Legal and Ethical Issues Surrounding Solyndra - Case Study Example

Discussion of the legal and ethical issues surrounding Solyndra Table of Contents Introduction 3 About Solyndra 3 Legal and Ethical Issues surrounding Solyndra 3 Legislations that apply to the issue of Solyndra 5 Influence of the Philosophy of Milton Friedman on the executives of Solyndra 6 Ethical framework that applies to the situation 7 Conclusion 8 References 9 Introduction The paper would essentially reflect on the case of a solar equipment manufacturer, Solyndra, highlighting on a legal and ethical case to which it had been associated with due to dearth in the operations. The context would reflect on the manner in which emergence of the ethical and legal issue had affected situation of the workers and the organization as a whole. The case would also be analyzed based on empirical discussions related to the legal, ethical and philosophical parameters wherein the same would help to indicate at different standpoints that ought to have been taken so as to protect the organization from being affected. About Solyndra Solyndra, a solar panel manufacturer, was formed in the Silicon Valley in 2005. The company focused on designing and manufacturing solar photovoltaic equipments mainly for commercial and public utility purposes. The client base constituted of commercial firms, government agencies, energy companies and other roofing firms. The company was established by Dr. Christian Gronet in 2005 as Gronet Technologies Inc (Hargreaves, 2012). At a later stage, the company was renamed as Solyndra that pioneered in the development of greener energy. The company aimed to create a breakthrough to reflect ways in which the government and business organizations would function in a cleaner energy environment (Brewer, Kinsey & Mendenhall, 2012). Legal and Ethical Issues surrounding Solyndra The saga of Solyndra venturing in the creation of greener technology is observed to encounter a severe downfall owing to the potential mismanagement of funds by the US government. Solyndra focused on gaining a competitive advantage such that it aimed to develop solar panels without the use of polysilicon, which was considerably expensive in the energy market. Though the production cost of solar panels created by Solyndra was high in nature, yet its installation was found to be considerably cheaper. During 2009, a huge loan amount of around $535 million was sanctioned by the US Government in order to enhance production and distribution operations of the company. The legal and ethical issues that rocked the company started with the declaration and receipt of this huge loan amount, which was observed to fail in achieving the required objective owing to fall in the value of polysilicon and also organizational inability to sustain the cheap installation costs (Wang, 2011). Similarly, with fall in the prices of natural gas and rising competition for the entry of Chinese firms, demand for the solar photovoltaic equipments produced by Solyndra faced a major setback. The management of the company was, however, criticized for unreasoned spending of the loan amount gained from the Department of Energy, US Government in order to procure highly expensive state-of-the-art infrastructural equipments that was left unused. Despite repeated warnings from both the government officials and the internal company staff, little effort was made to help revive the situation, which finally led Solyndra to the brink of bankruptcy owing to its failure to meet up the federal loan. Though an amount of $75 million was further infused into the company, based on both private and government backup, yet market position of the company could not be sustained. As a result, Solyndra eventually had to file for bankruptcy in 2011 (Weiner, 2012). The failure of Solyndra’s management to meet up the loan taken from the government cannot be solely attributed to external causes such as, growth of Chinese firms in the market rendering low cost products and reduction in the polysilicon materials. Rather a host of internal causes related to the existence of a recalcitrant and inept management that failed to rightly act in the face of emergent risks pertaining to falling demand of the products is accounted for the company’s dismissal. Evidence suggests that documents filed by the company to the Securities and Exchange Commission reflected that the management was highly aware of the pertinent risks. Furthermore, the combined rise of a host of different factors such as, emergence of operating losses, negative flow of cash along the different periods and rising deficits, reflected ethical concerns about the use of company finances (Furchtgott-Roth, 2012). On the legal side, the failure of Solyndra LLC in complying with terms of the agreement relating to borrowing of the loan from the Department of Energy due to lack of effective financial potential is identified as a complete violation of the loan agreement. Solyndra LLC, besides failing to comply with terms of the loan agreement, was also observed to be riddled with investigation activities of criminal and congressional category, which in turn made the matters complex (Solomon, 2011). Legislations that apply to the issue of Solyndra Bankruptcy Law tends to be one of the significant legislations that can be applied relating to the above issue of Solyndra. The Bankruptcy Law is concerned as the statutory law that is framed based on Title 11 of the Federal Law Code of the United States. The Bankruptcy Law requires for the formulation of a plan relating to a debtor that has become insolvent to liquidate the assets in order to meet financial needs of the creditor. In the case of liquidation, the court must appoint a trustee. The trustee is required to sell assets of the Debtor Company or firm, thereby generating proceeds of the sales to the creditor. Bankruptcy proceeding in the above manner can be generated voluntarily by the debtor company or in other case, the trustee can be directly appointed by the creditor. Legislation like, the Bankruptcy Prevention and Consumer Prevention Act of 2005, reflects the rights of trustees in respect to settlement of the bankruptcy issue (Rotem, 2013). Another legal system that gains relation to the above issue is the Contract Law relating to the United States. The Contract Law tends to govern agreements relating to the issue and meeting of the loan amount by the applicant of the same. Relating to the above issue where the government tended to generate a loan amount to the company, the company is required to rightly abide by the rules of the loan agreement formed with the government agency, thereby adequately meeting the loan amount at the right time (Kupetz, 2003). Influence of the Philosophy of Milton Friedman on the executives of Solyndra The philosophy of the economist, Milton Friedman, relates to the development of a free market economic system such that it potentially advocates on personal freedom of the individuals. In the mode of enhancing personal freedom of the different individuals, the free market economic system also aims at facilitating development of the living and working standards of individuals. Also, the law of the region in a free market economic system also contributes in encouraging the individuals to voluntarily participate in decision making activities. As a result, the above practice effectively helps in generating holistic growth and development related to an organization and to the society in general. The existence of a free market economic system also contributes towards enhancing scope for the growth of humanitarian and ethical standards over a period of time (Hamzaee & Baber, 2014). In the case of Solyndra, use of the free market economic system would have assisted in improving potential of the executives so as to take individual decisions in a concerted fashion, thereby protecting the organizational cause. Encouraging the executives to take key decisions and undertake needed actions would have helped in saving the organization from the event of bankruptcy. This initiative would have been effective in ceasing actions of the management pertaining to funds usage for continually purchasing expensive and complex instruments that were not put to effective use. Solyndra based on encouraging the potential of individual workers to take key decisions could have gained the expertise to develop new products and technologies so as to counter foreign competition related to development of the solar panels. Generation of holistic development in the organization through sharing of knowledge, expertise and needed experiences would have contributed in increasing the level of competitive advantage and sustaining profitability and market share. Ethical framework that applies to the situation An ethical framework such as, the Common-Good Approach, can be implemented relating to the case of Solyndra such that the same indicates at the development of individuals for that of the community as a whole. Herein community members are required to operate based on the idea of facilitating common good through fulfillment of the shared values and goals. The idea of creating common good signifies a situation where policies, systems and different institutions work collectively to support betterment and provide benefits to the society. Hence, decisions and actions of the individual employees need to be guided and motivated by elements that contribute in improving the lives of others pertaining to the group, society or community framework (Weiss, 2008). Analyzing the case of Solyndra based on the Common-Good ethical framework, it can be observed that individuals related to the company’s management was required to take decisions in order to contribute towards betterment of the staff as well as of the company in the long run. The management body should have evaluated the case of not expending the loan amount in undue investments for procuring expensive equipments. The same amount could have been expended for enhancing potential of the solar equipments through generation of needed innovation and providing training to workers so as to hone their expertise and efficiency levels. Relating to the executives who had become aware of the internal risks involved, they should have acted as effective whistleblowers in the organization. Effective whistle blowing of the growing risk in the organization would have contributed in not only making the other staff aware of the unstable situation, but also in restraining the government and private institutions from offering further funds. Generation of needed awareness along with prompt action would have rightly contributed in controlling plight of the organization and the individual staff. Conclusion It is observed that Solyndra operating as a solar equipment manufacturer had encountered potential constraints owing to fall in price of the polysilicon materials and natural gas as well as the entry of foreign Chinese firms in the related category. Solyndra had been largely financed by the United States government through the generation of financial loans of high amounts in order to enhance its productivity and performance. Even so, the company’s management is observed to use the financial resources in an unjustified fashion such that the same was expended mostly in buying expensive and high quality equipments that failed to provide the required competitive advantage. Rather than working to facilitate needed innovation and development of the staff, the loan amounts spent on individual whims of the managers were unable to offer any benefit to the organization. Unjustified spending of the loan amounts, thus, led Solyndra to a state of insolvency. The organization stood bankrupt failing to meet the loan agreements of the Federal Government. In the light of the above situation, the paper has endeavored to conduct an effective analysis based on discussion of legal, philosophical and ethical parameters so as to help generate needed frameworks that could have safeguarded the organization. While on the legal front, the law relating to bankruptcy and contract was examined pertaining to the case; on a philosophical note, use of the concept of Free Market Economy by Milton Friedman was discussed in order to help enhance the decision making ability at an individual level. The Common-Good Approach was also explained in the paper relating to the ethical parameters, where the same contributes towards facilitating development of the individual and the community as a whole. References Brewer, B., Kinsey, M., & Mendenhall, A. (2012). SOLYNDRA’S CHAPTER 11 BANKRUPCY. Retrieved August 7, 2014, from aw.utk.edu: http://law.utk.edu/wp-content/uploads/2012/10/SolyndrasChaper11Bankruptcy.pdf Furchtgott-Roth, D. (2012). Solyndra and the Perils of Green Industrial Policy. Retrieved August 7, 2014, from Manhattan Institute for Policy Research: http://www.manhattan-institute.org/html/ir_19.htm Hamzaee, R. G., & Baber, J. (2014). Ethics and Market Economic System: A General Review and a Survey. International Journal of Applied Management and Technology, 13 (1), 1-32. Hargreaves, S. (2012, June 6). Seven things you should know about Solyndra. Retrieved August 8, 2014, from CNN Money: http://money.cnn.com/2012/06/06/technology/solyndra/ Kupetz, D. S. (2003). The Bankruptcy Code is Part of Every Contract. Secured Lender, 6, 48-72. Rotem, Y. (2013). Governmental Concessions in Corporate Bankruptcy Proceedings: A New Approach. American Business Law Journal, 50 (2), 237-411. Solomon, D. (2011, September 26). Solyndra Said to Have Violated Terms of Its U.S. Loan. Retrieved August 7, 2014, from The Wall Street Journal: http://online.wsj.com/news/articles/SB10001424052970204422404576596601891250510 Wang, M. (2011, September 15). What’s Happening With That Solar Company Scandal? Here’s Our Guide on Solyndra. Retrieved August 7, 2014, from Pro Publica: http://www.propublica.org/blog/item/whats-happening-with-solyndra-heres-our-guide Weiner, R. (2012, January 6). Solyndra, explained. Retrieved August 8, 2014, from The Washington Post: http://www.washingtonpost.com/blogs/the-fix/post/solyndra--explained/2012/06/01/gJQAig2g6U_blog.html Weiss, J. (2008). Business Ethics: A Stakeholder and Issues Management Approach. United States: Cengage Learning. Read More