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Business Regulation Simulation 530

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Business Regulation Simulation

University of Phoenix


Alumina Inc. is a $4 billion aluminum maker, based in the United States, which operates in eight countries around the world. The United States market constitutes 70% of its sales. Alumina manufactures automotive components, alumina refining, bauxite mining and aluminum smelting.

The situation is based on a simulation for the MBA560 course of the University of Phoenix (Legal Environment of Business Simulation UOP, 2006). In this paper, I will identify the key facts, regulations, and legal issues. Discuss the conflicts among competing stakeholders, the organizational reaction to the regulatory issue. I will identify and analysis the risks involved in the simulation, along with the ethical dilemmas and how they align with the overall values of the organization.

Key Facts, Regulations and Legal Issues

This section discusses the main themes of the simulation and why they are important aspects in the decision making process. The first key fact in this simulation is five years ago Alumina Inc. in a routine EPA compliance evaluation was found to be in violation of environmental discharge. The PAH concentration test samples were above the prescribed limit. The EPA ordered a clean up, which Alumina Inc. complied. The subsequent environmental audit reported the violation as "corrected" (Legal Environment of Business, UOP, 2006). Except for this one incident, Alumina Inc. has a positive overall environmental regulation compliance record.

The second key factor in the simulation is in regard to the Freedom of Information Act 5 U.S.C. 552, as Amended by Public Law No. 104-231, 110. 3048 (Freedom of Information Act, 1996). The Freedom of Information act was enacted by President Lyndon B. Johnson on July 4, 1966 and went into effect the following year (Wikipedia, 2007). This act allows any person a process in which to access any information or records held by government bodies. In the case of Alumina Inc., Ms Bates can request information from the Environmental Protection Agency (EPA) on their spill five years ago. Alumina has a right to with hold any information that the company feels is confidential business information. The courts would decide what is confidential and what is not. It would be in Alumina best interest to release as much information as possible to ensure they protect any possible confidential information.

The U.S Environmental Protection Agency Compliance Incentives and Auditing policy is another key factor in this simulation. "The EPA Audit Policy, formally titled "Incentives for Self-Policing: Discovery, Disclosure, Correction and Prevention of Violations," safeguards human health and environment by providing several major incentives for regulated entities to voluntarily come into compliance with federal environmental laws and regulations (EPA's Auditing Policy, 2007). The two main incentives to this policy are 1). Significant penalty reduction (75%) and 2). No recommendation for criminal prosecution.

Roger Lloyd, Chairman of Alumina, was stating this law as a reason for the company to begin an independent site study. He felt that if the company did find that they were in violation of any pollution laws, they would be able to self-report the incident saving the company tens of thousands of dollars in fines. Mr. Lloyd understands the cost of the independent study was expense, but in relation to not reporting the violation, it would be pennies on the dollars of cost savings. The independent study did prove that Alumina was under Federal guidelines for PAH in the ground. The only possible negative side of generating an independent study is that all information generated by the study would have to be made available in any future litigation issues between Alumina and the plaintiffs.

The report by a leading American scientific society in its quarterly journal is the next key factor in this simulation. The journal article reports that due to increased traffic in the heavily industrialized state of Erhwon that the waters of Lake Dira are being poisoned. The polycyclic aromatic hydrocarbons (PAHs) concentrations have been found to be 100 times greater than pre-urban conditions and pose a danger to animal, aquatic and human life (Legal Environment of Business, UOP, 2006). This recent report according to Arthur Todd, Legal Counsel, for Alumina has rendered Ms. Bates claim tenuous. Todd further states the link between Alumina's violation and leukemia is not established and he feels the company could win in court. Mr. Todd maybe technically right in regard to winning a trial, but what would the cost and time of litigation. The cost of the company being "right" may be too expensive in the long run.

The last key fact in this simulation is Ms. Bates has threatened to file a million-dollar personal injury lawsuit against Alumina Inc. to recover compensatory and punitive damages. Alumina's negligent conduct, evident in the "serious violation" of environmental laws five years ago, is proximate cause of her daughter's leukemia (Legal Environment of Business, Simulation UOP, 2006).

There are two means by which Ms. Bates can bring suite against Alumina. The first deals with "Citizen Enforcement". "Most of the environmental laws, such as the Clean Air and Water Acts, contain citizen enforcement provisions, which grant private citizens and groups the standing to sue to challenge failures to comply with the environmental laws. In many instances, private citizens can sue polluters directly to force them to cease violating the law. Private citizens also have standing to sue public agencies to require them to adopt regulations or implement enforcement against private polluters that the environmental laws require" (Reed, Shedd, Morehead and Corley, 2004, p.533).

The second area of private control of private action lies in tort law and its state codification. When the polluting directly injures a private citizen, then they may sue offending polluters under various theories of tort law. This traditional deterrence of tort law contributes to private control in pollution control (Reed, Shedd, Morehead and Corley, 2004, p.533).

These two approaches will give Ms. Bates the ability to ensure her concerns are heard. By bringing suit against Alumina, Ms. Bates may not get her day in court, but may end up with the conclusion she is looking for.

Conflicts Among Competing Stakeholders

The chairman Roger Lloyd and Diane Richards, public relations, have competing



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