Option A: Case Study #3: ‘Searching for the ‘New Normal’: The Business Response to the Covid-19 Pandemic of 2020′ (page 467)? Be sure you have read the instructions and the grading rubr

Table 6.3 Systematic Rational Ethical Decision-Making Process

Step 1: Write the decision options in the appropriate column below.

Step 2: Apply the seven systematic rational ethical decision-making process questions to the decision under consideration to obtain relevant ethical information.

Step 3: Insert the ethical strength and weakness revealed by each of the seven ethical questions in the appropriate column below.

Step 4: Given the strengths and weaknesses, choose a decision option, explain why that option was chosen rather than the alternative options, and determine how to manage the weaknesses associated with the option chosen.

1. Who are the people affected by the action? (stakeholder analysis)

1. What option benefits me the most? (egoism)

1. What option does my social group support? (social group relativism)

1. What option is legal? (cultural relativism)

1. What option is the greatest good for the greatest number of people affected? (utilitarianism)

1. What option is based on truthfulness and respect/integrity toward each stakeholder? (deontology)

1. What option would a virtuous person of high moral character do? (virtue ethics)

Note:

If answers to Questions 2 through 7 are all the same option, then do that option.

If answers to Questions 2 through 7 are mixed, then:

If answers to Questions 5, 6, and 7 are the same option, this option is the most ethical. But you may need to modify this decision in consideration of answers to Questions 2 through 4, or weaknesses associated with Questions 5 through 7.

If answers to Questions 5, 6, and 7 are mixed, then there is no clear “most ethical” response, and you should make your decision by carefully considering the strengths and weaknesses of Questions 2 through 7.

Option and Its Underlying Value Option Strengths Based on Application of Ethical Theories

Option Weaknesses Based on Application of Ethical Theories

#1:

#2:

#3:

Option Chosen

Chosen Because

How Will You Manage Chosen Option? Weaknesses?

Searching for the “New Normal”: The Business Response to the Covid-19 Pandemic of 2020

Searching for the “new normal”: The business response to the covid-19 pandemic of 2020

467

478

3 SEARCHING FOR THE “NEW NORMAL”: THE BUSINESS RESPONSE TO THE COVID-19 PANDEMIC OF 2020

AUTHOR BIOGRAPHIES Tara J. Radin is a consultant and educator who has spent the past 20 years teaching undergraduate and graduate business ethics, law, corporate governance, and strategy at schools including the Wharton School at the University of Pennsylvania, the Jones Graduate School of Business at Rice University, and the School of Business at George Washington University. Her research encompasses employment, global labor practices, stakeholder thinking, and other issues at the intersection of ethics and law.

Dahlia B. Rehg is a principal at Cipher Learning Tools, a small company dedicated to creating innovative pedagogical tools for live and virtual case-based instruction. An engineer by training, she has since transitioned into marketing, education, and mentorship through positions as director of marketing, MBA admissions consultant, and talent acquisition specialist.

CASE OVERVIEW What constitutes a business ethics issue has clearly evolved generation by generation. As society begins to tackle one problem, others come to light. Combatting financial fraud was, for example, at the forefront of the 1980s and 1990s; environmental sustainability has been on center stage since about 2000. Although the global coronavirus pandemic of 2020 represents a new issue for modern society, traditional tools—such as moral philosophy and stakeholder thinking— continue to provide valuable anchors upon which managers can rely in deciding what to do. The ongoing applicability of such tools, regardless of the specific issues being addressed, reinforces the importance and relevance of business ethics in managerial decision-making.

OVERVIEW What would you do if you were a public official responsible for a community where a highly contagious virus had suddenly been discovered, a virus transmitted person to person, typically through respiratory droplets from coughing, sneezing, or just talking. This virus is so contagious that it spreads exponentially; in other words, if each person spreads it to just three others, the first person who contracts the disease passes it to three others, who then pass it to three others, and so on. It is not long before that first case goes from 1 to 4 to 10 to 28 to 82. Although the mortality rate is low, people can and do die from the disease caused by this virus; you know this because of the death tolls experienced in other communities. What would you do to protect your citizens?

This is not a hypothetical question; this was the question confronted by public officials around the world in spring 2020. In the United States, the vast majority of governors shut down their economies in an attempt to contain the spread of the disease. Businesses have responded in a variety of ways.

This case study examines the impact of the Covid-19 pandemic on business in the United States and explores the ways in which businesses have reacted. While not every business will have a happy ending, there are many positive lessons that can be learned about flexibility, adaptability, and resiliency.

COVID-19 The year 2020 witnessed a global pandemic that ravaged the world. The culprit? Covid-19. Covid-19 belongs to a family of viruses called coronaviruses. There are many types of coronaviruses; some cause only mild to moderate respiratory infections like the common cold while others have resulted in devastating situations such as the severe acute respiratory syndrome (SARS) outbreak of 2002–2003 and the Middle East respiratory syndrome (MERS) outbreak in South Korea in 2015. The novel coronavirus, Covid-19, emerged in China in late fall or early winter 2019. It manifested as a respiratory illness accompanied by a variety of symptoms including a cough, fever, shortness of breath, breathing difficulty, fatigue, and muscle or body aches. It was considered highly contagious; communities experienced exponential growth rates of infections. Four cases of Covid-19 were reported in central China in Wuhan, the capital of Hubei Province and a large city

of 11 million people. All four cases were linked to the Huanan (Southern China) Seafood Wholesale Market.1 By the end of January, China reported 9,720 confirmed cases of Covid-19, 15,238 suspected cases, and 213 deaths. In addition, there

were 106 confirmed cases in 19 other countries.2

Italy was the first country in Europe to be devasted by Covid-19. In less than 3 weeks, the novel coronavirus overloaded the health care system in northern Italy. Confronting shortages of hospital beds and ventilators, doctors were unable to treat all Covid-19 patients; elderly patients were left to die without being treated: “A nurse collapsed with her mask on, her

photograph becoming a symbol of overwhelmed medical staff.”3 It was at this time, in late February, that universities

announced they were bringing students home from study-abroad programs in Italy.4

It is believed that Covid-19 arrived in the United States in late January 2020. As elsewhere, the growth rate of infections was exponential (see Figure 1). In the face of such explosive growth, health experts warned of the necessity of slowing the growth rate and flattening the curve. The fear was that hospitals would be overwhelmed, as they had been in Italy and elsewhere, and that would lead to an increased number of deaths.

Description

Figure 1 Early Growth in U.S. Covid-19 Cases

Source: CDC

By late February, it was apparent that sustained community transmission of Covid-19 had occurred, particularly on the

West Coast.5 Washington state reported the first death in the United States linked to Covid-19 on February 29, 2020. A single nursing home in that state reported that approximately 27 of 108 residents and 25 of 108 staff members exhibited

symptoms of Covid-19.6 In early March, government officials in Washington and California warned vulnerable residents to avoid unnecessary outings and interaction in large groups. By March 16, six California counties became the first in the country to enact shelter-in-place orders; on March 19, the state of California mandated a statewide shelter-in-place order. Governor Andrew M. Cuomo signed a similar order for New York on March 20, the “New York State on Pause” executive order. The vast majority of states followed suit by passing similar stay-at-home orders.

SHUTDOWN ORDERS Beginning in March 2020, nonessential businesses shut down across the United States. In virtually unprecedented moves, governors in all but four states (Arkansas, Iowa, Nebraska, and North Dakota) issued stay-at-home orders. The majority were statewide; a handful were regional or only advisory. Hospitals, grocery stores, “big box” stores, and other businesses deemed “essential” were allowed to stay open, many with restrictions such as reduced hours and limited in-store capacity. In some states, even the types of product that could be purchased were limited; clothing, toys, and electronics, for

example, were not considered allowable purchases during the shutdown.7

The passage of such orders meant that the economy in the United Sates was effectively shut down. While essential businesses such as grocery stores, hardware stores, and discount stores remained open, general retail and other nonessential businesses were forced to close. As elsewhere in the world, people were sent home and asked to stay there.

It was widely understood that this virtually unprecedented step was taken because of the serious threat to human life. The United States was haunted by the many images of dead bodies littering the streets in Italy, because there was not even room in the morgues. If Covid-19 was not contained, more and more people would die, not only because of the disease but because of the lack of available health care resources (e.g., hospital beds and ventilators). Particularly since Covid-19 was highly contagious, even from people who were not symptomatic, it was commonly believed by health experts that the only way to slow down the spread of Covid-19 was to create distance between people. Shutting down the economy was viewed as necessary to accomplish this feat. Although the shutdown of business was mandated, it is interesting to explore how businesses chose to respond to these extraordinary circumstances.

Impact on Business

As the economy closed, businesses responded in a variety of ways. Businesses that could accommodate nontraditional work arrangements moved quickly to transition their brick-and-mortar workplaces to telework. But telework was not always an option, particularly in service industries such as retail and hospitality. Some businesses in those sectors were not so fortunate; the pandemic created serious financial hardship for some retailers that were already struggling. Neiman Marcus and J. Crew filed for bankruptcy in May 2020. Gold’s Gym also filed for bankruptcy in May with plans to permanently close approximately 30 company-owned locations. Pier 1 shuttered all its stores permanently in May 2020 and entered

liquidation.8 Analysts warned that the retail industry would likely suffer a lasting legacy of fewer department stores because

of the pandemic.9

BUSINESS RESPONSE 1: SHARING THE COST WITH EMPLOYEES AND OTHER STAKEHOLDERS A common response by businesses was to shift the cost of the pandemic as much as possible away from the business and to share that cost with stakeholders such as employees and landlords. To curb expenses in the absence of income, numerous retail chains immediately furloughed workers, a temporary layoff. Gap, Macy’s, and Kohl’s, for example, notified

store associates almost immediately that they would be furloughed indefinitely.10 By May, more than half of retailers announced furloughs.

Furloughs were not enough for some companies. The Cheesecake Factory, a popular restaurant chain operating more than 200 full-service restaurants in the United States, announced on March 18 that April rent would not be paid by any of its locations. According to chairman and CEO David Overton, “We are sincerely concerned for everyone who has been impacted by the coronavirus (Covid-19)…. This situation is unprecedented and rapidly evolving. The severe decrease in restaurant traffic has severely decreased our cash flow and inflicted a tremendous financial blow to our business. Due to these extraordinary events, … I must let you know that The Cheesecake Factory and its affiliated restaurant concepts will

not make any of their rent payments for the month of April 2020.”11 Office supply chain Staples communicated a similar unilateral decision not to pay rent, even though Staples remained open as an essential service.

BUSINESS RESPONSE 2: PUTTING STAKEHOLDERS FIRST Other companies, however, stood out for making the decision not to furlough workers or stop paying their bills and instead chose to bear the cost of the pandemic themselves. PepsiCo, for example, continued to pay employees who were unable to work because of Covid-19 and offered additional assistance to employees affected by the disease. According to Patrick McLaughlin, chief human resources officer of PepsiCo Foods North America, employees “are the backbone of our company.” PepsiCo decided to continue paying any employee who was unable to work from home but had to care for a

child who could not go to school or day care at least two-thirds of his or her pay for up to 12 weeks.12

A number of retail stores, including Urban Outfitters, Anthropologie, Free People, Bath & Body Works, Adidas, Ulta, and

DSW continued to pay sales associates even though stores were closed.13 Such retailers decided to bear the cost of the pandemic themselves. The Nordstrom leadership team went a step further in absorbing some of the cost themselves. The executive leadership group decided to forgo a portion of their salary from April through September; CEO Erik Nordstrom

and chief brand officer Peter Nordstrom decided not to take any salary during that time.14

BUSINESSES AND FRONTLINE WORKERS Many businesses paid special attention to frontline workers. Frontline workers are those employees who work in essential industries who physically had to show up to work during the pandemic. This category not only includes health care professionals and protective service workers but also captures grocery store employees, truck drivers, transit personnel, and so on. These workers typically earn lower wages on average and are more likely to come from socioeconomically

disadvantaged groups than the overall workforce.15

Recognizing the tremendous service of frontline workers at a time when they were required to work, even though most other workers were required to stay at home, a number of companies decided to pay special bonuses, hazard pay, or “hero’s pay” to these workers. On March 21, Kroger, for example, announced one-time bonuses to be paid to both hourly and full-time associates. On March 31, the company added a $2-per-hour wage increase, additional emergency paid leave,

new workplace safety measures, and other critical worker protections.16 Retailers like Target, Whole Foods, Amazon, and the Texas grocery store chain H-E-B also offered $2 per hour “hero’s pay” raises to their frontline workers.

Other companies also reached out with support for frontline workers. Businesses such as Goldbelly and Sweetgreen donated meals and boxes of food to these workers. And health care workers could specifically request free burritos for their

medical facilities from Chipotle.17 The list goes on and on but is not limited to food. Nike donated more than 32,000 pairs of

shoes specially designed for medical personnel.18 In Madison, Wisconsin, a local tech giant even donated office space. Epic Systems donated its former headquarters so that it could be turned into a childcare center specifically for kids whose parents were at local hospitals treating patients with Covid-19. “We used it as an office space for about 15 years,” said Sverre Roang with Epic Systems. “This was originally a school, so it’s kind of going back to the original use of the

building.”19

BUSINESS AND OTHER STAKEHOLDERS

Treatment of other stakeholders was mixed. There was little consistency with regard to who was expected to bear the cost of canceled events, for example. Many wedding venues refused to refund deposits; others tried to be creative in offering gift cards toward future events. Live Nation, the global concert giant that owns Ticketmaster, initially refused to refund tickets to events that were canceled or postponed because of the pandemic. In the wake of numerous customer complaints, though, the company did announce in late April a program through which it automatically issued refunds for canceled shows and gave patrons the option to apply the refund as a 150% credit toward future events. “When you choose this option, Live Nation will also donate tickets to healthcare workers to share the gift of live with those working on the front line through our Hero Nation program” the company said. “We will donate one ticket for every ticket you originally

purchased.”20

Although some companies, like Live Nation, had to be prompted, others took the initiative to reach out to stakeholders without first being asked. USAA, the country’s fifth largest property-casualty insurance company, announced in March that it was giving its members a 20% credit on 2 months of auto insurance premiums since people were driving so much less. In April the company extended the credit to a third month, committing to returning a total of $800 million to its auto policy holders. Allstate did something similar, when the company announced on April 6 that it would return 15% of premiums paid for April and May, a total of about $600 million. “Given an unprecedented decline in driving, customers will receive a

Shelter-in-Place Payback,” said Allstate CEO Tom Wilson. “This is fair because less driving means fewer accidents.”21

Such initiatives proved powerful in that they were replicated by competitors. After USAA and Allstate announced their programs, most other auto insurance companies decided to offer comparable programs. Liberty Mutual, MetLife, and Mercury, for example, also provided a 15% credit for April and May. Progressive Insurance provided a 20% credit.

Nationwide, on the other hand, offered a one-time $50 refund per policy.22

BUSINESS AND THE COMMUNITY A number of companies reached out beyond even their own customers to address community needs stemming from the pandemic. Loom, a video recording and sharing service, made Loom Pro free for teachers and students at K–12 schools, universities, and educational institutions. It also removed the recording limit on free plans and cut the price in half for Loom Pro. U-Haul announced 30 days of free self-storage to all college students affected by schedule changes at their colleges

or universities.23

Among those most severely affected by the pandemic were children, whose learning and education were disrupted by the sudden closing of schools. Of particular concern were children already experiencing barriers to education or who were at

higher risk of being excluded as a result of physical, economic, and/or technological disparities.24 Preexisting issues created a significant challenge to the possibility for remote learning to continue while schools were physically closed.

A number of companies responded to this challenge by donating directly to these children. Amazon, for example, donated 8,200 laptops to families of elementary school students in Seattle Public Schools who did not have access to devices for

remote learning.25 Similarly, in Pennsylvania, Comcast chairman and CEO Brian Roberts and his wife Aileen gave $5 million to the Philadelphia School District earmarked to purchase up to 50,000 Chromebook laptop computers. Their goal was to “even the playing field for learning” in an area where computer access and Internet connectivity lagged other

communities.26 According to Roberts, “When we heard that many Philadelphia students weren’t going to be able to learn from home without laptops, we quickly decided we wanted to help and provide these teachers, parents and students with the technology they need to begin learning online within just a few weeks. In good times or bad, now all of our Philadelphia

students will have access to technology to help them succeed.”27

To help bridge the digital divide, or technology gap, some companies specifically targeted lower-income areas and students. Both Spectrum and Comcast offered free broadband and Wi-Fi Internet access to students affected by the

coronavirus shutdown.28 AT&T launched a special, targeted $10 million fund, its Distance Learning and Family Connections Fund, to provide home learning resources during Covid-19. “Our country is grappling with an unprecedented challenge,” said AT&T chairman and CEO Randall Stephenson. “Now more than ever before, connecting people with the resources they need to maintain a sense of normalcy is paramount. For students and teachers, that means creating the

best digital learning environment. For families, that means simply staying connected to loved ones.”29

SMALL BUSINESS: PIVOTING TO SURVIVE The pandemic posed a particularly severe threat to small business as an institution in the United States. Small businesses, which typically lack resources to sustain the absence of income for weeks or months, are not poised to weather a pandemic. Although the government instituted federal, regional, and local efforts to rescue small businesses, and the White House and Congress made saving small businesses a “linchpin of the financial rescue,” Washington Post reporter Heather Long pointed out that “tearful, heartfelt announcements about small-business closures are popping up on websites and Facebook pages around the country. Analysts warn this is only the beginning of the worst wave of small business bankruptcies and closures since the Great Depression. It’s simply not possible for small businesses to survive with no

income coming in for weeks followed by reopening at half capacity, many owners say.”30 More than 100,000 small

businesses had closed their doors permanently by early May; they were viewed as merely the first of many.31

Not all small businesses collapsed, however; some pivoted to enable their survival. A number of distilleries, for example, started making hand sanitizers. Shelley Dailey, herself a member of a population particularly vulnerable to Covid-19, pivoted during the pandemic to turn her 2018 start-up, Studio Distilling, into a hand sanitizer producer. Although her expertise was in rye malt whiskey, she recognized synergies in crafting whiskey and hand sanitizer (which shares an

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