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Business Regulation Simulation
Introduction
According to the BNET business dictionary, regulation is “the use of laws or rules stipulated by a government or regulatory body, such as the Securities and Exchange Commission, to provide orderly procedures and to protect consumers and investors.” (BNET, 2008) Business regulation is not limited to these sorts of issues, though. As is the case with Alumina, the Environmental Protection Agency (EPA) also sets standards that need to be enforced to protect the business as well as the community in which it operates. Because the employees at Alumina adhere to the regulations and standards set by the EPA there is little risk to them when issues arise. However, Alumina’s unfortunate experience with the water pollution five years ago earned them a violation of the EPA rules. Now Alumina is targeted as the cause of a young girl’s case of leukemia. Despite the incident five years ago, executives at Alumina are confident that they are in compliance with all the rules now. The negative publicity incurred by the allegations could be detrimental to the future of Alumina. Cautious decisions need to be made whenever a case of this nature is initiated. Legal counsel should be consulted in reacting to any such allegations and decisions should be made that maintain the best interests of the company while preserving the community relationship.
Key facts, regulations, and legal issues
The mission of the EPA is to establish and enforce standards that must be followed in order to maintain a clean environment. They have set regulations to limit such pollutions as air and water. Alumina had a spill five years ago into a local waterway. This violation of EPA regulations and its aftermath earned Alumina unwanted negative publicity that proved embarrassing. As Alumina is getting past that incident, accusations of inadequate emissions being the cause of a newly diagnosed leukemia case threaten to mar their reputation yet again.
The legal issues associated with this case include whether or not they are in compliance with the regulations and whether or not they should disclose the business records being requested in part or in their entirety. According to the simulation, “citizens can request information from the records of government agencies and their private enterprises, under certain conditions, to bring contentious issues to their rightful conclusion.” (Business Regulation Simulation) In the simulation the records were requested to find a link between any violations Alumina may be guilty of with the development of the leukemia. It is important for their image for Alumina to disclose limited information to maintain an appearance of cooperation in the investigation. They have the right to withhold information that may be deemed privileged or confidential. They should do so carefully to avoid any future problems.
Values and Stakeholders
Alumina has an image to uphold as being environmentally conscious in their operations and adhering to the rules and regulations that govern their existence. Mistakes and errors in judgment should be kept to a minimum, as too many will lead to the demise of the organization. They need to establish and maintain an impeccable image within the community in order to survive. When issues arise, many people have a lot on the line. This group of people includes the executives and employees at Alumina as well as the members of the community in which they operate. In this particular case, the Bates family is a primary stakeholder in the investigation. If a link is found between the two entities, the other community members are at risk as well. Alumina has the potential to lose significantly.
Basic issues for counsel
Alumina has to be cautious as to how they react and address the issues with which they are faced here. They will want to seek the advice of their legal counsel before making any decisions or going public with any remarks concerning the allegations. Arthur Todd is well versed in the practices of Alumina and offers valuable advice as to how to handle the situations as they arise. Following his advice can help Alumina maintain a poised and confident public image. He recommended releasing a news story indicating their compliance with the environmental regulations and their state of the art technology.
In May, Arthur Todd assisted in the determination of which bits of information could be deemed privileged information and could be withheld when the results of the environmental audit report were disclosed. His expertise in this area proved beneficial to Alumina as they were able to remain competitive throughout the investigation. Because no link could be determined between Alumina and the leukemia, Arthur Todd was quick to advise that they could defend themselves in the case with confidence.
Solution
Refer to Table 1 which compares the alternatives that Alumina had in dealing with this situation. It also indicates the risks and consequences of each alternative. They could choose to litigate in the courtroom which could take a significant amount of time and money. The duration could negatively affect the productivity levels of the employees, as their moral could decrease while the stresses of the court case create undue tensions in the workplace. The financial burden with which Alumina could be faced could further create unnecessary tensions. With the high costs of attorneys and court fees as well as the expert witness fees and the uncertainty of the obligation possible at the end of the case, Alumina could be incurring a financial disaster. (Alumina Legal Process)
Their other alternative would be mediation. Third party mediation is often a faster way to resolve issues, so the costs are significantly less. This quicker resolution would limit the tension at work and allow for a more productive employee base. This could be partly due to the fact that mediation is often private so there is less public scrutiny. Because of these reasons, Alumina should opt with suggesting a third party mediation process.
Effectiveness of solution
Third party mediation is better for both parties involved in any dispute, because it is much faster and each party has a greater opportunity for input into the decision. (Alumina Legal Process) Another advantage of this is that the public image of Alumina can be maintained, so they can retain their competitive edge over other organizations within the industry. This is very important because negative publicity could be detrimental to their future success. Alumina was able to settle the dispute without much publicity while maintaining control of the time commitment and financial obligations incurred.
Conclusion
Regulations have been established and put into place to control the operations of businesses. When companies are not in compliance with these rules and regulations, they are responsible for correcting their mistakes and facing the consequences of their actions. It is important for management teams to be aware of the rules and regulations associated with their industry and ensure that they are adhered to. Allegations can be made against an organization despite their compliance with the laws. It is necessary for the management to respond and react to these allegations professionally to maintain public support. The support of the community is often important to the success of the business, not only with the issues at hand but also with their future success.
Table 1
Risk Analysis Matrix
Alternative Solution Risks and Probability Consequence and Severity Mitigation Techniques and Strategies
Litigation • Financial Costs – High
• Time – High
• Publicity – High Expert witness fees, Attorney’s fees, Loss of productivity, Court Costs…. Depending on the duration, the severity could be grave. Sensitive information or trade secrets could become public knowledge which could be detrimental to the business. • Object to disclosing confidential or privileged information that could be considered trade secrets.
Mediation • Number of Cases – Medium
• Principles – Medium
• Nature of Cases – High
Could become time consuming if an exorbitant number of cases go to mediation. Important precedents may not be able to be set if significant issues are settled out this way. • Limit the cases to be resolved by mediation to those that seem elementary and will not be needed to set a precedent for future cases.