not have the final say. It was by consensus after reviewing facts, conducting independent new testing to assure they were in compliance with the EPA and releasing a news story of efficacy of systems and clean record. They had previously complied with the EPAâ€™s complaint in a very efficient and prompt manner and releasing only pertinent data to the public using the exemptions and exclusions provided by law from the Freedom of Information Act (FOIA), 5 U.S.C. Â§ 552 when Ms. Bates wanted the information on the EPAâ€™s ruling five years prior.
Risk Analysis Alternative Solutions
Some alternative solutions other than what was determined in the Business Regulation Simulation could be to ignore the situation and do nothing. This could have risks of potential lawsuits by other people, reputation of being insensitive would be a problem or the escalation of the problem would be another risk. This would cause severe monetary losses and a possible class action lawsuit. The mitigation strategy would be to respond accordingly, review all information and meet and resolve.
Another alternative solution would be to hire investigators to see if they can find damaging information on the accuser Ms. Bates and make it public to discredit her. However, the risks and probability would be that the company would be morally and ethically wrong. This could also cause legal problems or the tactic could rebound and cause more problems to Alumina. In addition, this could also cause negative publicity for the company for a long time. The consequences could ruin the reputation of the company and cause damage beyond repair. Mitigation techniques and strategies could be to get the PR department involved to create a better image for Alumina, meet with community leaders and make donations to local volunteer organizations to help them correct their bad decision.
Lastly, another alternative solution could also be to fight back and counter sue if needed. However, this would probably have costly risks including a negative outcome and loss of its community loyalty. The consequence and severity would be that the company could end up paying more money in the long run. The mitigation techniques and strategies would be to settle amicably, offer monetary solution, and agree to make amends.
All three solutions do not align with Aluminaâ€™s values due to its ethical dilemmas that were identified at the latter part of this paper. Alumina wants to assure they comply with all allegations and do not want to have pending lawsuits that can threaten their organization further. Even though they could have fought back on Ms. Bates possible lawsuit, the risks were greater for their organization due to the publicity and negative newspaper articles. The Chairman and the Legal Counsel discussed these matters in the simulation and the outcome was to offer to mediate a settlement for the allegations of the cause of the ill child.
Evaluating problems and making legal decisions using the organizationâ€™s values and ethics will have a better outcome. Each organization such as Alumina has to take into consideration all legal regulations, professional and organizational codes of ethics and individual values. Organizations also have to consider its stakeholders on making decisions. In addition understanding the rewards â€œAlthough there are unique problems with promoting ethical corporate decision making, the rewards for making the attempt are important both to business and societyâ€ (Reed & Shedd, 2005).
And finally, the morality of property, which is the legal right to exclude others from the resources one has or acquires. A concept, having moral implications that everyone should understand in this global society. It is best described as recognizing property as â€œan exclusive private sphere of effort and resources on which the community and the state have no legal claim. It also permits individuals to acquire unequal amounts of the resources that others may need or wantâ€¦property reflects moral values concerning the resource relationships among peopleâ€ (Reed & Shedd, 2005).
Reed, O. L., Shedd, P. J., Morehead, J. W., & Corely, R. N. (2005). The legal and regulatory environment of business. Environmental laws and pollution control. New York: McGraw-Hill Companies.
Simulation. (2007). Business Regulation. Retrieved May 31, 2007, from the UOP rEsource https://ecampus.phoenix.edu/secure/resource/vendors/tata/sims/legal/regulation/legal_regulation_frame.html