The COVID-19 pandemic brings a global display of ethical controversies. The health threats posed by disease outbreaks and epidemics and the accompanying anxiety are associated with multiple economic risks. The severity of the consequences of such a scenario for the global economy will depend on how well the government’s measures to support the economy work. However, there are different ways of de facto implementing such measures. Compliance with the legislature is not the estimate of the morality of actions (“Defining on “Ethical dilemma, “n.d., p. 2). This paper discusses the ethical controversies involving USAA and Shake Shack from moral and economic points of view. It considers these cases from utilitarian and Kantian perspectives, describes the ethical issues, lists the implementations for stakeholders, and suggests what the companies could do differently.
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The US economy’s current structure involves the constant circulation of money, which has become impossible due to the critical epidemiological situation. Many businesses are closing, and people are losing jobs, entire sectors of the economy and some of the county’s regions are stagnating. The US Congress passed legislation, including a stimulus package and a Paycheck Protection Program (PPP), to balance preventing the virus spread further and support the small businesses (“Small Business Administration,” 2020, para. 4). Such steps seemed justified since social responsibility can bring positive long-term results (Van Dyck, 2013). Nonetheless, the implementation of these measures has brought many ethical problems and controversies for businesses and stakeholders.
The course materials present two scenarios showing fundamental ethical issues caused by good intentions. USAA is a member-owned organization providing insurance and financial services exclusively to military professionals and their families. A feature of the organization is that some of its members maintained a negative account balance. After receiving the stimulus checks, USAA used the money to offset these members’ negative balances. Thus, some of its members did not receive financial help. Although the USAA actions are considered perfectly legal, they seem to be ethically flawed since not all people who were entitled to profit were involved in its redistribution.
The second case represents an example of the ethical controversy caused by Shake Shack. The company had a large market capitalization but still took advantage of the PPP stimulus. While the program’s goal was supporting small businesses, its primary beneficiary became Shake Shack. It happened due to the company’s rationale: de jure, the corporation consisted of a large number of establishments that fell under the definition of a small business. Soon after Shake Shack received a loan, the PPP went broke. Many endangered companies that were not under the protection of a vast corporation did not receive loans.
USAA stakeholders mainly include the militia and their family members. USAA is structured in the form of a consumer cooperative, thus making consumers and vendors the same community. Other stakeholders are employees and competitors, such as additional insurance and financial, real estate, and travel companies. A portion of impacted stakeholders consists of the businesses and organizations involved in providing services, such as insurers, travel agents, vendors, and others.
As for Shake Shack, it is one of the leading restaurant chains serving American cuisine. There are many competitors in this market, especially in terms of local small businesses. However, there are also such competitors as licensing corporations and franchise companies. Another pool of stakeholders is Shake Shack’s consumers as well as employees. Those who are impacted by Shake Shack’s operations are suppliers, equipment manufacturers, and electrical companies.
Potential Implications for Stakeholders
In the case of USAA, the most influenced stakeholders are the consumers and vendors. The problem lies in an uneven and unfair redistribution of the care packages caused by the organization’s structure. Some benefited from the company’s good intentions, while others did not receive the necessary help. By contrast, Shake Shack’s loan appropriation influenced the company’s competitors the most. Other stakeholders who suffered from Shake Shack’s actions were suppliers and equipment manufacturers. By saving and reinforcing the corporation’s position in the market and preventing its smaller competitors from obtaining loans, Shake Shack caused a two-fold problem. The company discouraged the supplier’s competition and prevented local businesses from strengthening in the market.
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Utilitarian and Kantian Perspectives
As a form of consequentialism, utilitarianism focuses on the outcomes rather than actions, so its central question is, “what kind of outcome should I want?” (“Theories of Consequence Ethics: Traditional Tools for Making Decisions in Business when the Ends Justify the Means,” 2012, para. 3). Utilitarianists believe that ethical action leads to the happiness of as many people as possible. Justifiable morality consists of steps that lead to long-term consequences that contribute to society positively (Nathanson, n.d., para. 3). One could argue that a consideration of positive results should be taken into account. If the action should create “the greatest net utility” to be ethical, one should think about their long-term consequences (Nathanson, n.d., para. 26). For utilitarians, the actor’s utility is equal to the individual utilities of other actors; it does not outweigh them (“Utilitarianism: crash course philosophy,” 2016). Thus, one can evaluate the morality of an event based on its outcomes.
From this perspective, the USAA’s actions are morally justified since they allowed the employees to preserve their job places. Undeniably, they also benefited the company’s future profit by investing in their employees (Van Dyck, 2013). In contrast, even though Shake Shack’s actions had some positive effects, the company’s strategy is ethically dubious in the long-term perspective. The corporation negatively affected the utility of its small competitors. Lack of business diversity can have numerous adverse effects, including market stagnation.
From the Kantian perspective, one would look at the intentions rather than consequences. Kantian ethics suppose a rational actor’s ability to derive universalizable moral rules for particular situations (“Theories Responding to the Challenge of Cultural Relativism,” 2012, para. 4.7). In assessing the ethics of the two cases from the Kantian perspective, one should look at the intentions’ nature and determine whether they were directed by pure self-interest or guided by moral duty. Shake Shack acted selfishly; their actions cannot be universalizable by Kant’s imperative since it is impossible to provide all large companies with loans from a relatively small program. USAA also followed their interests; therefore, their actions cannot be extended to a shared moral rule, even though they had positive consequences.
One thing that could be recommended generally for each company is to avoid treating its stakeholders in an impersonal, abstract way. As Anderson (2015) argues, every company should depend on the real human dimension (para. 3). For Shake Shack, it would be better to think of their competitors more humanely. It seems that there was no financial necessity in such a massive appropriation of money. The corporation could instead consider each of its locations individually and assess whether there were businesses in danger. A recommendation for the USAA would be similar: to evaluate each member based on immediate financial help. It might have shown that there were select people in need of a fiscal stimulus package, and the negative accounts could have been covered. Even though both companies acted within their legal rights, they should also base their decisions on moral considerations.
The consequences of outbreaks and epidemics for the economy are uneven. Some industries may even benefit financially, while others will suffer disproportionate losses. The same is true for economic support: even though it aims to help as many businesses and stakeholders as possible, it may lead to an unbalanced and unethical distribution of money. Any company seeks profit since it is the essence of every organization to maintain its existence, but it can do so per moral standards. This paper’s main argument is the necessity to add long-term considerations into actions to make ethical choices. It is not enough to consider only immediate steps.
From the Kantian perspective, neither USAA’s nor Shake Shack’s actions are ethical because they cannot be said to be done out of moral duty and fit the categorical imperative. However, from the utilitarian point of view, USAA’s actions may be ethically justified because they bring long-term positive outcomes. Shake Shack’s actions, on the contrary, have negative long-term implications; thus, they are not ethically justified. Even though neither philosophical theory is superior to the other, businesses should take at least one of them into consideration to produce socially desirable outcomes.
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