Question: Alliance Partners (a fictitious name) is a data broker. You'll learn about data brokers in Chapter 9, but for now, just know that such companies acquire and buy consumer and other data from retailers, other data brokers, governmental agencies, and public sources and aggregate it into data profiles of individuals. Alliance specializes in acquiring and analyzing market, buyer, and seller data for real estate agents. Alliance sells an individual profile to qualified real estate agents for $100 to $1,500, depending on the amount of data and type of analysis requested. Alliance is owned by three partners who started the business in 1999. They endured tough times during the dot-com collapse at the turn of the century, but crawled out of that hole and were doing well until they encountered severe revenue shortfalls in the 2008 real estate collapse. In late 2008, in order to reduce operational costs to survive the downturn, Alliance transitioned its data storage and processing from its own Web farm to the cloud.
The elastic flexibility of the cloud enables Alliance to improve the speed and quality of its data services at a fraction of prior costs. Furthermore, using the cloud enabled it to reduce the in-house hardware support staff by 65 percent. The partners meet twice a year to review their financial performance, evaluate strategy, and plan for both the next 6 months and the longer term. In 2008, in the midst of their revenue shortfalls, they met in a small suite in the local Hamilton Inn, ate stale doughnuts, and drank watery orange juice. This year, they've rented a facility in the British Virgin Islands in the Caribbean. The following conversation occurred between two of the partners at the onset of this year's meeting: "Bart, what are we doing here?" Shelly, the partner in charge of sales and marketing, is challenging Bart Johnson, Alliance's managing partner. "What do you mean, Shelly? Don't you like it here?" "I love it here. So does my husband. But I also know we're paying $15,000 a night to rent this island!" Shelly rubs sunscreen on her hands as she talks. "Well, we don't have the entire island." Bart sounds defensive. "No, I guess not," she says. "
They have to let some of the staff stay here. We're the only paying customers ...the only non-locals. "But," Shelly continues, "that's not my point. My point is how can we afford this level of expense? We'll pay nearly $200,000 for this meeting alone. Where will we meet next? Some five-star resort on the moon?" "Look, Shelly, as you're about to hear, our gross margin last year was 74 percent. We're a money machine! We're swimming in profit! We can't spend money fast enough. One of the items on our agenda is whether we want to issue a $1 million, a $3 million, or a $5 million partners' distribution." "No!" Shelly sounds stunned. "Yup. Using the cloud, we've reduced our operational expense from 62 percent of our revenue to 9 percent. I'm plowing money back into R&D as fast as I can, but there's only so much that Jacob and his crew can absorb. Meanwhile, order the lobster and wait until you taste tonight's wines." "That's disgusting." "OK," Bart says. "Don't drink the wine. Do you want your distribution?" "No; I mean yes, but this is crazy. It can't last." "Probably not. But it's what we've got right now
1. From the perspective of Kant's categorical imperative (pages 16-17), are Alliance's partners' meeting expense and intended partner distribution unethical?
2. From the utilitarian perspective (pages 40-41), are Alliance's partners' meeting expense and intended partner distribution unethical?
3. Milton Friedman, world-renowned economist at the University of Chicago, stated that corporate executives have a responsibility to make as much money as possible as long as they don't violate rules embodied in law and in ethical custom.5
a. Do you agree with his statement? Why or why not?
b. Friedman defined ethical custom narrowly to mean no fraud or deception. Using his definition, has Alliance acted ethically?
c. Define, using your own words, ethical custom.
d. Using your definition of ethical custom, has Alliance acted ethically?
4. Do you find any of the following excessive? Explain your answers: a. Spending nearly $200,000 on a 5-day partners' meeting for three partners and their spouses? b. Earning a 74 percent gross profit?