Identify ethical issues that arise in domestic and global business environments using an understanding of ethical concepts and of legal and business principles.

QUESTION

Purpose: In the first assignment, you have the opportunity to see how ethics can play out in a real-world scenario. You will read the case scenario and answers the questions in a narrative format. Use headings for each question. Headings are not the question. You are required to use the course material to support your reasoning and the conclusions made.

Learning outcome met by completing this project:

Identify ethical issues that arise in domestic and global business environments using an understanding of ethical concepts and of legal and business principles.

Case Scenario

The outbreak of the COVID-19 pandemic required Americans to shelter in place thus causing the U.S. economy to freeze-up, resulting in millions of lost jobs. The U.S. Congress passed legislation to try and limit the economic damage. Included in the legislation was a stimulus package that would give $1,200 to single tax filers making $75,000 or less and $2,400 to married couples making $150,000 or less. The purpose of the payment was to give people emergency funds and to stimulate the economy. Also included was the CARES Act that provided the Paycheck Protection Program (PPP). The PPP was a program administered by the Small Business Administration that was targeted at small businesses. It provided for a government loan that was forgivable if used to pay employees’ salaries and benefits, mortgages, rent, and utilities. According to the SBA website, “[t]he Paycheck Protection Program is a loan designed to provide a direct incentive for small businesses to keep their workers on the payroll.”

USAA is a member-owned organization that provided insurance and financial services exclusively to current and former members of the military as well as their family members. USAA has an excellent reputation as a well-run organization and for giving its members good service. Many USAA members maintain checking accounts with it. Some of those members who have checking accounts had overdrawn their balances and had a negative balance in their accounts. When the $1,200 or $2,400 stimulus check was deposited, USAA used those amounts to offset the negative balances in some of its members’ accounts. Members were not informed in advance that this would be the case. This resulted in some USAA members not having any access to the stimulus money. The action USAA took in crediting the funds to existing account deficits was perfectly legal.

Shake Shack is a corporation that owns and licenses restaurants selling traditional American fare like hamburgers and milk shakes. It currently operates 124 locations in the U.S. and overseas. As of May 4, 2020, the company had a market capitalization of $2.06 billion. The company is publicly traded on the New York Stock Exchange. In 2019, Shake Shack’s CEO received $2.3 million in compensation. Shake Shack applied for and received a loan of $10 million under PPP. The loan was permissible under a provision in PPP that allows restaurant chains to apply when each location has fewer than 500 employees. Shortly after Shake Shack received the loan, the PPP ran out of funds and many small businesses did not receive loans.

Small Business Administration. (2020) Retrieved from https://www.sba.gov/funding-programs/loans/coronavirus-relief-options/paycheck-protection-program

How to Set Up the Paper

Create a Word or Rich Text Format (RTF) document that is double-spaced, 12-point font. The final product will be between 5-8 pages in length excluding the title page and reference page. Write clearly and concisely.

Create a title page with a title, the course number and section, the instructor’s name and your name.

Instructions:

Course Material

For this project, you are required to use only the case scenario facts and the course material. What actually happened is not to be considered. External sources are not permitted. You are not researching on the Internet or using resources from outside the course. You are expected to answer the requirements identified below showing the connection between the case scenario facts and the course material. Using course material goes beyond defining terms and are used to explain the ‘why and how’ of a situation. Avoid merely making statements but close the loop of the discussion by explaining how something happens or why something happens, which focuses on importance and impact. In closing the loop, you will demonstrate the ability to think clearly and rationally showing an understanding of the logical connections between the ideas presented in a case scenario, the course material and the question(s) being asked. Using one or two in-text citations from the course material throughout the entire paper will not earn many points on an assignment. The use of a variety of course material is expected consistently supporting what is presented. The support must be relevant and applicable to the topic being discussed. Points are not earned for mentioning a term or concept but by clearly and thoroughly explaining or discussing the question at hand.
NOTE: If external sources are used, what is presented will not count and a penalty for not following instructions will apply.

Project Requirements

Introduction

Write an Introduction paragraph. The Introduction paragraph is the first paragraph of the paper and will be used to describe to the reader the intent of the paper explaining the main points covered in the paper. This intent should be understood prior to reading the remainder of the paper so the reader knows exactly what is being covered in the paper.

Consider writing the introduction last to ensure that all of the main points are covered.

Ethical Issue(s)

Identify and discuss the ethical issue(s) related to USAA and Shake Shack.

Stakeholders Implications

Identify the stakeholders involved in the actions of both companies.

Discuss the potential implications of the company’s actions on each stakeholder or stakeholder group. Give examples.

Utilitarianism Viewpoint

Explain how a utilitarian would view USAA and Shake Shack’s actions.

Rights and Duties Viewpoint

Explain how the actions of both USAA and Shake Shack would be viewed under the theory of Rights and Duties.

Fairness and Justice Viewpoint

Explain how the actions of both USAA and Shake Shack would be viewed under the theory of Fairness and Justice

Recommended Actions

Regardless of what these companies actually did, recommend the actions that you think they ethically should take going forward. This is not about what they should have done in the past, but rather speak to actions they should take now having done what they did. There is no right or wrong action, but rather it is about supporting the actions you choose from your ethical arguments.

Conclusion

Write a concluding paragraph that is brief and summarizes the main points. Provide specific information related to the major topics discussed in the paper.

Review the Paper

Read the paper to ensure all required elements are present.

The following are specific requirements that you will follow. Use the checklist to mark off that you have followed each specific requirement.

ANSWER

Ethical Issues in the Actions of USAA and Shake Shack: A Comparative Analysis

Introduction

The purpose of this paper is to analyze the ethical issues arising from the actions of USAA and Shake Shack in response to the COVID-19 pandemic. The case scenario presents two distinct situations: USAA using stimulus funds to offset negative balances in members’ accounts, and Shake Shack receiving a $10 million loan under the Paycheck Protection Program (PPP) meant for small businesses. This paper will discuss the ethical implications of these actions, examine the stakeholders involved, and evaluate the viewpoints of utilitarianism, rights and duties, and fairness and justice. Furthermore, it will provide recommendations on the ethical actions that these companies should take going forward.

Ethical Issue(s)

The ethical issue related to USAA revolves around their decision to use stimulus funds to cover negative balances in their members’ accounts without prior notification. This resulted in some members being deprived of access to the stimulus money, contradicting the intended purpose of the stimulus package. On the other hand, Shake Shack’s ethical issue arises from receiving a $10 million loan under the PPP, which was initially intended for small businesses struggling to survive during the pandemic. Shake Shack’s market capitalization and the CEO’s compensation raise concerns about the appropriateness of a large corporation benefiting from funds meant for smaller entities.

Stakeholders Implications

The stakeholders involved in the actions of USAA include its members, employees, and the wider community. USAA members who had negative balances in their accounts were directly impacted by the decision to offset their balances using stimulus funds. Employees of USAA may face reputational challenges due to negative public perception. In the case of Shake Shack, the stakeholders include small businesses, employees, investors, customers, and the government. Small businesses that did not receive PPP loans due to funding depletion may face financial distress. Employees’ job security may be affected if the company’s financial situation deteriorates. Investors and customers may question the fairness of Shake Shack’s actions, potentially impacting the company’s reputation and customer loyalty.

Utilitarianism Viewpoint

From a utilitarian perspective, USAA’s actions may be seen as promoting the greatest overall happiness by resolving negative balances for members and ensuring financial stability. However, this view overlooks the potential harm caused to the individuals who were denied access to the stimulus funds. In the case of Shake Shack, a utilitarian viewpoint would consider the impact on the overall economy and job retention. By receiving the PPP loan, Shake Shack aimed to preserve jobs and contribute to economic stability. However, the negative consequence of smaller businesses not receiving the intended support undermines the utilitarian argument.

Rights and Duties Viewpoint

Under the theory of rights and duties, USAA’s actions can be questioned in terms of member rights and the duty to provide transparent communication. Members have the right to access their stimulus funds without interference, and USAA had the duty to inform members of their decision to use the funds to offset negative balances. Shake Shack’s actions can be evaluated in terms of the rights and duties of small businesses. Small businesses have the right to equal access to financial relief programs, and Shake Shack had the duty to consider the impact of their loan application on smaller entities.

Fairness and Justice Viewpoint

From the perspective of fairness and justice, both USAA and Shake Shack’s actions raise concerns. USAA’s decision to use stimulus funds without prior notification creates an unfair situation for members who were counting on those funds for emergency expenses. In the case of Shake Shack, the allocation of a substantial loan to a large corporation while smaller businesses struggled to secure funds can be seen as unjust and inequitable.

Recommended Actions

Moving forward, USAA should prioritize transparent communication with its members and ensure that stimulus funds are used solely for their intended purpose. This may involve refunding the offset amounts or providing alternative solutions to rectify the situation. Shake Shack should consider returning the $10 million PPP loan or utilizing the funds in a way that directly benefits struggling small businesses. This could involve supporting local initiatives, contributing to relief funds, or providing assistance to smaller restaurants within their network.

Conclusion

The ethical analysis of USAA and Shake Shack’s actions reveals the complexities of decision-making during a crisis. While legal, their actions have raised ethical concerns related to fairness, transparency, and the impact on stakeholders. By considering the viewpoints of utilitarianism, rights and duties, and fairness and justice, it becomes evident that these companies should take proactive measures to rectify the situation and uphold ethical principles. Transparency, fairness, and stakeholder considerations should guide their future actions, fostering trust and maintaining a positive reputation in the long run.