Case 7.3 – The NYSEG Corporate Responsibility Case

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Presentation transcript:

Case 7.3 – The NYSEG Corporate Responsibility Case

Facts of the case. NYSEG employs social workers to proactively identify and assist customers who have (or soon will be having) problems paying their gas and electric bills. The costs to NYSEG probably exceed (slightly) the “recovered” payments. NYSEG also administers a voluntary assistance fund, to which it has contributed about 1/3 of the money.

What would Milton (Friedman) say? Is NYSEG out of its mind? Cutting off deadbeats’ utilities does not break any law or regulation. If doing this angers any paying customers, who cares. They have no choice but to keep on buying gas and electricity from NYSEG.

What would Edward (Freeman) say? The customers are a stakeholder group that is worthy of consideration. Kantian ethics – NYSEG’s action respects customers’ dignity. Rawls – NYSEG’s action would be chosen from behind the veil of ignorance. NYSEG’s shareholders are also a stakeholder group worthy of consideration. Utilitarian ethics – There may be long-term financial benefits from NYSEG’s action.

Case 7.4 – Beech-Nut’s Imitation Apple Juice

Facts of the case. Beech-Nut substituted a lower cost ingredient in its (baby) apple juice. Evidence steadily mounted that the substitute was fake. Beech-Nut executives refused to act because of cost issues. Bad consequences all around.

What would Milton (Friedman) say? Was Beech-Nut out of its mind? It broke the law. Two top executives were convicted and punished. The company paid a $2 million fine. It violated prevailing social standards to a great enough degree that profit was decreased. The total cost of a class action lawsuit and lost sales was $23 million, an amount that almost ruined the company.

What would Edward (Freeman) say? The Beech-Nut customers are stakeholders worthy of consideration. Kantian ethics – Do not treat them as means only. Beech-Nut stockholders and suppliers also are stakeholders. Utilitarian ethics – Utility was not maximized for the greatest number.