Legal And Ethical Issues Surrounding Solyndra – California Based Solar Panel Manufacturer

Law And Business Ethics Essay Instructions

Discuss the legal and ethical issues surrounding Solyndra, the California based solar panel manufacturer. You will need to research the company through the University library. Incorporate two to three specific laws that apply to the situation. Discuss how the philosophy of economist Milton Friedman may have influenced the executives of the company. In addition, identify an ethical framework other than Free Market Ethics that applies to this situation and discuss how it may have influenced the executives of the company. Minimum 8 Pages and in APA format, with reference page. Use at least 7 credible sources for your essay.

Legal And Ethical Issues Surrounding Solyndra – California Based Solar Panel Manufacturer


Solyndra solar a renewable energy manufacturing company based in Fremont, California in the United States of America (U.S)   was founded by Dr. Chris Granet in 2005 who was the director until 2010.  The company was engaged in manufacturing cylindrical panels made from copper indium gallium selenide (CIGS) thin film solar cells before it was closed down in 2011. The system of manufacturing these panels was specially developed to optimize photovoltaic (PV) performance on roofs with a low angle and on highly reflective surfaces (Andrew, 2011).

In order to set up the manufacturing plant the energy programme guarantee  in US offered t$535 million loan guarantee to help in financing the construction of the solar panel plant in 2009. The energy department was established under the leadership of President Bush authorized. by the time Solyndra loan was approved  Obama was the president . The energy department had authority by the law to issue federally backed loans to innovative projects that helped limit air pollution. Solyndra Company being a project that would reduce air pollution was the first company to benefit from the energy department loan guarantee.   In addition the management also received $ 25.1 million tax break from California’s Alternative Energy & Advance Transportation Authority (CAEATA) to help in the same (David 2005).

After one year of operation Solydra Company experienced financial problems and decided to layoff approximately 135 temporary and 40 full-time employees.  The company contied with its operations until 31st August 2011 when breaking news by Calif through Greenteck media reviewed that    Solyndra had   made an announcement that it had suspended its manufacturing operations as a result of   global economic and solar industry market conditions and they intended to file a petition for relief under chapter 11 of the U.S bankruptcy code while they evaluated options, including sale of the business and license of its advanced CIGS technology and manufacturing expertise. As a result of suspension of manufacturing operation the remaining workforce of approximately 1,800 were also laid off (U.S. House of representative, 2012).

Legal and ethical issues surrounding Solyndra

Ethics and law plays a role in the way an organization treats its employees as well as the customers. In addition they also deal with when an employee can be; hired or fired, treated, payed as well as the condition of their working environment addition.  In the United States, institutions like the Occupational Safety and Health Administration (OSHA) and the Equal Employment Opportunity Commission (EEOC) have been developed to address employees’ areas of ethics through law (Morley, un). The following legal and ethical issue surrounds Solyndra Company for the closure of the company and the act of lay off of more than 1000 workers.

Legal issues

Investigation to whether the program was being run efficiently and whether the taxpayers’ interest was being properly protected is one of the legal concerns. The other legal issue is the status of the process for loan application and approval for the section 1705 loan guarantee program (US house of Representative, 2012). Accountability of use of the loan is also another legal issue that Solyndra will encounter. Issue of notification of plant closing and mass lay off  for not giving a 60 days  acknowledgment on employment termination  hence violating Workers Adjustment & Retraining notification  act (WARN ) that states that protects workers, their families and communities by requiring most employers  to provide notification 60 calendar days in advance of plant closing and mass layoffs (David  2011).

In addition during the period that Solyndra health was deteriorating the company’s two largest investors drew an agreement that they were to give the energy department a $75 million loan – with a catch if the loan would fail to save Solyndra from bankruptcy before repaying the government an activity that never took part thus an issue that requires investigation to determine if the management violated the law..

Ethical issues

It is believed that Loan guarantees to soldndra may have been influenced to get them loans this is also an ethical issue since loan guarantees should engage in such activities upon will but not influence as was the case for Solydra. There are ethical issues on President Obama administration since one of Solyndra’s top investors George Kaiser was also involved in Obama campaign and was responsible for tens of thousands of dollars campaign donations, white house should have ensured that no loan guarantor had close relation with the white house since this could have led to influence of the loan release without due diligence being carried out (Andy, 2011). In addition it is also in record that the energy department had asked the management of Solyndra not to lay off until after the primary elections of 2010 also their denial of Solyndra’s having financial woes even when they knew it to be a fact is a sign of ethical failing on the departments side (David 2011).

Read also Ethical Issues Or Challenges Associated With Prioritization

Specific laws and ethical codes that apply to Solyndra situation

Fundamental law of economic is one of the laws that apply to Solyndra situation as a result of the company rise and fall that illustrated the folly of empowering government to pick winners and losers in the energy sector. This would lead to government distorting market, weakening the rule of law, and failing to spur sustainable job creation. As result this would in return lead to taxpayers losing billions of dollars, the compan losing competitive advantage and workers losing their jobs (Paul 2011).

The energy policy act of 2005 also apply to Solyndra situation, the act cautioned Department of Energy (DOE) that the restructuring of a portion of the loan that allowed private investors priority payment in case of defaults is illegal and that should obtain a second opinion from the justice department before taking such an action a step that was not put into consideration by the Solyndra company management.

Advance of public interest is   principle of the America society for public administration (ASPA) advance science, art, and practice of public administration is an ethic that applies to Solyndra situation, under this principle people should promote the interest of the public and put service to the public above service to one self. However the company closed down without prior acknowledgement to the employees in order to use the secured benefits for their own benefits (David , un)

Milton Friedman’s Philosophy as Applies to Solyndra situation

Friedman was an economic adviser to Republican U.S. President Ronald Reagan. His political philosophy extolled the virtues of a free market economic system with minimal intervention. Friedman strongly believed that the scope of government must be limited. While government promises to preserve freedom, and may act as an instrument to that end in certain respects, it simultaneously represents a concentration of power that constitutes a threat to freedom. The government is unable to respond to, nurture or enhance the variety and diversities of individual action.  The U.S government did intervene with Solyndra management and failed to leave the company in the hand of a private sector to run as per Milton believes. In return if failed and was closed down and employees were laid off. Maybe if the government had left Solyndra to be controlled by the private sector the companies’ operations could have succeeded.

This philosophy interfered with the executive as the employees should be entitled to severance of benefits from the company despite the fact it run bankrupt thus no finances to cater for these benefirs.

An ethical framework that applies to the case of Solyndra-warmat ethics

Ethical business practices include assuring that the highest legal and moral standards are observed in your relationships with the people in your business community. This includes the most important person in your business, your customer. Short term profit at the cost of losing a customer is long term death for your business. A reputation for ethical decisions builds trust in your business among business associates and suppliers. Strong supplier relationships are critical to a successful business.

Walmart ethics is based on selling products that people want to buy at low prices satsyfying customers wants and needs. Warmart is the largest importer in the U.S amongst most categories like electronics. The ethics also states that directors must avoid conflict of interest that may occur when an individual private interest interferers in any way with the interest of the company or any of its subsidiary and affiliated companies. This ethics relates to one of the aims of solydra was to produce cheap solar panels by use of CIGS so that would out way the traditional energy system. In addition Walmart ethics calls for everybody maintaining conducive working environment that should encourage associates to raise concerns about possible violations of Walmart statement of ethics (anon 2005).

However this did work as subsidized Chinese solar panels got even cheaper as the price of silicon plummeted along with Solyndra’s chances for becoming profitable. Also there was an influence on loan was approved   due to close relation with the government with one of the guarantors. Solydra violated this ethics by failing to report to the government about their financial crisis.


Other companies should learn from the case study of Solyndra that it is important to make real decisions before inventing in any business. Before setting up a plant it is also important to test its distribution channel, analyze the industry technology curves and fully understand the firm’s competition status. This would save a company from a situation like that of Solyndra being called off as a result of competition from china which out laid them. It is also important engage in a trial business and monitor results before innovating in the actual business that would require large amount of money. It is also crucial that responsibility are shared between the government and private sector where the two have to engage in the same business as this would help in financial the accountability.

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