Ethics of Penn Square Bank and the Dow Corning Bankruptcy

Ethics play a role in everyday business. Many company executives in an attempt to build a profitable organization and build individual wealth are confronted with ethical decisions daily. Penn Square Bank and Dow Corning have both made decisions in their business that started out making millions of dollars but ultimately cost them more than could have been imagined.

Unethical decisions cause more than just cash to an organization, the loss of reputation could be even more detrimental. Penn Square Bank Penn Square Bank made decisions that were not only unethical but also based on pure greed. Penn Square Bank could not fund the extravagant loans that they were negotiating on their own forcing them to originate the loans and sell them to large banks. The arrangement alone was not the problem it was the loose credit terms and lack of documentation employed by Penn Square Bank.

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The loose credit terms and issues with valuation of the collateral led to the demise of not only Penn Square but also some of the other organizations that bought the loans. The idea that this practice was going to last forever and all would become rich was insane. Banks should base the loans on revenue the collateral produces not on the hopes of what it may be worth some time in the future. The lack of documentation shows that management was more interested in the cash that will be made from originating the loan and not the regulations in place or the ability for repayment.

Penn Square Bank’s credit extensions made the situation even worse. Refinancing loans instead of requiring payment on the loans perpetuates the problem. The downfalls of the oil and gas industry led to Penn Square Bank failure and almost the collapse of some of the largest banking institutions in the country. The federal government stepped in to bail out Continental Illinois National Bank and Trust of Chicago to fend off a major shut down of the banking system. The problem should not have been allowed to go on as long as it did. The federal government needs to have stringent oversight, especially when millions of dollars are involved.

The management of both Penn Square Bank and the other large banks that were involved should be held responsible for the damage done. Dow Corning Dow Corning made some extremely unethical decisions when it came to the silicone breast implants produced by their organization. The denial of possible side effects was the biggest issue that they had. Dow Corning released six months of research to the public leading to the notion that the silicone implants are completely safe instead of the multiple year information that was available shows the lack of integrity of the organization.

The silicone implants were such a small part of the business that suspension of the implant sales should have happened as soon as there was evidence that medical problems existed. Morally, ethically, and legally there is no excuse for physically portraying a product as safe when there was knowledge that it is not. Many women were hurt by the product unnecessarily. The parent company decided to move ahead with the production and sale of the silicone implants accepting the profits however when the lawsuits started they denied any responsibility.

Ethically Dow Corning and the parent companies should have accepted responsibility and paid out the lawsuits instead of hiding behind chapter 11 bankruptcy. The filing of bankruptcy was the best idea for the company’s bottom line but not for the women who were injured. Bankruptcy in itself is not necessarily an unethical decision because it would be more harmful in the future with the loss of jobs if the company were to close its doors. If Dow Corning had closed its doors the casualties would never had received any sort of restoration.

All in all, Dow Corning’s unethical decision to move forward with the production and sale of silicone implants was wrong on many levels but had they used filing of bankruptcy to deny any payments to the victims that would have been unforgivable. Emerging from bankruptcy ready to start paying all of the settlement claims helped them save the reputation of the organization and exhibit some sort of remorse by taking responsibility for their actions. Conclusion Ethics in the corporate arena is a never-ending battle that will always be up for interpretation.