Purpose: In the first assignment, you have the opportunity to see how ethics can play out in a real-world scenario. You will read the case scenario and answers the questions in a narrative format.
Purpose: In the first assignment, you have the opportunity to see how ethics can play out in a real-world scenario. You will read the case scenario and answers the questions in a narrative format. Use headings for each question. Headings are not the question. You are required to use the course material to support your reasoning and the conclusions made.
Reading links: https://search-ebscohost-com.ezproxy.umgc.edu/login.aspx?direct=true&db=nlebk&AN=1249059&site=eds-live&scope=site
Learning outcome met by completing this project:
Identify ethical issues that arise in domestic and global business environments using an understanding of ethical concepts and of legal and business principles.
Case Scenario:
The outbreak of the COVID-19 pandemic required Americans to shelter in place thus causing the U.S. economy to freeze-up, resulting in millions of lost jobs. The U.S. Congress passed legislation to try and limit the economic damage. Included in the legislation was a stimulus package that would give $1,200 to single tax filers making $75,000 or less and $2,400 to married couples making $150,000 or less. The purpose of the payment was to give people emergency funds and to stimulate the economy. Also included was the CARES Act that provided the Paycheck Protection Program (PPP). The PPP was a program administered by the Small Business Administration that was targeted at small businesses. It provided for a government loan that was forgivable if used to pay employees’ salaries and benefits, mortgages, rent, and utilities. According to the SBA website, “[t]he Paycheck Protection Program is a loan designed to provide a direct incentive for small businesses to keep their workers on the payroll.”
USAA is a member-owned organization that provided insurance and financial services exclusively to current and former members of the military as well as their family members. USAA has an excellent reputation as a well-run organization and for giving its members good service. Many USAA members maintain checking accounts with it. Some of those members who have checking accounts had overdrawn their balances and had a negative balance in their accounts. When the $1,200 or $2,400 stimulus check was deposited, USAA used those amounts to offset the negative balances in some of its members’ accounts. Members were not informed in advance that this would be the case. This resulted in some USAA members not having any access to the stimulus money. The action USAA took in crediting the funds to existing account deficits was perfectly legal.
Shake Shack is a corporation that owns and licenses restaurants selling traditional American fare like hamburgers and milk shakes. It currently operates 124 locations in the U.S. and overseas. As of May 4, 2020, the company had a market capitalization of $2.06 billion. The company is publicly traded on the New York Stock Exchange. In 2019, Shake Shack’s CEO received $2.3 million in compensation. Shake Shack applied for and received a loan of $10 million under PPP. The loan was permissible under a provision in PPP that allows restaurant chains to apply when each location has fewer than 500 employees. Shortly after Shake Shack received the loan, the PPP ran out of funds and many small businesses did not receive loans.
Small Business Administration. (2020) Retrieved from https://www.sba.gov/funding–programs/loans/coronavirus-relief-options/paycheck-protection-program
How to Set Up the Paper
Create a Word or Rich Text Format (RTF) document that is double-spaced, 12-point font. The final product will be between 5-8 pages in length excluding the title page and reference page. Write clearly and concisely.
Create a title page with a title, the course number and section, the instructor’s name and your name.
Instructions:
Course Material
For this project, you are required to use only the case scenario facts and the course material. What actually happened is not to be considered. External sources are not permitted. You are not researching on the Internet or using resources from outside the course. You are expected to answer the requirements identified below showing the connection between the case scenario facts and the course material. Using course material goes beyond defining terms and are used to explain the ‘why and how’ of a situation. Avoid merely making statements but close the loop of the discussion by explaining how something happens or why something happens, which focuses on importance and impact. In closing the loop, you will demonstrate the ability to think clearly and rationally showing an understanding of the logical connections between the ideas presented in a case scenario, the course material and the question(s) being asked. Using one or two in-text citations from the course material throughout the entire paper will not earn many points on an assignment. The use of a variety of course material is expected consistently supporting what is presented. The support must be relevant and applicable to the topic being discussed. Points are not earned for mentioning a term or concept but by clearly and thoroughly explaining or discussing the question at hand.
NOTE: If external sources are used, what is presented will not count and a penalty for not following instructions will apply.
Project Requirements
Introduction
- Write an Introduction paragraph. The Introduction paragraph is the first paragraph of the paper and will be used to describe to the reader the intent of the paper explaining the main points covered in the paper. This intent should be understood prior to reading the remainder of the paper so the reader knows exactly what is being covered in the paper.
- Consider writing the introduction last to ensure that all of the main points are covered.
Ethical Issue(s)
- Identify and discuss the ethical issue(s) related to USAA and Shake Shack.
Stakeholders Implications
- Identify the stakeholders involved in the actions of both companies.
- Discuss the potential implications of the company’s actions on each stakeholder or stakeholder group. Give examples.
Utilitarianism Viewpoint
- Explain how a utilitarian would view USAA and Shake Shack’s actions.
Rights and Duties Viewpoint
- Explain how the actions of both USAA and Shake Shack would be viewed under the theory of Rights and Duties.
Fairness and Justice Viewpoint
- Explain how the actions of both USAA and Shake Shack would be viewed under the theory of Fairness and Justice
Recommended Actions
- Regardless of what these companies actually did, recommend the actions that you think they ethically should take going forward. This is not about what they should have done in the past, but rather speak to actions they should take now having done what they did. There is no right or wrong action, but rather it is about supporting the actions you choose from your ethical arguments.
Conclusion
- Write a concluding paragraph that is brief and summarizes the main points. Provide specific information related to the major topics discussed in the paper.
Answer
Identify ethical issues that arise in domestic and global business environments using an understanding of ethical concepts and of legal and business principles.
By: Essayicons.com
During the COVID-19 pandemic, the U.S. faced significant economic challenges that affected many business operations. Following the course assignment’s case study scenario on the USAA and Shake Shack, this paper explores the ethical dimensions and actions taken by the USAA and Shake Shack during COVID-19. It assesses the companies’ decisions through the viewpoints of the theories of utilitarianism, fairness and justice, and rights and duties. The paper also evaluates the impact of the decisions on the companies’ stakeholders and recommends ethical actions that the companies should take going forward.
Ethical Issues
One ethical issue related to USAA and Shake Shack is utilitarianism. Utilitarianism is a moral, ethical theory that asserts that correct action is the one that favors the greater good of most people (Gilbert, 2016). From a utilitarian perspective, although the USAA decision might have negatively impacted some individuals who were relying on the money for immediate needs, one might argue that their decision to offset negative imbalances with the stimulus funds was meant to maximize the overall happiness of the customers by reducing the financial strain on the organization. In the case of Shake Shack, receiving a loan could be seen as an action meant to promote the overall happiness and well-being of the employees, stakeholders, and the community.
Another ethical issue related to the USAA and Shake Shack is rights and duties. Rights and duties is an ethical theory that holds that every person has certain rights that should be protected and that an organization should fulfill its duty in protecting the rights of its customers (Gilbert, 2016). Since customers have a reasonable expectation that the funds deposited into their accounts will be available for use, USAA using these funds to offset negative balances without notifying the customers could be seen as a violation/breach of USAA’s duty to communicate transparently with customers. In the case of Shake Shack, although the company adhered to the PPP guidelines in obtaining the loan, questions about the ethical duty of larger companies to consider smaller businesses’ needs during crises may arise. Although legally, Shake Shack obtained the loan at the expense of many other small businesses. The right of smaller businesses to access funds to maintain their operations is as important as the rights of larger companies.
Fairness and justice ethical theory is also related to the USAA and Shake Shack’s case. According to Gilbert (2016), the fairness and justice ethical theory requires organizations to treat people justly or similarly according to some relevant criteria. The USAA’s lack of communication about the use of stimulus funds to balance negative balances could be seen as unfair since it denied individuals the ability to have control over their finances. In the case of Shake Shack, the ethical concern lies in obtainment of the PPP loan. While taking the loan was completely legal and right, the fact that the funds quickly ran out, leaving many smaller businesses without assistance, raises questions about the fairness and justice of the overall distribution of relief funds.
Stakeholder Implications
The stakeholders involved in the actions of the USAA are USAA members, including current and former military members (customers) and the company’s shareholders. USAA’s decision to use stimulus funds to offset negative balances could have impacted some of its customers positively and others negatively, as since some might have benefited from the intended stimulus relief, those who had negative balances might have faced financial challenges. USAA customers, particularly those facing financial challenges might have experienced dissatisfaction and a potential erosion of trust. Negative customer consequences could lead to negative publicity, leading to a decline in shareholder value (Gilbert, 2016). On the other hand, the Shake Shack stakeholders involved in its actions included the employees and investors. The PPP loan benefited the employees since a company’s financial stability ensures that the employees retain their jobs and that their financial stability is supported. A company’s stability also positively impacts investors since it guarantees safety and security in their investment. Thus, the potential implications for the stakeholders included employees’ benefit from the PPP loan and business stability for investors.
Utilitarian Viewpoint
A utilitarian would view USAA’s actions as justifiable and Shake Shack’s actions as unfavorable. Utilitarianism views an ethical act as one that benefits the larger population (Gilbert, 2016) and, in USAA’s case, balancing the negative balances in some member accounts, while it may have negatively impacted some members by not having any access to the stimulus funds, a utilitarian would view the company’s action as one that helped to maintain the company’s stability thus protecting a large number of customers. A utilitarian would, however, view Shake Shack’s actions as unfavorable. This is because although Shake Shack protected the well-being of their employees and their investors by obtaining the PPP loan, it led to the depletion of PPP funds, negatively impacting many smaller businesses and the overall societal well-being. Thus, while obtaining the PPP loan was for the company’s greater good, a utilitarian would view this action as unfavorable as it was at the expense of many smaller businesses.
Rights and Duties Viewpoint
Gilbert (2016) asserts that the theory of rights and duties requires firms or managers to uphold other people’s rights and the duties accompanied by those rights. Using the viewpoint of rights and duties, the actions of USAA and Shake Shack would have mixed reactions. USAA’s use of stimulus funds to offset negative balances without notifying its customers may be viewed as a violation of its duty to communicate transparently with customers, as customers have the right to be informed about any decisions affecting them (Gilbert, 2016). Shake Shack’s decision to take a PPP loan aligns with the right to seek financial support during tough economic times. However, the company’s duty to consider other smaller businesses during the distributions of funds is questionable.
Fairness and Justice Viewpoint
The fairness and justice ethical perspective involves similarly treating people in similar situations (Gilbert, 2016). USAA’s action to use the stimulus funds of some customers to balance negative accounts contradicts this perspective as the company did not consider that all customers might have been under similar financial constraint situations due to COVID-19 and using some customers’ funds to balance the negative balances such that the customers could not access the funds might have been unjust. Lack of prior communication may also be viewed as an unfair act to the customers since customers have the right to know the company’s decisions regarding their funds. Shake Shack’s action of obtaining a large PPP loan at the expense of smaller businesses, on the other hand, could be perceived as unjust since the companies’ actions did not treat smaller businesses under similar financial crises similarly, controverting Gilbert’s (2016) definition of the fairness and justice ethical theory.
Recommended Actions
The actions that the USAA and Shake Shack should take going forward should align with ethical practices, primarily the ethical theories of fairness and justice and rights and duties. USAA should consider prioritizing clear and transparent communication of decisions with its customers as it promotes productivity (Gilbert, 2016). Prioritizing clear and open communication will also enhance customer trust and satisfaction. Moreover, if possible, USAA should review and reevaluate its policies regarding using customers’ funds during economic crises, ensuring fairness and justice. Shake Shack should advocate for fair and just policies in relief funds allocation. Going forward, it should acknowledge the needs of smaller businesses during periods of economic crises. These actions can contribute to a more ethical and responsible approach, foster a positive relationship with stakeholders, and promote a sense of fairness and justice.
Conclusion
This paper has explored the ethical concerns relating to USAA and Shake Shack’s actions, pointing out utilitarianism as the main ethical issue related to both scenarios. It has also discussed the stakeholders involved (customers, employees, and shareholders) and how the companies’ actions may have impacted them. Based on the course material, the paper has also discussed the ethical theories of utilitarianism, fairness and justice, and rights and duties. In conclusion, the paper has given recommendations that the companies should consider going forward, such as observing fairness and justice, open and transparent communication, and the rights of stakeholders. Moving forward, observing and embracing these ethical considerations, as well as the recommendations, will not only reinforce and strengthen the companies’ responsibility but also help build customer trust.