Ethical Issues USAA and Shake Shack

USAA and Shake Shack Ethical Issues

Introduction

To a large extent, the way businesses conduct their affairs is governed by a certain set of standards or principles. As commercial entities, businesses should not only be driven by the need to rake in profits. Instead, they should be aware of their responsibilities to a wide range of stakeholders including, but not limited to; employees, customers, suppliers, regulatory agencies, as well as competitors. This is more so the case given that in some scenarios, some actions could be perfectly legal, but unethical or injurious to the wellbeing of a certain stakeholder. This text concerns itself with a number of ethical issues relating to two entities, i.e. USAA and Shake Shack. In so doing, it will take into consideration the implications that the decisions made by the two entities had on stakeholders and how the said actions could be viewed from both a Kantian and Utilitarian perspective.

Ethical Issues

From the onset, it would be prudent to note that the COVID-19 pandemic has affected individuals and businesses in diverse ways. Due to the challenging times that most people have been going through as a consequence of loss of livelihood, the U.S. Congress deemed it fit to structure a stimulus package to cushion the most vulnerable. This was the intention of the funds that were deposited into the checking accounts of USAA members. However, USAA went ahead to offset the negative balances that some of the accounts belonging to members reflected. Thus, effectively, the conclusion that could be arrived at on this front is that some funds did not reach those in dire need of the same. As a matter of fact, USAA could be viewed as being insensitive to the plight of its members.

On the other hand, when it comes to Shake Shack, it should be noted that with a market capitalization of $2.06 billion and by virtue of being listed in the NYSE, the organization cannot be considered a small business. However, the enterprise still went ahead and used the provisions for accessing the PPP funds to its advantage. Further, it is likely that a significant chunk of the loan was used for executive compensation owing to the fact that the company’s Chief Executive Officer had received total compensation of $2.3 million in 2019. In taking up the loan, Shake Shack effectively denied other more vulnerable and needful enterprises funds to cushion their employees from the harmful effects of the pandemic. This is more so the case given that PPP depleted its funds shortly after the company received a $10 million loan.

Stakeholders Implications

In essence, stakeholders could in this context be described as all those who were impacted upon, or had an interest in the decisions that the two organizations highlighted above made.

a) USAA

Some of the key stakeholders in the case of USAA were; USAA members (i.e. those who maintained checking accounts with the organization), employees of the organization, top officers of the firm (i.e. top decision makers), and the U.S. government. The implication for each stakeholder group identified above has been highlighted below;

1. USAA members (i.e. those who maintained checking accounts with the organization): While there are some who received the stimulus money (i.e. those without a negative balance in their checking accounts), some only received a share of the same, while other did not receive anything at all (depending on their negative balance). This essentially means that there are those who were not adequately protected from the economic damage occasioned by the pandemic – effectively worsening their situation.

2. Employees of the organization: It important to note that from a financial perspective, the decision made by USAA could have been the most viable one to keep the organization afloat and enable it to pay salaries and other benefits owed to the said employees. However, it should also be noted that there could be a ‘blowback’ effect in the future if the organization attracts a lousy reputation as a consequence of that particular decision – probably resulting in mass exit of members.

3. Top officers of the firm (i.e. top decision makers): These are inclusive of all those who made the decision to offset the negative balances that some of the accounts belonging to members reflected. While they could be hailed in some circles for what could be seen as a prudent financial decision, they could lose their reputation for appearing inconsiderate or unbothered about the plight of their members. Only time could tell.

4. The U.S. government: The U.S. government is also a stakeholder owing to the fact that was the originator of the fund and sought to accomplish a certain objective in releasing the said funds. Was this objective met in the light of the decision made by USAA?

b) Shake Shack

Key stakeholders in the case of Shake Shack were; small businesses, the firm’s customers, the firm’s employees and shareholders, key decision makers in the firm, and the Small Business Administration (and by extension the U.S. government). The implication for each stakeholder group identified above has been highlighted below;

1. Small businesses: Given that the funds being offered to small businesses were finite, the decision by Shake Shack to seek the loan essentially locked out other more deserving enterprises.

2. The firm’s customers: Some of the firm’s customers could consider the decision by the enterprise unethical and, thus, cease being customers.

3. The firm’s employees and shareholders: If properly utilized, the funds could be of benefit – from an operational perspective – to the company. The benefits could, in turn, flow over to employees (especially if used to pay salaries) and shareholders.

4. Key decision makers in the firm: Over time, theirs could be considered either a wise or flawed decision. There is also the issue of whether the company’s CEO had a hidden agenda on this front owing to the fact that part of the loan could be used for his compensation.

5. The Small Business Administration (and by extension the U.S. government): In this case, the overall objective of the government was to, amongst other things, ensure that small business employees were kept on the payroll. It is debatable whether this goal was met with the likes of larger organizations such as Shake Shack also seeking the said loan.

Kantian Viewpoint

According to Westacott (2019), Kant abhorred utilitarianism. Towards this end, Kant was convinced that our actions should be directed by our intentions. In being directed by our intentions, the standard should in this case be commitment to moral obligation. As Westacott (2019) observes, Kantian ethics holds that actions ought to make the world a better place. In the case of both USAA and Shake Shack, the decision makers appear to have been led by certain interests that were not aligned with that which could have been considered the right thing to do. In both instances, a decision was made to deny ‘vulnerable’ parties that which would have been of great help to them.

Utilitarianism Viewpoint

In essence, utilitarianism is largely inclined towards the consequences of the decisions we make, as opposed to the intentions (CrashCourse, 2016). One primary goal on this front is the avoidance of pain. From a utilitarian viewpoint, the right question to ask in this case would be: were the courses of action designed to result in enhanced wellbeing of the greatest number of people? When it comes to USAA, this could be looked at in terms of the main beneficiaries (i.e. the organization as a whole), and those who were inconvenienced (i.e. those with negative balances in their accounts). Thus utilitarian ideals appear to have been deployed on this front. On the other hand, with regard to Shake Shack, the main beneficiary was the organization and all those associated with it (i.e. employees, shareholders, etc.), while those who were inconvenienced were all the deserving small businesses. Utilitarian ideals were, thus, not deployed.