Business Ethics Case Analyses

Individualism (Friedman's Economic Theory), Utilitarianism, Kantianism, and Virtue Theory

Analyses of Business Controversies
AIG: From Bailout to Bonuses (2008)
During 2008's "too big to fail" bailouts exercised by the federal reserve, many
struggling multi-national companies were awarded cash in hopes of avoiding
bankruptcy. One company deemed simply too big to fail was the American
International Group, Inc. (AIG for short), which provides insurance for individuals
and businesses. The company, which would have almost certainly been forced into
bankruptcy if not for the bailout, received hundreds of millions of dollars to keep
from drowning. However, in an utterly shocking series of events, the company paid
$218 million to top executives in bonus money. In a completely unethical fashion,
the company used taxpayer bailout money to fund vacations and private jet flights
to the executives who many blamed for causing AIG's financial troubles in the first
place. Additionally, many senior employees were flown to California for a "retreat"
including spa treatments and golf outings. This retreat cost over $400,000 dollars.
By the end of 2008, AIG had received over $100 billion in bailout money.
Unfortunately, the general public was not sure if the money was going toward
improving business of simply paying for luxuries of the organization.
These actions by AIG completely ignored each and every theory related to the study
of ethics. In regards to the individualistic theory of ethics, AIG seemingly followed
the principles of individualism. Although the theory is strictly focused on profits, the
profits must be for the owner and its stockholders. Because the stock prices
following the bailout dropped 12%, it is clear that the interests of profiting did not
translate from executives to stockholders. This clear violation of individualism
ignored the profits of any stockholder outside of an elite group of executives.
Looking at the scandal through a Utilitarian lens, it is easy to see that AIG was
focused on happiness of a select few executives. Rather than looking to please their
stakeholders (employees, customers, investors, and tax payers) who funded the
bailout, AIG selfishly focused on their own happiness. A Utilitarian would have
suggested a more balanced spread of the $218 million to more employees, to leave
everyone happy.

A similar applicable theory to the case is the idea of Kantianism. A Kantian

would view AIG as being unethical, but due to the fact that the company
disrespected its non-executive employees, tax payers, and investors. In
Kantian ethics, equal respect means equal treatment. Clearly, there was not
equal treatment in the case of AIG. The non-executives were not given the
same luxury treatment, and the tax payers were forced to watch the
company waste hard-earned money. Furthermore, Kant promoted acting
rationally, and AIG's choices related to the bailout and bonuses reflected

actions that were far from rational. In looking at AIG's actions as a virtue
ethicist, you would be drawn to the two virtues of courage and justice.
Rather than courageously facing the economic hardship ahead, the company
took the easy way out by accepting hundreds of millions of dollars in the
bailout. In relation to justice, it is clear that there was little concern for
justice, as the executives responsible for the company's economic issues
were rewarded with huge bonuses.
These facts and Analyses are based on a paper by Paige Vandermyn &
Holden Canty, "American International Group, Inc." (2011).
Barr, Alistair. "AIG Stock Tumbles on Heightened CDO Concerns."
MarketWatch - Stock Market
Quotes, Business News, Financial News.
MarketWatch. 11 Feb 2008. Web. 16 Nov. 2011.
http://www.marketwatch.com/story/aig-drops-12-as-auditor-spat-raises-cdoconcerns
Brady, Diane, Marcia Vickers, and Mike McNamee. "AIG: What Went Wrong."
Businessweek Business News, Stock Market & Financial Advice.
Bloomberg BusinessWeek, 11 Apr. 2005. Web. 16 Nov. 2011.
http://www.businessweek.com/magazine/content/05_15/b3928042_mz011.ht
m
Salazar, Heather. "Kantian Business Ethics." Herman 122, Springfield. 19
Sept. 2011. Lecture.
Salazar, Heather. "Virtue Theory." Herman 112, Springfield. 26 Sept. 2011.
Lecture.