Business Regulation

The respective environment in which a company exists can often dictate strategy, rate of growth, and level of risk of which a company is willing to engage. Industries are also required to operate within government constraints, regulations, in order to maintain accountability and social responsibility in an effort to protect the well-being of the population. Companies that operate within the environmental industry are required to adhere to strenuous government regulations administered by various entities. Within the simulation Business Regulation, Alumina, Inc. (AI) is embedded in controversy involving regulatory issues and social responsibility as a result of hazardous waste.

Situational Analysis

Alumina, Inc. is an aluminum company based in the United States (US) with global operations in eight countries. Though AI maintains a global presence, its primary source of revenue is derived from the US. Per the simulation, “70% of sales are US driven” (University of Phoenix simulation, 2008). AI’s business markets include “automotive components and manufacture of packaging materials, bauxite mining, alumina refining, and aluminum smelting” (University of Phoenix simulation, 2008). The respective regulatory agencies and acts involved in the simulation include The Environmental Protection Agency (EPA), The Occupational Safety and Health Administration (OSHA), and The Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA). Per the Oil Pollution Act of 1990:

EPA is required to direct the response in cases where the spill "is of such a size or character as to pose a substantial threat to the public health or welfare." EPA may also take the lead in managing the response if requested to do so by state or local response officials, or if EPA determines that the responsible party is incapable of responding adequately to the spill. (http://www.epa.gov/emergencies/content/learning/respmgnt.htm, 2008).

The simulation identified an instance AI was held liable for non-compliance with regard to environmental discharge norms of polycyclic aromatic hydrocarbons (PAH). As stated by the EPA within the simulation, “The PAH concentration in test samples was above the prescribed limit” (University of Phoenix simulation, 2008). Per Corley (2005), the EPA “administers federal laws that concern pollution of the air and water, solid waste and toxic substance disposal, pesticide regulation, and radiation” (p. 10). AI was quick to respond to EPA’s recommended compliance and resolve the issue. Most recently AI is dealing with an allegation by a local resident that AI continuously contaminated the water source which resulted in her 10 year-old daughter’s leukemia. AI is now forced to investigate and evaluate the respective allegations and determine the proper course of action in order to manage the interests of the various stakeholders while maintaining social responsibility. AI’s risk mitigation plan will need to address the various legal, business, and financial impacts.

One immediate decision requires AI sufficiently to defend historical allegations by leveraging proprietary business records. However, the level of disclosure will need to be evaluated as AI’s competitive position could be compromised by disclosing excessive proprietary data. AI may insulate itself from full disclosure by leveraging the Freedom of Information Act (FOIA) which states “agencies may withhold information pursuant to nine exemptions and three exclusions contained in the statute” (http://www.usdoj.gov/oip, 2008). Another potential legal issue that exists within the simulation is Defamation of Character. Defamation of Character is stated as that “which causes someone to be shamed, ridiculed, held in contempt, lowered in the estimation of the community, or to lose employment status or earnings or otherwise suffer a damaged reputation” (http://definitions.uslegal.com/d/defamation-and-libel/, 2008). The claim that AI’s historical environmental business practices could have contributed to a child’s cancer condition could be grounds for a countersuit on behalf of AI.

Values and Stakeholders

AI’s current operating environment is impacted by various stakeholders. Some of the key stakeholders are shareholders, employees, customers, regulatory agencies, competitors, and the community. Within the blend of stakeholders values such as accountability, commitment to society, high-quality standards, and maximum utilization of resources exist.

The highest ranking stakeholder group is the shareholders who invest financial resources into AI. Though many other stakeholders may have more influence in the daily operations within AI, the stakeholders provide AI the financial foundation to maintain its competitive position and invest in innovation and technology in order to address market and industry needs. One of the greatest struggles between the shareholders and every other stakeholder is the struggle to manage financials against accountability. Accountability can come into the form of regulatory compliance, from various environmental agencies, or social responsibility where the global community might require AI to not meet minimal operating requirements but significantly exceed such requirements in order to protect the environment and community. Obviously, AI is in business to generate significant revenue and profit margins. Exceeding regulatory and community expectations would increase costs negatively impact favorable financial margins. The global community might believe that no cost is too significant when it comes to protecting human life and the environment. AI may have a similar position but would also argue that the inability to generate significant profit margins, via increased costs, prevents the company from growth and innovation.

The other competitive force exists in the form of competition. Though every company would like to be recognized as an industry leader, the ability to create a competitive position can negatively impact all players if the respective strategy is not effectively managed. In such a scenario, one competitor may try to cut corners or perform minimal diligence with regard to compliance or legal issues. Repetitive inefficiencies within the industry can create an elevated level of compliance and regulatory issues. Such requirements can create additional costs not only for the offender but for all who operate within the industry. Though some of the more profitable companies may be willing to stretch the limits and incur higher regulatory or compliance enforcement, considered a small cost for