Question

SCENARIO:

Eva Melon, the CEO and majority shareholder of OuterSpace Corp. (OSC) (incorporated in Delaware) founded the company to develop the technology needed to make commercial space flights available to the average citizen. She believed that space could be made available for colonization and that the energy and resources needed to sustain life in outer space could be harvested from other planets, such as Mars. Eva spent most of her substantial fortune investing in renewable energy and philanthropic endeavors aimed at making life more comfortable through technological breakthroughs. Because Eva’s mother was from the United States and Eva’s father was from France, she held citizenship in both countries. She frequently traveled back and forth operating OSC from her homes in both countries.

Eva’s most recent project for OSC involved the design and construction of a space vehicle. While Eva had initially planned on manufacturing the vehicle in the United States, she projected that she could save approximately $10 million dollars by manufacturing the vehicle in China. However, she wanted to launch the vehicle from a spaceport either in Russia or the United States. Several test flights were slated on the project’s schedule for the years 2020 and 2021 which included a standard flight into low earth orbit, a docking with the international space station, and finally, a trip to Mars for natural resource sample collection. If successful in all the test flights, OSC planned on launching short commercial trips to space for individuals in 2023 and “colonization” flights to Mars some time thereafter.

To help secure funding for the research and development of the project, OSC also developed and produced solar panels for sale to the public, which were very similar to the ones that they would be using on their space vehicles for energy while in space. The panels were highly successful not only because of their technological brilliance, but also thanks to the public’s fascination with Eva, who was portrayed in the media as the “architect of the future.” OSC’s solar panels dominated the solar panel market, effectively shutting down other solar panel companies both domestically and abroad. Upset by the shift in the market, a competing foreign company, SolarX, filed a suit against OSC in federal court for violations of Section 1 of the Sherman Act.

Undeterred, OSC entered into agreement with a Chinese company to begin the manufacture of the space vehicle. However, upon learning of the agreement, the United States government immediately notified OSC that they were in violation of the U.S. Department of State’s International Traffic in Arms Regulation laws and that OSC must cease all transfer of technology and data related to the manufacturing of the vehicle. Concurrently, the Chinese government, in learning of the agreement and realizing the benefit of the technology to its national government, seized control of the manufacturing facility. OSC immediately filed suit in the United States against the manufacturing facility and Chinese government. It also brought an injunction against the U.S. government to prevent the enforcement of any federal regulation prohibiting OSC from using the Chinese company to manufacture space vehicles.

Knowing how long the lawsuits would take and wanting to stay on schedule, OSC opened a manufacturing facility in France to continue the construction of the space vehicle through a wholly-owned subsidiary of OSC (rather than an outside company).

The publicity surrounding OSC’s struggle to get its vehicle built and operational was overwhelmingly in support of OSC. As a result, OSC hinted at solidifying its decision to launch the vehicle from the United States, at a spaceport which it would build in Texas, for use in all its testing operations.

ETHICS QUESTION:

1. In 5-10 sentences, answer the following question. Assume OSC grants an exclusive interview to a 24-hour news channel about the economic status of the company hours after the seizure of the manufacturing facility in China. Chen Li is the marketing director for OSC and is assigned to the interview. Li does not know if the news station yet knows about the seizure, but knows he will be asked about the financial state of the company. He confirms that the confiscation has actually cost the company millions, which will impact the company's finances significantly but has been told by Eva "not to spook investors because we will recover." When asked by the interviewer, "Where is the company financially today, and what can we expect in terms of company growth over the next year?" Li responds, "OSC's management is as strong as ever and we expect revenues to climb in the future." Li never mentions the losses incurred by the seizure. Is this an ethical answer and should Li have disclosed the company's losses? Is corporate marketing "spin" an ethical business practice?

Answer 1

Ans. In the context of marketing, PR or journalism a spin can be termed as selective assembly and presentation of facts so that nuance can be shaped for supporting one view of the fact or situation, while it may hide another. With a spin, the facts will be perceived in a different way than what they really are. Spinning the facts is unethical as it hides the real truth, whether it is for corporate reputation management, wooing the investors, or for any other reason.

Deontological ethical perspectives say that the acts should be done in a way that they are right and ethical. By spinning the facts Li is not telling the truth and is unethical in his approach. The Utilitarianism theory of ethics says that action should result in good for a maximum number of stakeholders, community, and people. When Li does not mention the losses OSC incurred due to seizure in China, he is hiding the truth by representing facts in a way that the company reputation does not get damaged. As a senior official and a responsible person in the community, Li should have presented all the facts and aspects of the story. He should have told that while the confiscation did cause losses worth millions of dollars, the company will soon recover as it had started production in France (for the space vehicle), and a launch location in the USA has also been decided upon. Scandals such as the Enron scandal occurred as the senior executives of the company hid important financial information through falsified entries and tried to hide the debt the company had. While the situation of OSC may be different, it is supporting wrong practices which may aggravate to be serious issues as well in the future. An honest and ethical company should be forthcoming in clearly and accurately stating its position at all fronts.

Such representation of facts by adding a spin to them will only serve the interests of a few people, including the company owner. However, the investors, as well as the community and society, are being kept in dark about the situation. If the situation worsens and/or when the facts are disclosed to all, the company will not be able to regain investor confidence again easily. The project itself is risky and includes many uncertainties and hence hiding the facts may be a cause of unforeseen and grave problems. The company should clear describe the developments, so that the investors are free to make their own decision.