Business Regulation

Alumina, Inc. is a USA-based aluminum maker that operates in eight countries around the world. The company receives 70% of its sales in the United States. Alumina’s business interests include automotive components and manufacturing packaging materials, bauxite mining, alumina refining, and alumina smelting. Improper use of these materials can have an adverse affect on an environment and the people in the surrounding areas. Statutory and common laws are in place to govern businesses and how organizations do business. Corporate governance relates to the rules, regulations, and laws that govern businesses and organizations. Alumina, Inc. is regulated by the Environmental Protection Agency (EPA) of the United States.

The EPA is a federal agency in charge of protecting human health and safeguarding the natural environment. The most stringent area of the government’s regulation of businesses is environmental regulation. The government imposes immense technology investment demands on the industry for regulatory compliance (U.S. Environmental Protection Agency, 2007). The penalty for even one single act of recklessness can be very high and even result in the collapse of a business. In order for a company to be successful and remain in business, being responsible and well-respected is important.

Facts, regulations, and legal issues

In order to determine what issues need to be addressed and the best direction to take to resolve the issue, stating the facts first is important. Five years ago, Alumina violated environmental discharge norms during a routine EPA compliance evaluation. The violation was due to a PAH concentration test in which samples were found to be above the prescribed limit. Alumina quickly complied with the clean up that was ordered by the EPA. When a subsequent environmental audit was reported, the violation had been corrected. This is the only incident on Alumina’s environmental record.

Kelly Bates is a local resident of Lake Dira in the state of Erehwon and a single mother. Ms. Bates accused Alumina of repeatedly contaminating the waters of Lake Dira with carcinogenic effluents. She alleges that contaminated waters have caused her 10-year old daughter’s leukemia through consumption. Ms. Bates also claims that the disease could possibly be as old as Alumina’s first environmental violation. Roger Lloyd, chairman of Alumina, is mindful of how such allegations may hurt the public image of Alumina, Inc. He wants immediate damage control to minimize the affect of the allegations against Alumina’s image.

The Erehwon Reporter has been printing editorials indicating that Alumina has secret environmental violations. The business manager elected to release a “clean record” news story in an attempt to trump the allegations made by Ms. Kelly Bates and The Erehwon Reporter. In turn, The Erehwon Reporter released an editorial with the headline “Skeletons in Alumina’s Closet.” With the continuous editorials and allegations made by the newspaper and Ms. Bates, Alumina decided to conduct an independent site study to determine if their claim has any basis. When the site study report came in, it was found that the PAH levels were lower than the prescribed level of 5 milligrams per liter in all hydrocarbons. Ms. Bates’ accusations were temporarily blunted.

The Erehwon Reporter and Kelly Bates approached the EPA in an attempt to gain access to the environmental reports of Alumina’s violation of the Clean Water Act from five years ago. Under the Freedom of Information Act (FOIA), citizens can request information from federal agencies and corporations. Alumina decided that some of the information that was being requested could be withheld under the Confidential Business Information exemption. Therefore, they allowed a partial release of the environmental audit report in order to not jeopardize its position in the aluminum trade industry. After receiving the information from EPA, Ms. Bates threatened to file a million dollar personal injury lawsuit against Alumina for compensatory and punitive damages based on their environmental violation five years ago.

In an effort to resolve the dispute instead of going to court, Alumina sought intervention from the American Arbitration Association (AAA). Assistance from AAA led to a win-win outcome in which a confidential settlement was reached. In the confidential settlement, Ms. Bates was awarded compensation for all past medical expenses for her daughter as well as a lump sum for future medical bills. In addition, an education fund was established just in case her daughter makes a recovery and attends college in the future. In exchange, Ms. Bates signed a release of all claims and a strict confidentiality agreement. By reaching a settlement and avoiding litigation, Alumina avoided the costly expense of defending themselves against Ms. Bates’ claims in court as