leadership Critical Thinking
Critical Thinking A ssignment #1/ UNIV4335
Leadership Principles
Be sure that questions are repeated exactly as they areshown below (do not delete the instructions).
Read the case and completely answer the questionsbelow. Single space all answers. Students may submit their assignment to theirprofessor anytime before the due date. Early submissions will be reviewed and graded after the due date. Allsubmissions must be through Blackboard ATTACH YOUR ASSIGNMENT.
Pleasekeep in mind that your professor is looking for the answers to have detail,thought, and an indication of understanding the issue(s)/topic(s) at hand.Responses should be personalized; however, they need to reflect anunderstanding of the concepts and theory from the text. Keep in mind that short and simplisticanswers will receive little to no credit.
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Salary AdvanceUnited Ponders its Future
Max is the CEO of Salary Advance United, a payday lenderwith twenty-five locations. The core business of Salary Advance is to lendconsumers advances of between $100 and $500 against their paycheck for shortperiods of time, usually about one week to ten days. Sal-ary Advance alsooffers other financial services such as check cashing and wiring money. Similarto other pay-day lenders, Urban charges approximately $15 for a 2-week loan totheir borrowers who tend to be high risk. If the loan interest were calculatedon an annual basis, the rate would be 390 percent. Some states, including NewYork, cap interest rates at 16 percent for loans, even though store creditcards often charge over 20 percent for their loans. (Both 16 and 20 refer toannual rates.)
Max informs his management team during a meeting that he,along with them, is worried about the future of the business. He notes thatfifteen states have already banned payday loans, and that more and more politiciansare condemning the business, including the president of the United States. He remindsthe team that some of the accusations against the industry are preposterous.
My favorite example is that renting a full-size sedan costsabout $75 before taxes, said Max. If somebody rented the care for the entireyear, or 365 days, the annual fee would be $27, 375 plus taxes. Yet no politiciancomplains about the exorbitant rates charged by car-rental agencies. My biggestconcern right now is that the state is going to shut us down.
Max then had a problem-solving session with the group, exploringalternatives that could be pursued to stay in business. One alternative thatemerged was to set up online operations overseas in a country that welcomedsuch businesses (e.g., Malta or the West Indies). The suggestion was to stillkeep a few offices open to catch street traffic and offer services for wiringmoney. In this way, state regulations could be avoided.
Another alternative that the group formulated was to basethe business on a Native American reservation, again to avoid state regulations.A handful of payday lenders have successfully made this transition.
Max concluded the meeting by saying, We cannot forget thatour mission is to help financially troubled people in need. Without our loans,many of our poten-tial customers would have their cars repossessed of theirhomes foreclosed. Equally bad, they would have to use loan sharks to get money.Our interest rates may seem high to the outside world, but we have to chargeenough to cover our risks and earn a small profit.
The team nodded in agreement with Max
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Minimum word count for all questions together is: 500.
1) What is your evaluation of the ethics of SalaryAdvance United making payday loans?
2) What do you think of the ethics of the twoalterna-tives mentioned to avoid state regulations: locat-ing offshore or on aNative American reservation?
3) What do you recommend to Max to make thebusiness model of Salary Advance ethical enough to avoid being attacked bypoliticians?
4) What would you do differently if you were theleader in this case study?
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