Legal and Ethical Issues Surrounding Solyndra


The legal and ethical issues surrounding Solyndra was believed to have stalled its operations and threatened its existence. The company was a California based solar panel manufacturer. In August 2012, the company operations stalled because it was declared bankrupt. This situation was caused by mismanagement of material, financial, and human capital in the organization. Surprisingly, this just happened after millions of dollars was spent on the attempts to improve service delivery and production of the company. When the company faced acute financial problem, the government advanced some loan to help it improve its operations after the business had shown economic potential to the overall economic growth of the country. However, the loan did not help improve the operations, soon after which the company was declared bankrupt.

The situation in the company got even worse when the FBI raided the company premises soon after it had announced being bankrupt. Apparently, the problems that the company faced were literally a result of poor management, since it had a lot of money that could have steered it to the greater heights of economic development. Therefore, the research focused on the ethical codes that applied to the situation in the company, ethical framework that applied to this situation, the philosophical aspect of the situation. Finally, it described the impacts of the ethical and philosophical aspects of the situation.

Ethical Codes that Apply to the Situation

Three of the specific ethical codes that apply to the situation include integrity in performing duties while allocating resources, ethical behavior, and transparency in doing transactions. A number of issues have to be considered for the company to achieve its intended outcome. On integrity, the leaders did not show the required level of reliability to manage the financial resources of the company, leading to misappropriation and subsequent collapse of the organization. Solyndra (2011) postulated that leaders ought to lower self preference and justifications when managing financial resources, thereby not jeopardizing the entire company (p. 11). This limited the extent to which prejudice was exercised in the company, thus caused unnecessary spending that jeopardized the operations of the company. To restructure the organization to be in line with the country’s economic status was also difficult, thereby increased the way in which individual managers perpetuated unnecessary prejudice in the company (Lawson, 2002). This led to the misuse of the company’s financial resources, making it bankrupt.

Second, ethical behavior could apply to this situation. This is where each and every worker must take it upon him/herself to behave in a manner that respects the company rules and regulations. Moral behavior cannot lead an employee to misuse the company’s financial resources, but to use them prudently (McWilliams & Matten, 2010). 

Third, transparency is very important for a company. Since the organization embraced diversity, different opinions were to be tolerated for the success of business operations. In this regard, Lawson (2002) asserted that those in charge of finances must be able to demonstrate a higher degree of transparency to avoid plunging the company to a crisis. 

Ethical Framework that Applies to this Situation

A remarkable and comprehensive ethical framework applies to this situation. For instance, some of the activities in which the managers could perform well were to promote ethical behavior, such as honesty and integrity when handling the company’s financial resources. Considering the amount low costs of inputs invested towards the production of different items, especially after the company received financial boos from the government, sound financial management was necessary to sustain its growth. Therefore, the failure could be a direct result of the ignorance of the required resource management skills among its managers (Solyndra, 2011). The trend continued despite pressure that was enforced via other tools, like the media, so that the company reaches more customers. However, no significant result could be realized due to the poor management. Scientific researches indicated that it was possible for the responding company to use a pressure by pretending to withhold/suspend rather than completely stopping its production processes, but it lost the struggle for economic improvement once it was declared bankrupt (McWilliams & Matten, 2010).

A good perspective was the specific action taken by some individual managers to improve its profitability and social impacts on the stakeholders. However, they failed to succeed due to massive financial mismanagement that was popular in the company (Solyndra, 2011). Despite the mounting pressure to stop the unethical labor practices in manufacturing the items, the company only opted to suspend its activities until the issue cooled down. It pretended to give in the presented pressure that it was using expensive labor to produce its merchandise, so that it could promote its image. Eventually it collapsed.

Apparently, there are several companies, similar to Solyndra in terms of financial management because neither they have sound and transparent monetary management, nor do they use strategies to improve the social and economic impacts of their activities (Solyndra, 2011). Such companies risk of becoming irrelevant in the market and could face potential collapse. Essentially, there is lack of information regarding financial management and the role of those companies providing organization in terms of sound resource management. Solyndra (2011) showed that owing to the fact that they are never informed of the policies, projects and objectives of the organization, exploitation of the company resources was not the part of their perspective (p. 1). This means that lack of proper financial management in the company was not working for them.

In addition, the company-customer and company-managers‘ relationship was non-existent to them. Perhaps, the company management had no information to enable them to think along such lines, thus resort to advertising, so that the business increase sale other than engaging in sound financial management (Northouse, 2006). However, the entire strategy failed, leading to the massive financial loss rendering it bankrupt. Sometimes, it would be wiser to use the alternatives if sound financial management proves expensive. Normally, the public appreciate and recognize sound financial management efforts made by the company because the practice makes the entity be sustainable (McWilliams & Matten, 2010). 

Philosophical Aspect of the Situation

In reference to the philosophy of economist Milton Friedman, the experience of Solyndra Company was that it adopted approaches which took a theoretical framework, the main content of the shareholder theory can be found in the headline of Milton Friedman’s argument in an article that he published in 2012. In his philosophical opinion, only individuals can act responsibly even in the company, meaning that if people in the organization did not carry out their duties ethically or within the law, the company could not operate efficiently and effectively (Friedman, 2012). In essence, this could be one of the reasons for the collapse of Solyndra. Therefore, it means that a corporate executive as a person has a direct liability towards leading the company in the interest of the employer. Thus, the corporate executive’s primary goal should be to generate as much profit as possible by sticking to the basic rules of the society, for instance ethic and justice (Northouse, 2006). Friedman implicates that if an employee acts social responsibly by, for instance, hiring unemployed instead of better qualified workers, the employee does not act in the interest of the employer (Friedman, 2012).

According to Friedman, the management might spend money that does not belong to them, thus they are likely to misuse the available funds that could otherwise be used for raising the economic development of the company. If his or her actions implicate a raise of products prices, lower wages or reduce return, he or she would spend money of customers, employees, and shareholders. Friedman argues that individuals can feel free to spend their money for charitable service, but the purpose of the company is to maximize the profit (Friedman, 2012). Additionally, managers have lack of experience in solving societal problems, thus Friedman sees company management as a main duty of its leaders. In essence, issues that the businesses face with regard to resource use and pollution has been minimal, due to the efficient practices which they adopt in their production, for instance mechanization (Friedman, 2012).

Friedman’s opinion was widely discussed in critical editions in 2009, which indicated that managers are recruited by the owner of a company with the long-term goal of maximising the profit. Similar to Friedman, the economist implies that companies have a lack of competence in resolving the issues of the society. The theory was challenged by other scholars who argued that the company management will have to work on data, regarding their previous efforts made to stop specific organizational practices (Ambrosini & Bowman, 2003). This proved that the organization was sourcing labor from the country for the production of its items was never willing to cease from using labor. Although this may pose numerous challenges, the scholar was justified because the ability of the company to work together and prove the suitability of their financial management styles would have yield fruits (Friedman, 2012). Otherwise, lack of sound financial management practices in the company led to its collapse.  

Impacts of the Ethical and Philosophical Aspects of the Situation

Concerning the situation, the current business operation at the company is determined by the input from each individual departments of the organization. Based on the overall organizational culture of the company derived from the newly adopted pyramid of organizational development, each segment of the organization has a different way of sharing the resources and output values. As such the management derives the defined roles from the pyramid rather than the corporate understanding of the needs of role definition. The management roles are not clearly defined drawing from the general postulation of the above organizational development pyramid.  Each of the managers have their different way of sharing the pertinent information with the staff under their supervision and this has really made it difficult for the organization to clearly track the direct causes of the resulting collapse of the company.

Although the company requires each manager to define their information needs in terms of what they need to share with their staff as well as when they need to share it, this is always an individual effort and the performance level of any managerial decision will be measured against the individual managerial formations of the desired channel for defining the role of each staff under the individual manager. This approach has resulted to the overpowering managerial decisions that the staff normally feel left out. Further, this approach has provided the managers of the company with a leeway to undermine the overall goal of the organization to provide the average citizen with access to home ownership.

Additionally, the pyramid of development that the company adopted provided a basic framework through which the management of the organization needed to formulate roles aimed at helping the company to achieve its financial goals of maximizing the shareholders’ value. However, the managers at the company employed a verbatim application of the pyramid, thereby subverting the organizational benefits that the designer anticipated (Northouse, 2006). Instead of applying strategic understanding and evaluation of the contemporary business needs of the organization in applying the pyramid, each manager took keen interest on the departmental contribution of their organizational areas. This has only enabled the management to find a protocol through which they could disseminate information to their staff. This leaves the staff with a gap of wanting to know their specific roles in helping the organization to achieve the business objective.

The collapse of the company following the financial crisis could be attributed to the lack of defined roles in the operational management of the company. The company was at best aware of the looming collapse and they utilized to leeway that the organizational pyramid of development offered them to maximize the gains that they now enjoy (Ambrosini & Bowman, 2003). In terms of behavior and defined roles, the lack of strong structures that detail the individual role of each manager and the staff in helping the company to expand the scope, has ensured unethical behavior among the managers as well as the employees. According to the evidence collected during the research about individual customer experience with the company, there are many complains than compliments about the company (George et al., 2007). Both current and former employees provide evidences concerning the undefined structures and lack of defined roles and how their customers lost money through unscrupulous and unethical lending practices at the company.        

In addition, the organization is in dire need of clearly defined operational roles that runs down from the executive managers to all the other levels of management in the organization. The executive managers must formulate strategic goals derived from clearly defined management roles. This will enable the company to subvert the disadvantages in terms of the increased costs and losses resulting from the perceived unethical practices. Further, this will ensure that the company develops strategically poised strong internal controls, which will help it in detecting unscrupulous deals that the executive management has been facilitating.

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