Penn Square Bank Bankruptcy

Ethics of Penn Square Bank & the Dow Corning Bankruptcy
According to Norm Bowie, “sometimes being moral enhances the bottom line rather than reduces it” (Hartman, 2005, p108). Unfortunately, in the instances of Penn Square Bank and the Dow Corning bankruptcy, that may not have been the case. The following will examine the particulars of these situations and discuss the ethical issues present for each. Penn Square Bank
Penn Square Bank was a small bank that played a large role in the Oklahoma banking crisis of the early 1980s. In an effort to maximize on the profits of the booming oil industry, the upper management of Penn Square Bank cut corners in several areas of its new lending division. Documentation to support million-dollar loans
But in 1995, the company filed for Chapter 11 bankruptcy to protect itself from lawsuits regarding their silicone-based breast implants. Some advocated that the action was an effort to “avoid compensating women for their injuries” (Book review, 1996, p7). However, according to Hartman, Chapter 11 bankruptcy is intended to protect companies from creditors while it undergoes restructuring in an effort to stave off liquidation. By doing so, the company continues business, pays taxes, and provide jobs but is allowed time to reorganize to triumph over its economic hardship (Hartman, 2005). The ethical challenge is to use Chapter 11 as it is intended – as a restructuring tool to avoid losing everything – rather than file for Chapter 11 as a way of cheating its creditors out of owed money. Hartman suggests that what is ethical in regard to bankruptcy is to go beyond what the laws require and uphold the debt agreements made with creditors (Hartman, 2005). Dow Corning seemed to have that same perspective. Nine years later the company emerged from bankruptcy after settling the lawsuits for a payout of $3.3 billion over the next 15 years (Arndt, 2004). During the time under Chapter 11, the company reorganized itself to refocus silicone production to develop fabrics, materials, and pharmaceutical products (Arndt, 2004). These sales and expanding markets will help Dow Corning to pay its
Problems with Dow Corning’s silicone breast implants began as early as 1984 when they lost a lawsuit claiming the implant caused medical illness such as autoimmune disease. During the investigation for this lawsuit, lawyers found evidence showing Dow Corning executives were aware of complaints from doctors, concerns about the lack of long-term testing, and cases of the implant bursting during surgery. In addition, the study that supposedly proved the effectiveness and safety of the product revealed detrimental long-term effects on the animals under experimentation (Book review, 1996). However, throughout all the breast implant concerns, Down Corning continued to advocate the safety of their product going as far as to hire high profile and extremely expensive teams of legal and public relations specialists. In addition, allegations were present of executives attempting to destroy damning internal documents suggesting upper management was trying to cover up its liability in the claims. The 1984 lawsuit found Dow Corning guilty of fraud and deceit stating the company provided inferior and incomplete information by understating the risks to make an informed decision (Book review, 1996). More important, it revealed the unethical behavior of the executives and company as a