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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 well as the negative publicity.
Stakeholders
The stakeholders of a company are those who have an invested interest in the way the company is ran and affected by inside and outside forces. The stakeholders of Alumina are Roger Lloyd, Chris Blake, Diane Richards, and Arthur Todd. The efforts of each of these people keep Alumina in the top of its industry. Although their titles differ, their ultimate goal is all the same.
Roger Lloyd is chairman of Alumina and an iron-willed man. His word is law when it comes to Alumina’s organization. Throughout the ordeal with Ms. Bates and The Erehwon Reporter, he always had Alumina’s best interest in mind. Likewise, so did Diane Richards, Head of Public Relations. Diane Richards’ responsibility to the company is to work out the best possible PR strategy for a given situation. Arthur Todd is the legal counsel for Alumina. His position involves providing legal advice for Alumina as well as handling any litigation or regulatory proceedings pertaining to environmental violations that may arise. Lastly, Chris Blake is the Chief Operating Officer of Alumina. He is second-in-command and has a genial personality. However, he can be very cutting at times. Mr. Blake has a way of convincing everyone that he is right including Mr. Lloyd.
When the ordeal arose with the allegations from Ms. Kelly Bates and The Erehwon Reporter, Lloyd, Todd, and Richards each had a different take on how to handle each conflict that was thrown their way. At the onset of the allegations, Mr. Todd wanted to release a news story immediately in an effort to clear the name of Alumina. While Mr. Lloyd agreed with this tactic, he felt an independent site study should be conducted first. Ms. Richards want to conduct an investigation on Ms. Bates which could have proven detrimental had she been found out.
Society has certain ethical expectations from companies and large organizations. When a business does not meet these expectations, the government has a right to step in. When Alumina violated environmental discharge norms, this posed as an ethical dilemma to society. The EPA, a governmental agency, stepped in and ordered a clean up. MS. Kelly Bates held Alumina liable for her daughter’s illness due to their ethical challenges five years ago. Had Alumina followed Ms. Richards’ suggestion to conduct an investigation of Ms. Bates, this would have also been an ethical dilemma because it could have possibly violated Ms. Bates right to privacy.
Alumina’s Legal Counsel
The responsibility of the legal counsel at Alumina is to determine when the organization has violated any laws, rules, or regulations. A legal counsel is in the best position to determine this due to the legal background the legal counsel, who generally is an attorney, holds. The legal counsel must conduct an extensive investigation to obtain all the facts and any relevant evidence.
Alumina’s legal counsel advises that whenever a request is made for information through the Freedom of Information Act, any information that is not specifically and truly confidential information should be released to the requestor.
Legal counsel and the business must take several things into consideration when deciding whether an organization should defend itself in court, attempt negotiations, or seek alternative measures. Some factors that Alumina’s legal counsel recommends are financial costs, time, and publicity and confidentiality. These factors can have an adverse affect on an organization and should be weighed heavily when making the decision on how to resolve a dispute.
Risk Analysis
In order to determine if Alumina made the best possible decision to resolve the issue, an analysis of alternative solutions may be used. The first alternative solution suggests hiring a medical expert to determine if Alumina’s violation five years ago possibly caused Ms. Bates’ daughter’s leukemia. This is a good alternative solution; however, it could be very costly. In addition, the expert’s findings may point to Alumina’s liability in some form. This may also result in other possible lawsuits and allegations as a response to Alumina’s negligence.
The second alternative solution is for Alumina to counter Ms. Bates’ threat of a lawsuit with one of its own citing defamation of character. The risk that they run by doing this is that there may not be any basis to their claim. Filing a counterclaim can be expensive and prove to be a loss. The cost for litigation should be avoided if possible.
Based on the analysis of the alternative solutions, the decision to use the intervention of the American Arbitration Association (AAA) was the best possible solution. The alternative solutions do not address the ethical dilemmas that Alumina faces. Arbitration is the best way to resolve the issue because it saves the company money, time, and negative publicity.
Conclusion
Although Alumina has only had one violation in the past five years, this single violation turned into a costly one. However, by resolving the issue through arbitration, they were able to save themselves time, money, and negative publicity. In addition to legal issues, Alumina also had to overcome ethical issues as well. Alumina’s ordeal helped identify the importance of environmental regulations.