Patel Construction Services (Patel) is a profitable company that manufactures materials used in building construction. It was a major producer of asbestos, which was used for insulation in buildings and other uses. Medical experts have shown that excessive exposure to asbestos causes asbestosis, a fatal lung disease. Employees and consumers of the products Patel manufacture and sold were exposed to asbestos and contracted asbestosis. This resulted in several thousand lawsuits filed against Patel. Patel filed for a reorganization of the company in bankruptcy. Patel argued, it provided thousands of jobs and served a useful purpose to the United States and other nations. The lawsuits would destroy the business, causing thousands of employees to lose their jobs and would seriously affect the construction industry, ultimately affecting consumers. Without bankruptcy, the plaintiffs who first filed the lawsuits would receive the majority of Patel's assets, leaving nothing for the remaining thousands of plaintiffs. Bankruptcy would allow Patel to restructure and survive. As part of the release from bankruptcy. Patel contributed money to pay current and future claims. The fund, however, was not large enough to pay every claimant who contracted asbestosis caused by Patel's manufacturing of the materials. Topic Questions 1. Do you believe Patel is liable for negligence or another legal theory? support your answer with information from the learning materials. 2. Based on what you learned about bankruptcy, please discuss whether the underlying policy for bankruptcy was served by allowing Patel to restructure the business and survive instead of going out of business to pay the increasing number of claims. 3. What about social responsibility. Did Patel fulfill its social responsibility in this scenario? Explain. Business persons are responsible to act ethically in conducting the affairs of the business. Businesses also have a responsibility not to harm society. Most discussions about social responsibility are directed at the corporation. A corporate employee is responsible to the corporate employer. The shareholders who own the corporation expect the business person to manage the affairs of the business according to their desires. A shareholder's sole desire is to make as much money as possible without violating the law or basic rules of society. Think back to what you learned about agency law and agency relationships. The business executive is an agent for the company. In view of agency principles, the employee is responsible to the corporation, not third parties outside the corporation. What happens however, when the employees has other responsibilties that conflict with the duties owed to the company? And, what does it mean for a business person to have social responsibility in relation to his or her performance of duties for the corporation? Does the business person act in the best interests of the corporation, or society? Who benefits from price increases, for example? Society? The corporation? Below is a very brief overview concerning the ethics and social responsibility of business. The Intersection of Law and Ethics As you learned in Business Law I and throughout this course, laws are enacted to require or prohibit certain conduct. What is lawful, however, may not necessarily be ethical. The textbook provides a good example of this intersect by discussing occupational safety laws. Although the law sets minimum standards for employee safety, good business ethics require more than the minimul. What happens when the law prohibits certain conduct, but the business person's ethics conflict with compliance with the law. Example: Assume you are the General Manager of an upscale hotel. On a cold, snowy night, a woman with two small children asks for a room. She tells you her husband placed them out of the car into the cold. She is from out of town and has no place to go. She walked from the interstate intersection to get to your hotel. The woman says she will call her parents to come and pick her up but it will take them 18 hours to get to the hotel. Your company prohibits you from giving complimentary rooms without advance approval from the. corporate office. There is no exception to this policy. You are also aware that your state requires all persons to be mandatory reporters in cases of child neglect and abuse. What do you do? Everyone has ideas of conduct that is ethical, and conduct that is not ethical. I am sure you will agree we all have 1. Ethical Fundamentalism. People look to outside persons or sources for ethical rules. (e.g., the Bible, Koran, Tora) or to persons (e.g. Osama Bin Ladin). Does this theory allow persons to determine what is right or wrong? Or. does it prohibit specific conduct, regardless of a person's personal ethical standards? What about a group that considers death by stoning to be an appropriate punishment for adultery? Or, what about polygamy? 2. Utilitarianism. People must choose the action and follow rules that serve the greater good of society, even if it does not mean the majority of people. 3. Kantian Ethics. Universal rules, e.g., "Do unto other as you would have them do unto you." This theory relies on two principles: consistency and reversibility. Consistency means everything is treated the same, no exceptions. Reversibility means, the individual must the same rules used to judge others. The question is, how do you have a majority consensus for universal rules? 4. Social Justice Theory. Fairness is the essence of justice. People without knowledge of the social status determine what is just and right. . 5. Ethical Relativism. Persons decide what is ethical based on their personal feelings of right and wrong. Moral Minimum What is the moral minimum? The corporation has a duty to make a profit. The corporation is a fictitious person; it has no conscience. The corporation must always act in the best interests of the shareholders. The corporation should make profits and at the same time, a joid injury to others. Laws are enacted to enforce the moral minimum duty of corporations. Corporate shareholders want profits. As you now know, the corporation is a fictitious person. It is not a natural person and it has no conscience. The best interests of shareholders take precedence over the best interests of stakeholders (e.g. employees, other businesses, residents where businesses are located). Under the stakeholder interest theory, a corporation considers the effects its actions have on the other stakeholders. Example: Small Widgets, Inc. has ten manufacturing plants in the United States. One of its plants, located in Nebraska, has provided unprofitable the last three years. If the Nebraska plant closes, one group of stakeholders benefits (e.g. shareholders, creditors) to the detriment of another group of stakeholders (the community, current employees). As you can see, there is a conflict among the stakeholders