Business Simulation Alumina, Inc
Category : Articles
Business Simulation – Alumina, Inc.
Businesses in a global environment run risks and one of the strongest areas of government regulation of business is the Environmental regulation. Businesses have to conform and comply with regulations mandated by the government and if failed to do so can face penalties that can cost the company immensely and sometimes closure. These regulations are set forth for companies to avoid major disasters that can affect the environment (to include animals and humans).
Alumina, Incorporated, a $4 billion aluminum maker operates in the United States with subsidiaries in manufacturing automotive components and manufacture of packaging materials, bauxite mining, alumina refining, and aluminum smelting. Operates in eight countries around the world, and the United States market constitutes 70% of its sales. Alumina experienced legal issues made public. Five years ago, Alumina was in violation of environmental discharge norms in a routine Environmental Protection Agency (EPA) compliance evaluation. The EPA was established to administer federal laws that set standards for clean water, to specifying cleanup levels for toxic waste sites, to controlling air pollution from industries and other sources. EPA found Alumina to have the PAH concentration in test samples above the prescribed limit and therefore, a clean up was ordered in which Alumina promptly compiled, and the violation was considered corrected after a follow up audit. The company now falls under the control of the Environmental Protection Agency (EPA) of region 6. Alumina then faced a new allegation or claim of environment endangerment to the community with accusations from a local resident, Kelly Bates. Kelly Bates, a 38-year-old mother accuses company of repeatedly contaminating the waters of Lake Dira with carcinogenic effluents. As a result of the contamination it caused her child of age 10 to acquire Leukemia. Bates believes that there is a correlation between her daughters Leukemia and the first environmental violation of Alumina. Businesses must not ignore their environmental and social responsibility. Alumina must follow legal, social, and environmental regulations in order to be a successful company. Alumina has a responsibility to its communities and the government in which it operates. The damaging accusations from Bates were reported to Erehwon newspaper, which caused major concern to their executive management team; mainly because of the possibility of affecting Alumina??™s public image and its responsibility in complying with environmental regulations and issues. This was a legal issue that had the elements of a large-scale scandal and bad publicity, however, its management staffs had to approach the problem and act immediately and work closely with their legal counsel to downplay the accusations and do more research to ensure their PAH levels were in compliance before moving forward .
In the first part of the simulation, Legal Counsel and Public Relations Head discuss behind closed doors the editorial that claims of Alumina not possessing a good effective system. Roger Lloyd, Chair, believes that the accusation is baseless and although he agrees with Legal Counsel to proceed with immediate press release, in addition, needs to conduct an independent site evaluation to check for new violations and to disclose results to EPA. Results of independent study found that Alumina was under Federal guidelines for PAH in the ground. One negative feedback in generating an independent study can be that all information generated by the study would have to be made available in any future litigation issues between Alumina and the plaintiffs.
The next key factor in this simulation is the report by a leading American scientific society in its quarterly journal reporting that because of increased traffic in the heavily industrialized state of Erhwon the waters of Lake Dira are poisoned with polycyclic aromatic hydrocarbons (PAHs). Its 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, UOPX, 2011). Arthur Todd, Legal Counsel believes that Alumina has rendered Bates claim tenuous and that link between Alumina??™s violation and her child??™s leukemia has not been established therefore company has a chance to win in court. Though, Todd may have a point in regard to the possibility of winning in a trial, but needs to keep in mind the length of time and costs that can be incurred in a litigation process.
Another key fact is that EPA has notified Alumina of the consideration of disclosing information under the Freedom of Information Act (FOIA). This act allows any person a process in which to access any information or records held by government bodies. In reference to Alumina, Bates can request information from the Environmental Protection Agency (EPA) on their spill even if it was five years ago. However, Alumina has a right to with hold any information that the company believes is confidential business information. The courts would decide what is confidential and what is not. According to Todd, Legal Counsel, he recommends to consider releasing portions of the environmental audit report that pertains exclusively to the EPA??™s adjudication of Alumina??™s violation. To prevent the public eye from receiving disclosed information, Alumina should release reports pertaining to the case only. Opening up all files can lead the public to other cases, which the company is trying to prevent and correct.
The U.S. Environmental Protection Agency Compliance Incentives and Auditing policy is another key factor in this simulation. The EPA Audit Policy safeguards human health and environment by providing several major incentives for regulated entities to voluntarily come into compliance with federal environmental laws and regulations. The two main incentives to this policy are significant penalty reduction (75%) and no recommendation for criminal prosecution.
In conclusion, a company should always have a preventive, detective, and corrective plan for all matters. Tort liabilities and regulatory risks are very important and should never be overlooked. If torts and risks are presented to the company and the company fail to obey with local, state, and federal laws and policies it can affect the business through earnings, assets, and public image. Being proactive in keeping future violations from occurring will help Alumina from litigations. They need to keep in mind that by hiding information or making it difficult to obtain information regarding business practices could cause the community to fail to trust. With all corrective measures taken Alumina should stay in compliance with the EPA, FIOA, and prevent negligence occurrences.
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5 yrs ago, Alumina was found in violation of not having effective systems in place to deal with the crisis (releasing 11 million gallons of crude oil into the pristine blue waters off the southern coast of Alaska), which resulted in acute embarrassment.
Kelly Bates alleges Alumina of repeatedly contaminating the waters of Lake Dira with carcinogenic effluents, which was the proximate cause of her 10-year old daughter??™s leukemia and may be as old as Alumina??™s first instance of environmental law violation. Bates allegation is bound to the hit Alumina??™s public image again
??? Arthur Todd, Legal Counsel ??“ believes Alumina??™s systems are effective & emission rate is way below the prescribed level, by using the best available technology for pollutant cleanup in compliance with the Clean Water Act.
??? Roger Lloyd, Chairman- believes the accusation is baseless and while he agrees with Legal Counsel to suggest an immediate press release, also feels they should conduct an independent site study to check for any new violations and disclose results to the EPA to take advantage of their self-policing incentives.
??? Diane Richards, PR Head- requests arrange a private investigation of Bates; though believes dangerous if word gets out; can have some liability for invasion of privacy. Feels the independent audit can be costly. Agrees in releasing news story immediately & thinks that speaking to Bates directly may not be bad either. Release news story highlighting efficacy of systems and clean record
Editorials talk about Alumina getting defensive and states that they may not have well effective systems
??? Arthur Todd, Legal Counselor- requests to demand a letter to ???The Erehwon Reporter??? demanding a retraction is in order, stating that Alumina has never violated any environmental laws ???willfully???
??? Roger Lloyd, Chairman ??“ recommends to conduct an independent study to check for any fresh violations and disclose results to EPA, as the EPA has incentives for self-policing including 100% penalty waivers for voluntary disclosure and correction of violation Ignore ???The Erehwon Reporter??? editorials and conduct an independent site study to check for any new violation.
Results show PAH levels are lower than the prescribed 5 milligrams per liter for all hydrocarbons; therefore, blunts Bates accusations of ???repeatedly contaminating the waters of Lake Dira???
If follow Todd??™s recommendation, if could send a message to the public that Alumina may be hiding something and lead to loss is profits
The Erehwon Reporter and Bates requesting EPA to release the environmental audit report which documented Alumina??™s violation of the ???Clean Water Act??? five years ago
Under FOIA, citizens have the right to request
??? Todd- states under the FOIA it is possible to withhold Confidential Business information; however, can consider releasing portions of the environmental audit report pertinent only to the EPAs adjudication of their violation
??? Roger Lloyd- objects to the disclosure of any information and feels that the newspaper has no business in snooping around; therefore, wants Legal Counsel to file an objection to the release of report based on Confidentiality of Business Information
??? Blake ??“ believes that the violation of Alumina 5 years ago was not intentional. He believes since it was Alumina??™s first instance in non-compliance, they should release the entire environmental audit report to the press and public and wait for reaction Allow partial release of environmental audit report
Alumina, Inc has to contend with the threat of a lawsuit claiming compensatory and punitive damages
??? Todd- believes that they should meet Bates in court since the link between Alumina??™s violation and leukemia has not established
??? Lloyd- recommends mediation through American Arbitration Association (AAA), since it is the quickiest and cheapest option in sorting out matters in court
??? Richards-recommends to negotiate with Bates and offer a trust fund and feels by doing this will improve the company??™s image Seek AAA intervention in resolving the dispute through alternative means
A win-win situation for both parties
Settlement without admitting any wrongdoing
Litigation too costly and can hurt company??™s image
Simulation. (2011). Business Regulation. Retrieved June 17, 2011, from the UOP rEsource https://ecampus.phoenix.edu/secure/aapd/vendors/tata/sims/legal/legal_simulation1.html
Cheeseman, H.R. (). Business Law. Legal Environment, Online Commerce, Business Ethics, and International Issues. Retrieved from https://ecampus.phoenix.edu/content/eBookLibrary2/content/eReader.aspx