Business Ethics: The Case of Folole Muliaga, Research Paper Example

In this paper I will examine the role of basic virtues such as honesty, loyalty, and compliance to law, specifically within New Zealand’s power-generation business environment, (although that environment may be taken as representative of many businesses today). I will do so first by reporting the facts in the death, in 2007, of one specific person, a residential customer of an energy company. I will discuss the consequences of that death and possible alternative outcomes; attempt to determine if what Mercury Energy or its onsite contractor did was illegal; and give an opinion as to the final decision by the police and coroner. In the process I will note the nature of the major reforms that were later adopted as a response to the incident.

Folole Muliaga was a woman who had long been in ill-health, having been given a life expectancy of 1– 3 years in 2002 during a stay in the hospital. By May of 2007, although having exceed that expectancy by two years, she was by then dependent on an oxygen machine[1] to breathe (Eweje and Wu, 2010). One day a technician, a contractor working for another company, arrived at Mrs. Muliaga’s home to cut off the electric power due to a long-standing bill in arrears. This person was variously reported to have seen the hose leading to Mrs. Muliaga’s nose and also to have seen (or not to have seen) any other tubes and/or the machine itself. He is also reported not to have asked about the nose-tube, nor about the condition that required it. When Mrs. Muliaga said “Please give us a chance,” the contractor replied “I’m just doing my job.” After he turned off the power, he heard no alarm (it would have been from the oxygen machine) and left (Bridgman, 2010). Mrs. Muliaga encountered breathing problems immediately. Her son tried to call an ambulance, but the phone was disconnected.[2] Two hours later, Mrs. Muliaga was dead. The  coroner stated that, in addition to her underlying condition[3] her death was partially due to the lack of oxygen itself, as well as the fact of its disconnection.[4]

            The story and circumstances of Mrs. Muliaga’s death was picked up by major media outlets and reported around the world. It was soon learned that that her husband had, earlier that same month, tried to set up a payment program of US$50 per week to the power company, but was forbidden to do so because of a Privacy Act law which required his wife’s [written] authority. She was evidently too ill to formally provide it, so Mr. Muliaga instead made two direct payments. But because the bill was not paid in full, the power was cut off anyway.

At first, Mercury Energy stayed loyal to its people and its policies and denied anything had been done wrong, morally or legally. The coroner found no one to blame, saying that the contractor could not or would not have cut off the power had he known of Mrs. Muliaga’s condition.[5] After their own investigation, police filed no charges.

In my own opinion, there conclusions were indeed justified. Although his claim of I’m just doing my job echoes the claim by at least one Nazi during the Nuremberg Trials that I was only following orders, to hold the contractor personally responsible would absolve the Muliagas of responsibility for their own failure to have the recommended backup oxygen. Thus the contractor was arguably at best an ambivalent moral agent with the responsibility to exercise his free will and so set in motion a morally correct chain of alternative events or non-events.

This may be a controversial claim, but we must consider that Mrs. Muliaga was not the contractor’s customer. Businesses and their customers do not always have moral relationships, and it is not necessarily illegal to be immoral. However, if the contractor had been a sales representative as well as a technician, the immediate outcome would likely have been quite different: seeing the impact on a customer in his account-book, he would have been more interested in Mrs. Muliaga as an individual, and so might not have cut off the power. He might have taken this alternative course of action out of a mix or morality, money, and a dose of Adam Smith’s enlightened self-interest. Lacking the financial incentive, the contractor’s morality switch stayed off. Unfortunately for him, his enlightened self-interest switch stayed off as well.

Regardless of that speculation, it is impolitic to be perceived immoral (in some situations, anyway) and as public outrage grew, political leaders like the Prime Minister jumped into the fray, seeking to protect the political capital in their own account-books. Inevitably, Mercury changed its public response to the incident. It publicly apologized and sent each of its customers a letter to that effect. The Privacy Act was slated for a rewrite. New guidelines (but not regulations) were issued regarding the cutting off of power to struggling residential customers.

Mercury’s response followed an arc well-known to informed citizens of western democracies. That arc has long been studied and contains four parts: denials, excuses, justifications, and concessions (Bradford and Garrett, 1995). As authors Eweje and Wu make clear, each of those stages can be neatly applied to the Mercury Energy incident. The final stage, concession, resulted in sweeping changes to the way the company interacted with all of its customers, initially assuming each of them as being uniquely vulnerable to a power cutoff, instead of making the vulnerable prove their claim first, as had been the case.

The price of this policy is that it will tend to make it that much harder for partially government-owned Mercury to achieve its legal mandate of being as profitable as a fully private entity would be.[6] And therein lies the heart of the moral problem facing managers and company CEOs when faced with the freak death of a single customer. Over time, such liberalizing policies tend to increase the number of customers who claim dishonestly that they are particularly vulnerable, which in turn will tend to increase the cost of energy to everyone else. This problem might be considered as a variation on the well-known moral dilemma called The Tragedy of the Commons (Hardin, 1968). Taken to its natural conclusion, Mercury could eventually become a money-losing public utility, hamstrung by politicians and their constituents from pursuing a profitable bottom-line, all in the name of compassion. The dysfunctional power-utility is of course a staple in the history of socialist and communist economies. Perhaps not coincidentally, New Zealand, a member of the British Commonwealth, has, like its mother-country Britain, a long history of state socialism. Its present system of more competitive “light-handed” regulation-through-persuasion dates to 1984. At that time a more traditionally socialist system of fully government-owned energy utilities was replaced with a modernized competitive one, due to a financial crisis involving New Zealand’s foreign exchange (Bridgman, 2010). Foreign exchange crisis are themselves almost infallible indicators of out-of-control governmental spending.[7]

In conclusion, the case of Mercury Energy and the death of Mrs. Muliaga was an incident that should not have happened. But such things do happen. The outcome was a good one in the short run, both from a moral and strictly economic point of view (since no new regulations were added). Mercury wiped the egg off its face and possibly retained the lesson for future reference. But it remains to be seen if the outcome will be a good one, morally and economically, in the long run. That will ultimately depend on how marginally economical it will be, to both Mercury and ultimately New Zealand itself, to prevent one more Mrs. Muliaga from dying. We know whose immediate self-interest will be the most positively affected. We know whose long-term self interest will be the most negatively affected. But whose, finally, will count the most?

References

Bradford, J., & Garrett, D. (1995). The effectiveness of corporate communicative responses to accusations of unethical behavior. Journal of Business Ethics , 875-892.

Bridgman, T. (2010). Beyond the Manager’s Moral Dilemma: Rethinking the ‘Ideal-Type’ Business Ethics Case. Journal of Business Ethics , 311-322.

Eweje, G., & Wu, M. (2010). Corporate response to an ethical incident: the case of an energy company in New Zealand. Business Ethics: A European Review , 379-392.

Hardin, G. (1968, December 13). The Tragedy of the Commons. Science , pp. 1243-1248.

 

[1] Technically an oxygen concentrator. Unlike an oxygen tank, it requires electricity (and may be battery powered when portable) but does not run out of air.

[2] It is not clear if this was due to the power cutoff, or an earlier, separate action by the phone company.

[3] Arrhythmia caused by morbid obesity, which in turn prevented her from expelling carbon dioxide as she breathed.

[4] In other words, she was conscious and aware of its disconnection.

[5] That individual reportedly stopped power from being cutoff at two residences with newborn or disabled children.

[6] Assuming that private power-companies would not also be subject to the same public pressure in similar cases.

[7] In 1971, U.S. President Nixon halted the convertibility of U.S. dollars to gold because excessive government spending had effectively devalued the dollar, rendering the then-fixed exchange rate of dollars to gold untenable.