The Adelphia family scandal is one among other cases, which demonstrate the depth of white-collar crime in America’s capitalist system. The company was founded in 1972 by John Rigas and was mainly focused on the cable TV business. However, in 2002, the company filed for bankruptcy due to internal corruption. Majority of the top management comprised of individuals belonging to the Adelphia family (Lowenstein, 2004). Th Chief Financial Officer (CFO) was Timothy J. Rigas, alongside his brothers Michael J. Rigas, and James P. Rigas who were Vice Presidents. Together, these board members in the company of Peter Venetis, their brother-in-law, had 100% ownership of the class B super-voting shares. This gave them the majority rights when it came to voting (Lowenstein, 2004). Simply, the Rigas family was in total control of Adelphia. Important to note is that the company had become publicly traded in 1986 and achieved growth through acquiring other systems.
Deloitte & Touche LLP was Adelphia’s external auditor. Albeit the purpose of an audit is not to detect potentially fraudulent activities, any kind of misstatements ought to be identified thereby providing the basis for an investigation. The chief executive of the audit company stated that they did not have objectivity and that they were training employees to demonstrate more professional skepticism. Thus, one could notice that the Rigas’ family fraudulent practices persisted because of the lack of objectivity on the part of the auditing company. Lowenstein (2004) explained that The Rigas family acquired loans totaling $3 billion from commercial banks with full knowledge that the company, and its public shareholders, would be liable to pay. The funds acquired were used to buy Adelphia securities. Unfortunately, the securities lost most of their value. The Rigas used a portion of the money to make stock payments, which the family had bought (Lowenstein, 2004).
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The ethical issue in question involves violation of Immanuel Kant’s utilitarian approach. Mandal, Ponnambath, & Parija (2016) explained the utilitarian ethical model noting that “… decisions are chose based on the greatest amount of benefit obtained for the greatest number of individuals” (p. 6). Thus, an individual should make a decision that promotes the wellbeing of the majority. However, the Rigas family members involved the scandal knew that the company was publicly traded and that public shareholders would accrue losses. This was not reason enough for them to refrain from making such unethical decisions, which led to the company filing for bankruptcy. Their intentions are reflective of their desire to maintain their status in the company. These individuals had the majority votes, which meant that they could pass a decision without being opposed.
Mandal, Ponnambath, & Parija (2016) also addressed the concept of deontology, which states that an act is wrong regardless of the consequences. The argument is that one should not engage in a morally wrong act even if it brings about positive results. In the context of Adelphia, the Rigas family engaged in unethical behavior, which consequently led to catastrophic outcomes. Applying a Christian worldview, Mele and Fontrodona (2017) noted that business ethics applies the concept of the “Golden Rule” which Jesus enunciated and is written in Mathew 7:12, which reads “Do to others as you would have them do to you”. There is a link between deontology and this particular Christian worldview towards business. One can notice that the former perspective implicitly emphasizes the need for one to act within that which is considered moral. In the same manner, deontology promotes ethical behavior independent of the nature of consequences.
In such a case, the best course of action would have been to discuss the company’s position with the shareholders. Despite having the advantage when it comes to voting rights, it would have been appropriate to discuss the company’s market and financial position with other shareholders. This would have provided an opportunity to identify potential avenues, which could be explored thereby leading to growth and development. The rationale for such kind of action bases on the idea that doing so would bring about gains for everyone.
Conclusion
Borrowing from the discussion above, it becomes clear that the Adelphia scandal entailed violation of the “Golden Rule” alongside the tenets of both utilitarianism and deontology. The Rigas family sought to enrich itself, while risking the property of others who had bought shares in the company. They had little consideration for the impact that their actions would have on the community. When the company filed for bankruptcy, this meant that those employed would lose their jobs, and hence source of income. Therefore, the effects of the unethical conduct of the Rigas family was far reaching.
References
Lowenstein, R. (2004, February 01). The Company They Kept. Retrieved from https://www.nytimes.com/2004/02/01/magazine/the-company-they-kept.html
Mandal, J., Ponnambath, D. K., & Parija, S. C. (2016). Utilitarian and deontological ethics in medicine. Tropical Parasitology , 6 (1), 5–7. http://doi.org/10.4103/2229-5070.175024
Melé, D., & Fontrodona, J. (2017). Christian Ethics and Spirituality in Leading Business Organizations: Editorial Introduction. Journal of Business Ethics,145 (4), 671-679. doi:10.1007/s10551-016-3323-3
