Ge and the Hudson River Case

Jordan Rawlings

Professor Rick McPherson

GE and the Hudson River Case

1. The stakeholder’s analysis completed in Appendix A shows that there are many stakeholders in this case with varying degrees of importance. The most important stakeholders include GE, GE shareholders, GE employees, the EPA, the community, the Government, environmentally conscious consumers, environmental groups, the media, the local fishing industry, environmentally conscious suppliers, the New York Department of Health, and people who have had health issues cause by the river pollution. Many of the important stakeholders have legal power in common. There are several different stakeholders in this case who could bring a potential lawsuit against GE. This analysis has similarities to the Apple Foxconn case we did in class where there are multiple government agencies and political groups working against the firm in question. This poses a major threat of a very powerful coalition forming against GE. A coalition including the EPA, environmental groups, the New York State Department of Health, and the community at large could do serious damage to both GE’s financial status and their public image. Some of the less important stakeholders are competitors, price conscious consumers, and the local tourism industry. I considered these stakeholders to be less important in this case because they don’t have nearly the same influence on what decision GE will make when compared to the previously listed stakeholders.
2. [pic 1]When approaching this issue from a consequentialist lens, there are strong arguments for and against the clean-up efforts. On one hand you can argue that the cost of cleaning up these sites will be too much of a financial burden on GE and produce negative outcomes for several stakeholders. But there is also an argument for the other side, which is that the net benefit of cleaning up these polluted locations will provide a greater net benefit even considering the costs to stakeholders like GE, GE employees, and GE shareholders. When looking through a deontological lens, the argument against fighting clean-up efforts is much stronger. GE caused this mess and therefore have a moral obligation to fix it based on universal principles and morals. The deontological argument for fighting the cleanup efforts is much weaker in comparison and assumes that it is the moral duty of GE to ensure job security and increase shareholders wealth. The argument against fighting clean-up efforts has a stronger basis in universal law in terms of who the responsibility for fixing the issue falls to.
3. Moral Disengagement Strategies employed by GE to fight clean-up efforts:

1. Restructuring Behavior to Appear Less Wrong

1. Moral Justification: GE justified their pollution of the river by pointing out how it provided jobs and economic prosperity to the community.
2. Euphemistic Labeling: GE tried to push the idea that the health of the river was ok because of the thriving catch and release system. This is a change from what the DOH defines as the standard for the river health, which is the ability to not only catch and release, but also catch and eat. GE conveniently left out the second aspect to make their impact on the river seem more benign.

1. Minimizing Victims Distress

1. Distortion of Consequences: GE tried to minimize the seriousness of the effects of their actions by saying a “thriving catch and release system” proves that the river and surrounding communities are prospering. GE basically said that because there is a successful catch and release system in place the river’s health is not that bad.

1. Obscuring Moral Agency

1. Diffusion of Responsibility: GE claimed that PCBs were a made-up controversy by environmentalist groups to destroy jobs. This was an attempt to avoid accountability for their unethical behavior by shifting controversy to environmentalists. GE also spent millions in aggressive ad campaigns to develop anti dredging support as it is an unnecessary and useless method that hurts economies. The strategy of GE in general was to shift opposition and blame to environmentalists so they were no longer responsible.

1. Alternative Policy Approaches

1. Environmental Standards: the government can establish specific standards for how much pollutants or emissions GE can discharge from their factories. If GE is given clear standards to follow, then they can alter their business practices accordingly to follow the regulations. In theory this will reduce the amount of pollution GE will produce moving forward or they will pay fines for violating the regulations.
2. Market-based Mechanisms: By implementing a Cap-and-trade policy this will force GE to either reduce their own pollution or require them to purchase the right to pollute from other firms. Ideally this policy will drive down overall pollution, because if GE wants to pollute more, they will have to purchase the right to from other firms who will also be reducing their own pollution.
3. Information Disclosure: If the government starts publicly disclosing the amount of pollutants that GE is producing each year, this could force them to reduce their emissions. GE produces a substantial amount of pollution which would be embarrassing for the firm’s public image if disclosed publicly. This embarrassment could potentially drive GE to cleaner and more environmentally friendly practices.
4. Civil and Criminal Enforcement: Establishing the threat of fines or prison time could deter GE from doing environmental damage moving forward. If GE executives know that they could face potential prison time for polluting like GE has in the past, then their environmental policies will change. This will make GE a better steward for the environment as executives will be held accountable for recklessly damaging the environment.

1. Based on the damage done and potential of illness and deaths, I think GE Top management should be held accountable and be charged with criminal penalties. GE top management should be charged for lying and misleading the public on the dangers of their pollution. GE launched ad campaigns in print, radio, and television misleading the public into thinking that the health of the river was thriving and that environmentalists were lying about pollution. Along with misleading their employees and the public about the effects of PCBs, GE also destroyed a centuries old fishing industry and river-based culture. The combination of misleading the public, destruction of the fishing industry on the Hudson river, massively polluting the Hudson River, and causing health issues is a strong foundation for holding GEs top management accountable in the form of fines or prison time.
2. I think the most effective policy to implement would be a cap and trade policy. This policy would be most effective because it would allow GE to legally produce a significant amount of pollution. For GE to do this they would be required to purchase the right to pollute from other firm’s excess capacities. While GE would still be one of the biggest individual firms polluting, this would bring would also actively bring down the emission numbers for others that are choosing to sell their pollution rights. Regarding the other 3 policy approaches, I don’t think they would be as effective based on GEs history. Information disclosure likely wouldn’t be effective because GE has already been exposed to the public for pollution and continued to do so anyways for many years. Environmental standards also might not be effective because GE has already shown the willingness to fight the EPA standards in court which delayed the cleaning of the river for over 30 years. Civil and Criminal enforcement might also prove ineffective with GE for similar reasons as environmental standards. GE has proven they are willing and able to engage in long term legal disputes, which means they would likely be willing to dispute criminal and civil threats to their executives in court. Ultimately, a cap and trade policy is the most flexible of the options and would allow GE to purchase more capacity to pollute in the short term, while also incentivizing them to cut emissions where they can moving forward without creating an imposing cap on their operation.

Appendix A: Stakeholders Analysis

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Additional Research:

Huffington Post Article: “Cap-and-Trade Versus the Alternatives for U.S. Climate Policy”

Robert Stavins, the director of the Harvard Environmental Economics Program makes the argument that a cap-and-trade system is more environmentally-effective and more cost-effective than just setting standards. By establishing a cap and trade system, policymakers are able to set a specific industry emissions target. Setting industry caps also creates incentives for technology innovation which will lower long term emissions and costs. It is also more flexible for firms who are not able to cut their emissions down to meet standards immediately without shutting down significant parts of their business. Some of the successful cap and trade examples provided by Stavins are the phase out of leaded gasoline in the 1980s, the phase out of ozone depleting substances, and the Clean Air Act amendments of 1990 SO2 allowance trading program which cut acid rain by 50%.