Organization of Corporation and Ethical Responsibility

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When a company organizes itself as a C corporation, that provides a shield for its owners from personal responsibility for the company's obligations and debts. Owners within a C corporation do not have to put up their own personal assets to cover liabilities and obligations for the company. Instead, the owner's liability, from a financial perspective, is limited to the financial investment that the owner has in the company. Should a C corporation go bankrupt or otherwise become insolvent, the creditors are not permitted to come after the personal assets of the owners.

        When it comes to ethical responsibility, the C corporation structure provides for limits to the exposure of each owner should some sort of event lead to civil litigation or some other form of judgment. Because the personal assets of the owners are not at risk, should a complainant come to court with a civil suit against the C corporation, the owners would not be held personally liable, even if the company would be found liable for a particular lawsuit. So while the owners could be considered liable from a more abstract perspective, they could not be found personally liable in court.

        According to the argument in the case study, the W.R. Grace Company complied with the terms of economic sustainability, at least in the short term, but failed to comply with the terms of social sustainability and environmental sustainability. Dumping the chemicals into the nearby groundwater obviously allowed the company to operate at a lower overhead cost than taking care of the toxic chemicals in a more responsible way would have meant for the company. However, those savings quickly evaporated when the contamination of the area near the plant became public knowledge. The civil suits cost the company millions of dollars, as did fines from investigations conducted by the Environmental Protection Agency, and the end result was a permanent stain on the company's reputation that a Grace Day would not be able to alleviate, no matter the pomp and circumstance.

        When it comes to environmental sustainability, the company was obviously using short-term means to accomplish ends that would cause damage to the environment, even over a relatively short period of time (Textbook 655). The cases of leukemia that results in newborns in the community, just a few years after the decision to allow the toxins into the soil, show that the short-term thinking of the company led to outcomes for the community that wreaked havoc on the local environment.

        The company's actions had a similar impact on the social sustainability of the situation. Of all of the residents in a town, newborns are the most vulnerable, and they pull at the sense of trust people have in the companies that serve them. When it became clear that the Grace plant was threatening the very viability of the town's next generation, it also became clear that the Grace company was shredding its social contract with the people who depend on it. That served as the basis for the size and number of the judgments issued against the company when those cases went to court.

        The stakeholders in a situation are not always defined in such a way as to include all of the people whose quality of life is affected. From a corporate perspective, it is one thing to talk about the financial stakeholders in a company, which in a publicly traded company would consist of the investors, as well as the employees. One could also talk about the community investment in a company, as in the tax rebates that might go into the establishment of facilities and the decision to move to a particular location. Balancing the interests of the financial stakeholders in this particular situation did not lead to a proper balance of all of the stakeholder interests in the company, particularly those whose quality of life was influenced by the decisions of the company even though they have no direct financial investment.

        For the families whose health was affected by the decisions of the company, they certainly qualify as stakeholders as well. The reason for this is that the families do not have a choice as to whether they consume the water that comes into their homesit is a basic part of their personal sustenance. When we consider how the company could have balanced their stakeholder interests, then we realize that having a proper method for dealing with toxic chemicals, one that did not rely on the nearby groundwater but instead would dispose of it according to established guidelines, was certainly a part of the consideration that would have brought the situation into balance. Once the spill became public knowledge and the lawsuits began to pile up, the interests of the financial stakeholders came into play as well, because it was clear that their own investment in the company would take a significant hit from the legal judgments the company was ordered to pay.

        It is fairly clear that corporate social responsibility is not a task that companies can handle independently of government regulation. It would be nice to allow the free market to provide the necessary corrections, but by the time that happens, the impact on the surrounding communities can be so significant that there is no way to ameliorate it, because it is simply impossible to go back into time. The reason for the rise of regulation of business activity, both in the United States and in other nations, is that initially companies were not required to undergo any meaningful sort of regulation, and the liberties that they tookwith profit standing as the only regulationbrought about significant damage to the environment, to workers and to the communities at large.

        One example of this could come from the way the meatpacking plants in Chicago were operated around the turn of the century. The author Upton Sinclair wrote his novel The Jungle about the practices of the meatpacking companies. They bought up the land around the plant, built cheap houses, and lured immigrants fresh from Europe into mortgages that they could not understand, beginning with interest-only payments that would add principal within six months or a year, and then crammed families into them. The conditions around those houses were filthy; the working conditions in the factories were unsafe, and the pace at which workers were expected to complete tasks guaranteed injuries. However, there were more and more laborers coming from Europe each week, so there were plenty of bodies to fill the factories. Sinclair's work brought this plight to the attention of the nation, and regulation came about as a result. When regulations are removed, abuses tend to creep up, and this happens time and time again. There is a clear need for government regulation.

        When a company provides an environmental impact statement, that serves as a sort of double-edged sword when it comes to the interaction of that company with the surrounding environment. On the one hand, the existence of a statement indicates that the company has spent some significant time, at multiple levels of the organization, considering the impact that it has on the surrounding environment and appears to have considered how it can work to keep that surrounding environment as pristine as possible. However, a more cynical view could consider that the company is putting out the statement so that it can seem caring while, at the same time, actually running its operations without much consideration for its actual impact on the environment (Textbook 320). The impact statement provides a sort of window dressing, and perhaps an initial volley in defense of a liability suit, but it does not inform the actual operations of the company. So one could say that the impact statement is meaningful if it reflects the actual philosophy and practices of the company that publishes it.

        If a corporation has a business activity that could threaten the environment, then it is responsible from an ethical perspective to finance protections that keep the surrounding environment free of harm. In modern practice, this often takes the place of fulfilling regulations that municipal, county, state and federal agencies place on businesses, but it also is the company's ethical responsibility to proactively consider, to the degree possible, the potential impact that their operations could have on the environment even after the company fulfills all applicable regulations. If the company is shown to be negligent in its handling of materials that could harm the environment, the cost will come in the form of civil judgments, so the company could end up paying much more on the back end, both in terms of dollars as well as in terms of ongoing viability, if it chooses to cut that corner in the first place.

        The W.R. Grace certainly had a financial responsibility to protect the environment, because its activities were what put the surrounding environment at risk. Had the company decided to handle the toxic material in a more responsible way, that would have increased the company's costs at the time, but it would have saved the company significant goodwill and money on the back end, not just in terms of verdicts and lost businesses but also in terms of considerable legal fees, all of which fell on the company and its shareholders later on, in the event of incidents such as this one.

        A cost-benefit analysis is a tool that allows decision-makers to decide how best to proceed when there are different scenarios that lead a company in different directions. It allows a company to compare the costs of a decision against the benefits that the decision will make; in cases where the costs become significant, this sort of analysis allows a company to see that the benefits make the costs worthwhile.

        Utilitarianism has to do with making decisions so that the greatest amount of happiness results for the greatest number of people involved. A cost-benefit analysis looks at who derives more advantage from a decisionand what that decision costs in return (Textbook 100). Deciding how to balance costs and benefits has a great deal to do with measuring which decision brings positive outcomes to the most people in a situationas well as helping to decide which people are most important when it comes to delivering those positive outcomes. For the W.R. Grace Company, running a cost-benefit analysis on the decision to handle toxic chemicals the way that they did might have shown (as they doubtless suspected) that their expenses would go up. However, the benefit down the road would have meant far less financial and ethical exposure because of the decisions they were making.

        The idea of a Grace Day is absolutely an ethical issue. Tenure in office is nothing to celebrate, when that time in office has been marked by the shoddy decision-making that the W.R. Grace Company showed with their handling of these toxic materials. Given the fact that infants in the town where their toxins entered the groundwater ended up suffering from leukemia, the best thing that the company could have done was to make the day about the town that their decision ravaged. Instead, celebrating the tenure of the figurehead at the top of such an organization only shows the fact that our consideration with ethical matters, as a society, tends to pale in consideration with our obeisance to matters that are financial in nature. That sort of truckling is what keeps our most vulnerable people in society at risk of harm, despite the wealth of technological advances that should be making life better for all.

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Organization Of Corporation And Ethical Responsibility. (2019, Dec 04). Retrieved December 4, 2023 , from

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