Please note! This essay has been submitted by a student.
In the year 1997 during the spring, Arthur Martinez, the boss of the company received news that his employees had been secretly violating the federal law and using it to their advantage for over ten years from his lawyers in the Roebuck and Company. This story was exposed after there was a case which exposed the company as bankrupt by the Boston court and it was going to result into a very big scandal that would be featured throughout the country. The accusation was that the employees of the company was had secretly been violating the rights of credit card holders with the intent of stealing money from them. This was argued out as a misinterpretation of the law to suit their interests instead of the customer’s interests. The boss said that this was one of the lowest moments of the company and further called it sick.
The three league issues and three ethical issues raised in this case included compromising with the company’s integrity, behaving in an untruthful manner and lack of the ability to confront the unethical behaviors that have resulted from the misconduct of the company as well as lack of confidentiality compromise since the company employees accessed the company’s secret information and used it in mischievous ways.
On the other hand, there are several legal issues which were brought into light by the incident include higher account delinquencies as well as increased bankruptcies and uncontrollable expenses consumer from the onset of 1997 and extending up to the early months of 1998, in addition to the above Sears continued to experience more and greater uncollectible expenses which were recorded on the folio of credit cards given to the users which would later affect the financial stability of sears very adversely especially in 1997. In addition to this, the Sears Company also was accused of being overaggressive in a very systematic manner as well as continued threat to customers who are creditors.
Rationally, the reason for sears course of action can be attributed to the economy at the time, since many companies were recording a lot of bad debts and one way to escapee the consequences of this problem is by somehow convincing the customers in signing reaffirmations. Need for market dominance, since they are already an icon in the US business market and occupies the top five in terms of credit card use by their customers, beaten only by banks. Their need for market monopolization made the employees engage in unethical and unlawful activities which later turned out to be illegal since they in a way exploited their customers. Another reason that might be behind the Sears behavior was the corrupt nature of the employees who wanted to use the loop holes in the law for the disadvantage of their customers.
There are very dire consequences that are bound to follow the misconduct of the Sear Company, which will include some drops in profits as well as a possible fall in their market base. This is because it cannot be forgotten how only five years ago, in 1992, the company was rescued from the brink of collapse by Martinez who also tried everything to regain the customer confidence. In their urgent meeting following the revelation in April 9th 1997, the Martinez said that they had struggled to build the customer confidence brick after brick over the past five years but with this case at hand, they are bound to be brought down by a bulldozer.
Additionally, this action may result into huge losses recorded form the cost of repaying back the illegally appropriated profits form unsuspecting customers who would otherwise not pay their debts. These expenses are approximated to cost over 14 million dollars as well as other unknown amount of expenses on court charges and compensation fees. The total cost of their losses was approximated at over 475 million dollars. Ofthismoney, over two thirds went out pay all the wronged debtors who also receive .40 dollars for every dollar they might have spent in the scam totaling to about 300 billion. In addition, Sears also is projected to loose most of its profits in the credit market since over 50 percent of its profit comes from customer’s use of credit cards. If in 1997 half of the 64 million house-holds were not actively using their credit cards and the company lost half of the profits that they might have made.
The statement as to whether the justice system or equity requires a punitive action against Sears is tricky since it is arguable from two perspectives. On the one hand, the justice system should and must prepare a legal framework for punishing all culprits and defaulters of the law, including sears that are a business franchise. On the other hand, it is a business wit to consider any means of clearing any bad debts and other factors which can result into losses for the company. Therefore, it should not be left for the judicial system to determine the fate of businesses because it may create a very unfair environment for competition.