Ethical and legal issues surrounding Solyndra

Solyndra: A Brief Overview

Solyndra was a California-based corporation that produced thin-film solar cells attached to cylindrical panels. The solar cells, according to the scientists, could yield more energy than the convectional flat photovoltaic panels. As a result, the United States government issued more than $535 million in debt guarantees to cover the lenders’ repayment obligations if the corporation failed. Notably, the flexible cells on the cylindrical tub were made of iron, gallium, indium, and diselenide. Flexible cells were able to receive direct or indirect light from all directions thanks to the devices. However, in September 2011, the company ceased operations, lay off all employees, and declared bankruptcy. The formation, management and dissolution of the company contravened some US state laws and ethical practices in a free market.

Reasons for Solyndra’s Failure

The statistics showed some of the reasons for the failure of Solyndra Company. First, at the formation of the Solyndra, the silicon was selling at high prices which made the alternative sources of energy cheaper. The Solyndra as well experienced the dropping prices of the gas which sabotaged their operation (Blue 2011). Some companies drilled the shale for domestic reserves which made the supply of the oil to increase to 30 percent. Consequently, the prices of the oil reduced making the company to incur great losses. The last blow to the company was the China’s creation of $30 billion credit line for the nascent solar energy (Blue 2011).

Violation of Loan Terms and Labor Regulations

According to experts in law and energy sector, Solyndra violated some of the loan terms as spelled in the US laws but got the greatest share of Federal money. Furthermore, the US Department of Energy as well violated the US law in the reward of the loan to the company (Carlisle, Kane, Solan, Bowman & Joe, 2015). After realizing that the company had violating the loan deal by defaulting on its $ 535 million loan, The US Department of Energy changed the term of the loan to allow Solyndra to continue receiving the taxpayers’ money (Carlisle, Kane, Solan, Bowman & Joe, 2015). Notably, the company was unable to pay $5 million to the special reserves fund as agreed in the loan term. According to the Energy Department spokesperson, Damien LaVera, the agency was aware that the firm had violated the loan terms but they solved to change the requirement to keep the company afloat (Carlisle, Kane, Solan, Bowman & Joe, 2015). Second, the firm violated the US law when it resolved to wind up its operation and lay off more than 1100 workers without prior warning which was against the US labor regulations.

White House Influence and Legal Violations

Third, the FBI investigated the existence of the White House influence on the award of the loan to the company which was against the law. Some of the republicans argued that Obama administration exerted improper influence on the loan given to the company. The republicans have accused the White House of the Crony Capitalism (Caprotti, 2016). In particular, the Congressmen argued that the owner of the Solyndra bundled large amount of money to finance Obama’s campaign which made the company officials to visit the White House. The hatchet Act of 1939 prevents the state officers from participating in any political activities except for the President and Vice President. However, the officials at the Department of Energy were politically influenced to give loan to the Solyndra even after realizing the companies’ incapability to repay the fund (Caprotti, 2016).

Legal Regulations and the Equal Credit Opportunity Act

The Bank Secrecy Act requires the financial institution to report any suspicious activity that may result in money laundering, misuse of the taxpayers’ resources, and tax evasion. Furthermore, companies are required by law to keep track records of the customers’ employment status for entire businesses which deals with government institutions (Caprotti, 2016). Furthermore, the Equal Credit Opportunity Act (ECOA) requires the lending institutions to extend the credit and loan opportunities to individuals based on their credit worthiness rather than political affiliations. Furthermore, the law guiding the prospective applicants states that the protection to credit must only be granted to the person who has requested for extension (Caprotti, 2016). The Act encourages the provision of loan and credit to different applicants on non-discriminatory basis. However, the Equal Credit Opportunity Act protected the Solyndra Company from civil liability for the offense committed in good faith and their conformity to the interpretation issued by the regulatory agency (Olson & Biong, 2015). Under section 706 (e) of the ECOA Act, Bureau of Consumer Financial Protection must ensure that all institutions which default to pay the loan but ensure good-faith compliance must be protected from forms of harassment.

Milton Friedman’s Perspective on Government Intervention

Milton Friedman argued that there is a natural rate of unemployment in which the employment done above it would cause inflation. Therefore, Friedman preferred the small expansion of the money supply as a mechanism for regulating inflation and improving the stability of emerging companies (Olson & Biong, 2015). The Friedman policy greatly influenced the Federal Reserve in response to the financial crisis of 2008. Furthermore, Milton argued that the world must move to a classically liberal society that embraces the activities of a free market. Additionally, the economist discussed the role of government in ensuring consistence in money supply to promote social welfare programs. However, Friedman noted that the government must not intervene on matters which are not absolutely necessary for survival of the people (Olson & Biong, 2015). In other words, he argued that companies which interact in a free market are more likely to succeed than firms which receive government intervention.

Solyndra and Government Intervention

In relation to the philosophy of Friedman, Solyndra could perform better in a free market than when the government intervened (Olson & Biong, 2015). For instance, without intervention in form of government loan, the company could handle issues relating to employment of workers and allocation of resources. According to Friedman, money supply only has short-run effect on the output. Nevertheless, the long-run impact is primarily on level of prices. Notably, the continued funding of the Solyndra Company by the Department of the Energy could only last for few years (Olson & Biong, 2015). Therefore, Friedman recommended that the government role in the control of the economy must be restricted.

Utilitarian Ethics and the Free Market

The utilitarian ethics can as well apply in the Solyndra situation, particularly, in the control of the economic issues. The utilitarian theory holds that a good policy produces the greatest outcome in the economy (Bassell, Fischer & Friedman, 2015). The good outcome must give rise to fullest satisfaction which is purely subjective to individual’s desires in a society. Utilitarians do not impose their own values in the market but they simple propose the greatest level of satisfaction to the key players in the economy (Brandt, 1996). Although the doctrine of utilitarian ethic is hardly scientific and does not advocate for value free market, its policy on the free market is ethically better and sustainable (Bassell, Fischer & Friedman, 2015). To elaborate, the wishes of the greater number of people is the better than the choices of the lesser number. Lastly, the utilitarian policy provides a defensible groundwork for the libertarian.

References

Beard, J. W., & Halluin, A. P. (2009). An Analysis of CIGS Solar Cell Technology. Nanotech. L. & Bus., 6, 19.

Bassell, M., Fischer, D., & Friedman, H. H. (2015). The Importance of Business Ethics and Corporate Social Responsibility: A Course Module.

Brandt, R. B. (1996). A utilitarian theory of excuses. The Philosophical Review, 337-361.

Blue, B. The Legal and Ethical Issues Surrounding Solyndra Solar Company.

Carlisle, J. E., Kane, S. L., Solan, D., Bowman, M., & Joe, J. C. (2015). Public attitudes regarding large-scale solar energy development in the US. Renewable and Sustainable Energy Reviews, 48, 835-847

Caprotti, F. (2016). Protecting innovative niches in the green economy: investigating the rise and fall of Solyndra, 2005–2011. GeoJournal, 1-19.

Olson, E. L., & Biong, H. (2015). The Solyndra case: an institutional economics perspective on the optimal role of government support for green technology development. International Journal of Business Continuity and Risk Management, 6(1), 36-47.