Instructions: Answer both Part 1 and Part 2. Part 1 is weighted 40% and Part 2 is 60%.
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PART 1: Case Analysis
Lobster Lovers
(note: this case is based on a true story though names, dates, and some other facts have been changed).
Marcus Jones, CEO of the“Lobster Lovers” chain of restaurants, looked up from his tablet feeling a bad headache coming on. In the top executive position for just two years, Jones had been adjusting to the pace and the workload fairly well, but what he had just read made him feel like this was his first day on the job.
It was an e-mail from Lobster Lovers Vice President for Public Relations, Gina Singh. One of Singh’s main responsibilities was to continually check the media for anything that mentioned the company–anything at all. On constant alert, Singh and her team sifted through the good, the bad, and the ugly–but especially the ugly. You could never be too quick when it came to responding to negative media exposure. That was why, Singh had written in her e-mail, Marcus should read the attached file as soon as possible. Evidently the low price of the delicious lobster that is the star feature of a Lobster Lovers menu came with a very high price tag–in human terms. Here is a summary of what Marcus read:
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La Mosquitia, known as the Mosquito Coast, is on the Caribbean side of Honduras and Nicaragua. Its tropical climate supports some of the richest biodiversity on the planet. But it is also a place of tremendous suffering. Most of the young men of this area are being killed and maimed to make lobster available at cheap prices to consumers in the United States.
The 50,000 people of the Mosquito Coast, descended from native tribes and escaped African slaves, are extremely poor, illiterate, and have few options for economic survival. They can get involved in drug smuggling, prostitution–or they can dive for lobster. Ninety per cent of the income earned in this region comes from lobster diving, and it is the Miskito men who do it. They call themselves “buzos–” or “divers.” They deal with the middlemen, the sacabuzos (meaning “fetch a diver,”) men in clean white shirts with clipboards who give them $50 advances and sign them up for 2 to 3 week stints on the lobster boats.
Lobster fishing, a $50 million industry on the Mosquito Coast, has changed radically over the last 30 years. It was once possible to wade out a few feet and simply reach down into the clear blue-green water to catch lobster; but since the 1990’s lobster have been over-harvested and are seriously depleted. These days, strapped into antiquated scuba tanks and breathing through clogged regulators, the buzos must dive up to 130 feet for lobster. Every year, they must go out further and stay down longer. The work is especially dangerous because there are no medical or decompression facilities on the boats, and no equipment to assist the divers as they make their way back to the surface. As a result, buzos commonly develop decompression sickness, known as the bends. This is an excruciatingly painful condition that begins with paralysis and ends in slow death. Men who are stricken while the boat is still at sea are often simply left below deck to suffer, untreated. In a form of mercy-killing, fellow divers may even vote to throw a stricken diver overboard if he should develop the illness in the early days of a cruise. Rarely does a boat return without someone dead or severely paralyzed, and without the rest of its crew suffering with some less severe form of paralysis. The problem is now an epidemic. According to a World Bank report, “close to 100% of divers show symptoms of neurological damage—presumably due to inadequate decompression.”
The men in a typical Mosquito Coast village can only shake hands weakly. Most limp. Almost everyone has lost a brother, an uncle, a husband, to the bends. In a location with no modern medical infrastructure, those who have been afflicted have nowhere to go for rehab. They don’t even have wheel chairs. Stricken divers lie on straw mats or blankets on the floors of their huts, waiting to die, easily becoming victims of urinary tract infections, skin ailments or cuts, and gangrene. But young buzos continue to sign up, dive, and come home to die. One factor may be a strong tradition of “machismo.” Miskitos have a reputation for stubbornness, for taking bravery to extremes–and are proud of it. Risky dives are a rite of passage for young buzos, who might boast, for example, of surfacing from 150 feet with a pierced ear drum. Too, for as long as he can survive it, a skilled buzo can make a decent living on the boats. A 100 pound box of lobster sells for $10-12 wholesale. After the sacabuzos, boat captains, and fish processors take their cuts off the top, the buzo will get what remains—about $2 per pound. This can amount to $300 per two week shift.
A quick comparison to the standards for North American recreational divers, who are trained and equipped to avoid decompression sickness: Dives below 60 feet are considered deep dives, and must be limited. Four to five dives a day at this depth would be pushing it. The Buzos on the Mosquito Coast will typically go deeper than 100 feet an average of 13 times a day, every day for two or three weeks.
Boat captains have a reputation for cruelty,fighting in court to avoid making any payments to injured buzos or to the families of those who die. One buzo, after 4 years of diving, became seriously afflicted with the bends. He contacted his boat owner to ask for help. The captain swore at him and hung up.
The sad situation on the Mosquito Coast has not gone unnoticed. A non-profit organization, Sub Ocean Safety or SOS, was founded by an individual from North America, Bob Izdepski. A commercial diver of some 30 years experience, Izdepski became aware of the Mosquito Coast situation and was appalled:
I had my epiphany. I understood that I was a diver, I made my living as a diver, that diving was my life. And what was going on in La Miskitia was the moral Armageddon of the diving world, a slow-motion underwater genocide. I stood on the beach and felt the blinding light of human obligation.
Funding SOS himself, Izdepski decided to help the divers by installing decompression chambers—the only ones on the Mosquito Coast—12 foot long metal capsules where underwater conditions can be simulated, allowing divers to be gradually “brought to the surface.” The trouble is, they should be used within 5 minutes of surfacing, and the buzos don’t reach these chambers until they come ashore many hours too late. Izdepski would like to see regulations on diving—control over the number of dives per day, safety equipment on the boats, and a limit on the lobster season to maintain the lobster population. There is no indication, however, that local or national Honduran or Nicaraguan governmental authorities are about to effectively regulate the lobster industry. Paul Raymond, with an organization that oversees seafood imports to the US, says:
There is a sense of lawlessness along the Mosquito Coast, especially in the lobster business. If you look hard enough you’ll find major abuses in almost all the big seafood import companies. Not that anyone is really looking. Policing by the locals is almost nonexistent.
Raymond points out that his organization monitors the size of lobster sold to the US, but has no power to deal with the diving situation.
There’s no law against diving for lobster, not in Nicaragua, not in Honduras, not in the United States. The fact is, lobster diving is a human rights issue, and human rights are beyond our jurisdiction.
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Lobster Lovers has been consistently profitable over recent years, with net earnings last year of $341 million. Both sales and earnings per share have been steadily climbing. Lobster Lovers helped set up one of the first lobster processing plants on the Mosquito Coast several years backand is still the biggest single purchaser of lobster from the area.
Marcus Jones was feeling confused. He was proud of his company. According to nationwide polls taken by an industry magazine, diners had voted Lobster Lovers as the best seafood restaurant for 17 years. What was the key to this kind of success? Marcus wondered if it was the company’s marketing strategy. People love to eat lobster not only because it tastes fantastic, but because it makes them feel special. A $19.95 lobster fest puts a delicious luxury meal within range of almost every pocketbook, almost every family. This strategy–making everyone feel like a king–played into the great American Dream. It was smart, and it was working.
Then Marcus scanned back over what he had just read. He could see inconsistencies between that information and Lobster Lovers’ advertising slogan, “Spread the Love.” But he wasn’t sure what to do about it. There were those happy customers to think about. And the shareholders.
Instructions: Advise Marcus Jones. Assume he has narrowed down his options to two possible decisions:
1)improve the working conditions of the divers, knowing that it will take a bite out of
profit(short- and long-term), or
2)leave things as they are.
Tell him which of the two decisions would be the more ethical course of action for him to take, and why, from each of the three main ethical perspectives (utilitarianism, profit maximization, universalism)(3 PowerPointI have uploaded ). That is, what would utilitarianism advise him to do? Profit maximization? Universalism? Be sure to do a thorough stakeholder analysis as part of your utilitarian analysis, including a stakeholder analysis table.
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PART 2
Essay Questions
Answer all three essay questions. Please note that these questions are designed to test your understanding of the course readings from weeks 8 through 14 of the course. Each of the three questions is weighted 20% of your final exam grade.
1. In the course we discussed in depth how corporations (or other business organizations) affect their key stakeholders, and in turn how that affects profit. We addressed three different models, all of which can be considered ethical depending on the situation and your personal opinion.
● One model is based on profit maximization as an ethical perspective. In this model shareholders/owners are benefited (and possibly others), but some stakeholders may be harmed. When corporations harm a stakeholder in the pursuit of profit, this is called a negative externality.
● The second model focuses on attempting to find a balance such that there is a maximum net benefit to all stakeholders through positive externalities, though this means not necessarily maximizing profit. This approach is consistent with utilitarianism and/or universalism, and is discussed by Mackey in the Friedman, Mackey, Rodgers Debate article.
● The third model represents the best of both worlds; the “win-win” ideal. In the course we identified examples (e.g., Costco, SAS, Trader Joe’s, ACIPCO, Herman Miller, Design-Tex) where not only do key stakeholders such as employees and customers do well and enjoy positive externalities, but shareholder/owner profit is maximized as well.
These three models can be summarized below:
A. Corporation → negative stakeholder externalities → maximize profit.
(Based on profit maximization)
B. Corporation → positive stakeholder externalities → make (not maximize) profit.
(Based on utilitarianism and/or universalism)
C. Corporation → positive stakeholder externalities → maximize profit.
(The win-win ideal.)
Discuss examples that illustrate each of the models above, drawing your examples only from the course readings assigned from weeks 8-14. Use one separate article/example for each model. Therefore you should use one example/article that highlights the first model, another example/article to highlight the second model, and a third example/article to highlight the third model. Altogether you should use three different articles in answering this question. Note that the three articles you choose must be different from the articles you chose to answer the essay questions below.
2. a. The Greenwald et al. and Mullainathan articles discuss the concept of “unconscious bias.” Several other assigned course readings from weeks 8-14 present examples where corporations or people in corporations made unethical decisions according to the ethical perspective of profit maximization. Explain how unconscious bias may have resulted in unethical decision making according to profit maximization using an example(s) from one of the articles assigned from week 8 on (though not theMullainathan article). Do not use an article discussed in any of the other essay questions. Make reasonable assumptions as necessary.
b. The Polk and Bevilaqua and Singh articles discuss the idea that money can be addicting, just like drugs. Choose an example of what you consider to be unethical decision making discussed in one of the articles from weeks 8-14 (though not the Polk or Bevilaqua and Singh articles), and indicate how addiction to money might explain the unethical behavior. Do not use an article discussed in part a. of this question or any of the other essay questions. Make reasonable assumptions as necessary.
3. Some of the course readings from weeks 8-14 discuss how organizations affect or might affect a particular group within a stakeholder category – for example, a specific group of employees, consumers, or the community. Choose one example of this from the articles from weeks8-14 (and not one of the articles from the previous questions) and using one or more of the main ethical perspectives (profit maximization, utilitarianism, universalism) from the course, discuss the effect on the stakeholder group from an ethical perspective. Is what’s going on ethical? If not, how could it be made ethical?
