Curbing Sports Agent Misconduct in an Evolving Industry


In this industry, everyone is a sleazeball and a loyal friend –it just depends who you’re talking to.  Drew Rosenhaus, one of the most well-known sports agents of all-time, currently represents over 170 clients but claims to have personal relationships with each one.  While I find this hard to believe, I would not question anything Rosehaus does or says that seems out of the ordinary.  Following the 2011 NFL Lockout, Rosesnhaus needed only 30 days to ink 90 deals totaling $600 million and earn an anticipated income of $18 million.  However, it is not all fame and fortune for sports agents.

 

The explosion in professional sports contracts equates to a similar rise in sports agent earnings, which are a percentage of a player’s total salary.  Therefore, the seemingly-lucrative sports agent industry has become filled with all different kinds of people and all sorts of problems.  Some agents are attorneys, while others could be high school dropouts.  Either way, they are both fighting for the elite group of talent that comes out of the college and enters the pros.  The NCAA, though, has not made things easy for sports agents or its student-athletes.  Current Bylaws and legislation surrounding sports agents are weak, rarely enforced, and in need of serious change to reflect the changing industry of professional sports.

Advertisements

Million$ of Rea$on$ for the NCAA to Change Its Current Amateur Sports Organization Model : The 2010 UNC Football Scandal


Imagine being a highly-touted college football player and receiving offers of all-expenses paid trips to South Beach and keys to a Bentley?  You know it is illegal to accept the offers, but let’s think about what happens to you if you accept an offer like this from a sports agent or some other booster.  One scenario is that nobody finds out.  You dominate in your college career while living like a king, and then you go on to have a professional career and become a 22-year old millionaire.  This seems to be the perfect life, but someone will probably find out, right?  Well, even if they do, you will get kicked off the team and have your character questioned by NFL general managers.  Then, after sitting out for a year and just having to stay in shape for the NFL draft, these same GMs offer you your first payday worth more money than you could have ever dreamed about receiving.  Deciding whether or not to accept these gifts then seems to be the best ever “win-win” situation for the athlete—take the gifts!  If you do not believe this is reality, look no further than the 2010 University of North Carolina football agent scandal.

Bentley with Money

This is a case of three players receiving significant amounts of gifts from sports agents while still students at North Carolina in 2010.  Marvin Austin, Robert Quinn, and Greg Little gave every Chapel Hill resident reasons to believe in the UNC football team, until they took the gifts, and consequently took away this same hope.  The three players were found to have accepted items including, but not limited to, rent payments, travel expenses, thousands of dollars in accessories, leased Bentleys, and all expenses paid trips to South Beach.  All three players were dismissed from the team, and the University of North Carolina took a huge hit to their reputation.  The school also suffered direct and measurable penalties with fines, vacated wins, and loss of future scholarships.  However, all three players are currently on NFL rosters—Austin signed for totals of 4 years and $3,675,000, Quinn for 4 years and $9,436,053, and Little for 4 years and $3,327,500 (Fox Sports).  Clearly, there is some sort of problem with the system if a player can take these gifts and be “punished” with angry college alumni and the loss of a year of college eligibility before becoming multi-millionaires.

livevidthumb-8205-300x225

While it seems the players made out just fine in the long run, it is clear that the NCAA needs to reevaluate its current business model when you consider that the situation experienced by these three student-athletes was not unique.  Under the current system, NCAA rules prohibit student-athletes from accepting any compensation for their athletic prowess from people not associated with the student-athlete’s school.  This is because the NCAA maintains that the school athletic programs are “an integral part of the educational program” since student-athletes are a crucial part of the student body, therefore, creating an amateur model where the student-athletes can not be considered professionals.  Moreover, the NCAA is unlikely to ever forego their status as an amateur sports organization due to the tax breaks on the billions of dollars it generates through college athletics.  Section 501 (c) (3) of the Internal Revenue Code provides a federal tax exemption for any entity that is created to exclusively operate for “religious, charitable, scientific, testing for public safety, literary, or educational purposes, or to foster national or international amateur sports competition.”  Therefore, the NCAA just does not care if, in this case, the North Carolina football program takes a hit to their reputation and a few student-athletes are put in a difficult spot, so long as the NCAA officials and universities are financially better off.

In order to put this in perspective, it is important to realize the magnitude of the money that is on the table for all of the different characters who are involved.  The NCAA enjoys approximately $650 million in revenue per year just from television and marketing fees, championship games, and investment fees and services.  Individual universities and colleges also make significant amounts of money from their athletic programs.  In the 2010 season alone, seven college football teams generated net revenue over $38 million, with only 4 out of 124 programs losing money.  In addition, reports estimate that alumni donations increase significantly as a result of successful sports programs.  On average, each team that makes the NCAA basketball tournament field of 68 teams receives an increase in alumni donations of $450,000, but this number can be much greater.  After winning back-to-back NCAA basketball championships and a NCAA football championship from 2006-2007, the University of Florida’s athletic department received an increase in alumni donations of $38 million.  Schools can benefit from athletic success in other ways, as well.  Universities that win a national football championship have experienced, on average, an 8% increase in enrollment for the following school year, creating yet another reason for school administrators to deeply care about their sports programs.  This conversation would not be complete without considering the significant benefits received by NCAA officials and coaches, as well.  Myles Brand, former President of the NCAA, made $895,000 in his last year, which is even less than contracts worth over $1 million that are signed by several athletic directors and coaches throughout the country.  Last but not least, we have the players.  These young men and women are the ones responsible for the money made by the previously mentioned entities; however, they are not compensated for doing so.  While many of these student-athletes receive scholarships to attend their respective universities, this is barely a fraction of the money they are generating for the groups of people who are preaching the ideals of amateurism and getting rich at the expense of their student-athletes (Corgan).

ncaa_money_mgn

After laying out these facts, many different schools of ethics, including deontology, virtue ethics, and consequentialism, can be used to better understand and evaluate the actions of the many different characters in the UNC football case.  The situation for the players and agents was very similar.  Both groups of people had a duty to follow the rules and codes prohibiting the exchange of benefits between agents and students-athletes that are outlined in the NCAA bylaws, as well as the Uniform Athletes Agents Act (UAAA) and the Sports Agents and Responsibility Trust Act (SPARTA) (Heitner).  From a deontological perspective, these agents and student-athletes would be expected to carry out their duties and follow the rules.  However, the student-athletes, especially those from a disadvantaged childhood, can hardly be blamed for being swayed by the gifts and attention that agents offer.  From a consequentialist perspective, these football players knew that their most severe “punishment” would be a suspension, without having any impact on the millions of dollars coming their way in professional contracts the following year.  Similar reasoning can help explain why agents, who are in a bloodbath competition to sign the most promising future professionals, continue to offer gifts to student-athletes.  With some star athletes earning lifetime salaries of over $300 million dollars, an agent’s 3% take of that is $9 million.  Therefore, agents could risk a few tens of thousands of dollars in gifts and penalties to sway a player to sign with him and earn him 500 million times his investment throughout the player’s career.  With millions of dollars in potential earnings up for grabs, a few years of suspension or fines from violating the UAAA or SPARTA, if they are even caught, is often times not enough to deter illegal behavior by the agents.  While virtue ethics considers the character and intentions of both the players and agents, it is hard to hold them at fault when you consider the potential consequences for their actions in the NCAA’s current system.

The NCAA shares a large portion of the blame for this and many other occurrences of illegal behavior between agents and student-athletes.  Essentially, the NCAA has created a shareholder-focused business model, where its executives and highest ranked administrators are the “owners” and main beneficiaries.  While holding collegiate sports to amateur status has allowed the National Collegiate Athletic Association to receive millions of dollars in tax exemptions, it has consciously ignored the most important stakeholders— the 170,000 Division I student-athletes who make this all possible (NCAA.org).  The NCAA should be blamed for maintaining its outdated system in an age where media sponsorships and the millions of dollars generated from the commercialization of NCAA sports have taken the association to record-high profits.  It seems as if the NCAA, with a focus on profits, has taken a consequentialist approach to this situation.  Apparently, the association feels that the money that would be saved from reducing scandals and the ensuing backlash to universities compared to the money saved through tax exemptions under the current system would not be enough to warrant changes to the current amateur sports organization model.

This relationship between the NCAA and its student-athletes can be closely paralleled with that of large corporations and its employees.  Many of the largest companies have received increasing criticism in recent years for seeking increased profits at the expense of treating its employees unfairly and subjecting them to extremely low wages.  The same case needs to be made for the NCAA.  It only makes sense, as a number of recently-published scholars have proposed, to lift amateur status and allow student-athletes to either receive money through sponsorships or a basic revenue-sharing system.  However, this would cause the NCAA to give up their tax exempt status and millions of dollars in tax savings.  A virtue ethicist would look at the character and intentions of the NCAA and see a group of people who are motivated by profits and financial growth with far less concern for its student-athletes.

ncaa-cash

There is no reason why the NCAA would not be able to lift amateur status from its student-athletes and still thrive in a rapidly growing industry.  In an “About the NCAA” section on its website, the NCAA claims that it was “founded more than one hundred years ago as a way to protect student-athletes (and) the NCAA continues to implement that principle with increased emphasis on both athletics and academic excellence” (NCAA.org).  In reality, the NCAA is doing the exact opposite of protecting its student-athletes, and therefore, it is time for a change.  While the agents and players in the 2010 UNC football scandal clearly broke the rules, the system was set-up for this to happen.

Student-athletes generate hundreds of millions of dollars while playing in college and some go on to earn hundreds of millions more as professionals in the years immediately following college.  If the NCAA wants to protect its student-athletes, it is time to take a look in the mirror and reconsider if “stealing” the profits from the student-athletes is the best way to protect them.  Many proposals have been made and rejected, but now is the time to get all hands on deck and devise a solution before any more scandals take place.  The UNC scandal was probably not even the only case of illegal behavior during that season, but it was the only one that got caught.  We live in a world where unethical behavior can sometimes be overlooked until it is noticed, and consequently, causes media uproar resulting in serious repercussions.  However, the NCAA has now been caught by many people for their unethical business practices without any repercussions or changes.  Maybe punishment is not necessary for the NCAA, but it certainly is time to stop punishing its student-athletes.

Whole Foods: Changing the Way We Think About Food


fd_wholefoods_2

The United States is currently facing one of the worst health crises the country has ever seen. Between 1996 and 2005 the number of Americans suffering from three or more chronic diseases increased by eighty-six percent, and the incidence of diabetes in the American population increased by ninety percent (Gene & Popper, 24). The source of this drastic increase in chronic illnesses can be directly tied to the lack of proper nutrition and the presence of dangerous chemicals found in the average American diet.  With two-thirds of the American adult population qualifying as either overweight or obese it is clear that the lack of government regulation in the food production industry has caused a nationwide epidemic (Gene & Popper, 24).

With drastic government reform of the food production industry unlikely to occur in the immediate future, there has become a societal need for alternative, healthy food options.  Current cultural trends show that American preferences are moving away from processed food and toward more healthy, sustainable food options.  This need has resulted in the creation of alternative grocery stores and restaurants with sustainable, nutritional focuses.  The most prominent example of one of these companies is Whole Foods Market.  Whole Foods Market was founded in 1980 by two individuals with the goal of transforming the way Americans eat and shop for groceries.  The aim of the founders was to create a shopping experience that encouraged nutritional education through the implementation of healthy eating habits and access to the highest quality foods available.  The company was formed in response to the processed food movement, as an alternative for individuals looking for healthy options (Whole Foods Website, 2013).  From a utilitarian viewpoint Whole Foods is an ethical company because every aspect of their business model from their food standards, to their educational programs, to their environmental policies result in positive benefits for all stakeholders that outweigh any societal costs.

Utilitarianism ethicists believe that it is the result of a particular business decision, not the decision itself that causes a particular situation to be ethical.  If the benefits of a certain decision outcome outweigh the costs of that same decision outcome then the consequences of that decision are ethical; if they do not, it is not ethical (Trevino, Nelson, 90).  The social costs incurred by society through the consumption of unhealthy, over processed foods found at standard grocery stores or in fast food restaurants have resulted in societal costs of roughly $40 to $100 billion dollars a year (Wolf, Colditz, 2013).  Not only is this practice unsustainable, but it is also unethical because the costs of these decisions to create unhealthy food options outweigh any potential benefits.  In this situation there is only one party that benefits from the consumption of processed food and that is the food corporations themselves.  Therefore from a purely sociological perspective the decision of using dangerous food producing practices is unethical and should be addressed immediately.

Whole Foods has been able to solve this ethical conundrum by implementing high product standards and offering a wide range of educational programming to customers, employees, and other potential stakeholders. Whole Foods has taken it upon themselves to eliminate dangerous and unnatural food additives from the products that they sell even though they are not required to by law. The list of prohibited food additives consists of roughly eighty different chemicals including BHA and BHT, two very commonly used preservatives made from petroleum, the same chemical used to make the gasoline that runs your car (Goyanes, 2013).  A full list of all prohibited food additives can be found at the end of this report (directly from the Whole Foods Website).  This is one example of how Whole Foods executives have created a company that is ethically responsible.  By eradicating all unnatural food additives in their products, Whole Foods has effectively eliminated any health costs associated with consuming food additives. While these foods options may cost a little more to purchase, the overall health benefits to the customer vastly outweighs any potential cost, which makes this policy ethical and beneficial to society as a whole (Heineman, Froemke, 2013).

Whole foods also has strict regulations for the production of its agricultural products.  Whole Foods prides itself on only selling the best organically grown produce available.  To be considered organic, the crop must be grown without the use of pesticides, synthetic fertilizers, sewage sludge, genetically modified organisms (GMOs) or ionizing radiation, all of which have been linked to health problems (Organic.org, 2013).  Whole Foods also tries to buy produce from local farmers in the community whenever possible.  These actions result in positive consequences for all involved (Whole Foods Website).  The customer is happy because they know that they are getting a quality product, and local farmers are happy because they are able to stay in business. The growth of the big agriculture industry has created an environment where it is difficult for small, family owned farms to compete.  Yes, it is valid that organic produce is more expensive than standard produce; however, the positive health benefits outweigh any of these costs, making this an ethical policy.

Whole Foods also employs strict standards for any meat or animal products sold in their stores.  One of the major problems the has surfaced since the industrialization of the food industry is the inhumane treatment and genetic modifications of farm animals.  Today, in an effort to make larger profits, meat producing corporations like Purdue and Tyson are creating genetically modified animals that live inhumane lifestyles (Kenner, 2013).  Take a look at the difference between a normal chicken and a genetically modified chicken shown in the photo below.             12785_368494776592533_415201850_n

As you can see the genetically modified bird is so large that it cannot stand upright on its own.  In an effort to create a chicken that provides larger portions of meat, genetic scientists have modified the chicken’s genes to create a super bird that cannot support its own bulk.  (Kenner, 2013).  This form of chicken farming is not only cruel because it significantly diminishing the bird’s way of life, but also unnatural.  Like GMOs in agriculture the human body is not meant to ingest scientifically created organisms.  Also it should be noted that some farms use hormones to achieve the same effect.  These hormones should be avoided at all costs as they have documented negative effects on humans that ingest them.  Based on the utilitarian theory of ethics it is unethical for a company to genetically modify and inhumanly house farm animals.  In doing this major costs are incurred for both the animals and the individuals that are consuming their products.  There does not appear to be any societal benefits from the use of these genetically modified animal products.

In an effort to eliminate animal cruelty from our food chain, Whole Foods has partnered with the Global Animal Partnership (GAP), a non-profit organization dedicated to improving the lives of farm animals, to establish their own meat standards.  All meat sold in Whole Foods stores must pass GAP’s strict six-step test.  This test requires that any animals used in the production of animal products are not to be confined to a crate or a cage, but instead allowed to roam free, outdoors, on dedicated pastureland.  They also encourage farmers to provide animals with an environment that encourages normal animal behavior, such as providing chickens with straw to peck at.  All physical alterations of these animals are strictly prohibited, and finally the animal must spend its entire life at the same farm (Whole Foods Website).  Farming practices such as these are ethical because they provide the most benefits to all the organisms involved.  The animals benefit because they have a higher quality of life, and we benefit because we are getting better quality meats.  Overall, while raising animals under these conditions may be more expensive for producers and consumers, these costs are offset by the massive health benefits provided for both the animals and consumers.

Whole Foods has also become the leader in providing sustainable seafood options.  With events such as the BP oil spill, Americans are becoming increasingly concerned with where their fish are coming from.  Also many of the country’s most popular fish species have become overfished, which has negative consequences for both the fish population and their natural habitat. In an effort to provide sustainable seafood options for its customers, Whole Foods became the first retailer to team up with the Marine Stewardship Council (MSC), a non-profit organization dedicated to the implementation of sustainable fishing practices.  Whenever possible Whole Foods tries to sell MSC certified fish that come from MSC certified fisheries.  However, there are certain fish that cannot be farmed and when this is the case the company uses a sustainability rating program to separate fish into three categories–red, yellow and green–to guide customers.  The green rated fish are the best in terms of sustainability and quality.  Yellow fish species are a step below green rated species, and red labeled species are the least sustainable species (Whole Foods Website).

In an effort to further their sustainability goals, Whole Foods announced last year that it will no longer be carrying red rated fish. While this was a difficult decision for the company to make–as it did have the potential to cut profits and cause customers to look elsewhere for these fish–they decided to go ahead with the policy as a way to maintain their reputation by making the most ethical decision possible.  This example particularly exemplifies Whole Foods’ commitment to socially responsible decision making (Whole Foods Website).  In the food production industry it is rare to see a company pass up an opportunity to make more money, even if the decision does create negative consequences for other stakeholders.  Whole Foods, however, decided to forgo this opportunity in the interest of doing what was right.  The video below is from the Whole Foods website and explains in detail the reasoning behind their decision to eliminate red rated fish from their stores.

Whole Foods takes pride in everything they sell.  The use of humane and sustainable business practices is what sets them apart from other grocers.  Every single one of their business policies was created with stakeholder well being in mind.  This is a drastic departure from the traditional attitude commonly found in the food industry. It is this concern for  stakeholders rights, as opposed to making the most revenue, that guides their decision making processes and results in the many societal benefits that their business practices provide.  These benefits include a cleaner environment, humane treatment of all living beings, and overall stakeholder health.  All of their actions as a business can be considered ethical based on the utilitarian view of ethics.  The reason for this is because of the consistently positive net benefits that arise as consequences of their business decisions.  Every decision Whole Foods makes must benefit their customers without causing harm to any additional external stakeholders.  The Whole Foods sustainable business model is revolutionary and signifies a revolutionary shift in the way we look at food.

Cited Sources:

  1. “Organic.org – Organic FAQ.” Organic.org – Organic FAQ. N.p., n.d. Web. 02 Apr. 2013.
  2. Wolf, Anne M., and Graham A. Colditz. “Current Estimates of the Economic Cost of Obesity in the United States.” Obesity 6.2 (2012): n. pag. Print.
  3. “Whole Foods Market.”  Wholefoods.com – Home Page.  N.p., n.d. Web. 02 Apr. 2013.
  4. “Fortune 500 2009: Top Performers.” CNNMoney. Cable News Network, n.d. Web. 08 Apr. 2013.
  5. “13 Banned Foods Still Allowed in the U.S.” Shape Magazine. N.p., n.d. Web. 08 Apr. 2013.
  6. Stone, Gene, and Pamela Popper. Forks over Knives: The Plant-based Way to Health. New York: Experiment, 2011. Print.
  7. Pollan, Michael. The Omnivore’s Dilemma: A Natural History of Four Meals. New York: Penguin, 2006. Print.
  8. Food, INC. Dir. Robert Kenner. Perf. Michael Pollan and Eric Schlosser. Magnolia Pictures, 2009. DVD.
  9. Escape Fire. Dir. Matthew Heineman and Susan Froemke. Lionsgate, 2012.
  10. Treviño, Linda Klebe., and Katherine A. Nelson. Managing Business Ethics. New York: Wiley, 2006. Print.
  11. Photo: “Welcome to Raw for Beauty.” Blog. N.p., n.d. Web. 08 Apr. 2013. http://www.rawforbeauty.com/blog.html
  12. Youtube Video: http://www.youtube.com/watch?feature=player_embedded&v=JEyy4fbOEz4

Photos:

http://upsidebusiness.com/blog/wp-content/uploads/2010/08/fd_wholefoods_2.jpg

http://media.npr.org/assets/img/2013/01/15/ap070824016201-1–c476bfe9dd721e6a1c72b80b01f224704baf0b0e-s6-c10.jpg

American Express’s Intentions


Can consequentialism always be considered ethical?  In 1963 American Express faced potential bankruptcy when Anthony De Angelis, the founder of Allied Crude Vegetable Oil Refinery, swindled inspectors in an attempt to corner the olive oil market.  Many people argued that American Express made the ethical decision to absorb the debt incurred by Allied, even though the Oil Company was guilty of obtaining massive loans through falsified collateral.   However, I want to take a different approach, and argue that American Express did not act ethically if they only absorbed the debt in an effort to maintain their public image or obtain a loyal customer base long term.  Linda Treviño and Katherine Nelson provide insight in their book, Managing Business Ethics: Straight Talk About How to Do It Right, by arguing that intent is crucial in in determining what is considered right or wrong, and not the actions themselves.  In addition, Stephen Darwell, the author of Consequentialism, also discusses the distinguishing qualities of consequentialist ethics and how they differ from deontology.  In this essay, I will argue that American Express’s actions were a direct example of consequentialism, and how this way of thinking is not always entirely ethical.

Anthony De Angelis’s scam, now known as the Great Salad Oil Swindle, started and ended with American Express.  The credit card company had recently opened a new division called “Field Warehousing”, where they would grant loans to businesses based on their inventory and commodities (Frank 1).  Inspectors were required to examine Allied’s Warehouses and determine that all the inventory was in order.  Once approved, American Express would issue receipts to the manufacturer that could be exchanged for loans from banks with the inventory as collateral.  The founder of Allied allocated some of this money towards buying futures in oil, which would allow him to own soon to be expensive oil and the futures he had purchased would be worth considerably more (Frank 1-2).  Soon, the exchanges became more regular, and Allied became one of the most profitable companies for American Express in the Field Warehousing Department.

Once the relationship between the two companies was established, De Angelis devised a plan to fill his barrels with water and add only a small portion of olive oil to the container.  Since oil floats on water, the inspectors would open the barrels and see the small portion of oil and think the barrel was full.  De Angelis succeeded in deceiving American Express for only a year, until it was soon discovered that the amount of oil Allied claimed to have in inventory was more than the farmers had supplied (Frank 2).  On November 19, 1962, Allied went bankrupt, and left American Express with a debt that totaled around $174 million dollars.  Almost instantly the entire futures market crashed, which wiped out the entire value of the loans issued.  Furthermore, the brokerage houses that were behind De Angelis’s futures trades now had a poor reputation from association, and were forbidden from trading.  Suddenly, American Express had to make a choice: admit defeat and go bankrupt or absorb the million-dollar debt that had not been accounted for.

The choice American Express had to make is one that distinguishes consequentialist theories from many other theories of ethics, such as Deontology or Kantian Ethics.  When deciding what is considered right or wrong, consequentialists focus on the intentions of the decisions, not on the actions themselves (Treviño and Nelson 42-43).  Furthermore, consequentialist theorists focus on maximizing societal welfare instead of making the absolute “right” choice.  Treviño and Nelson compare the theories of deontology to consequentialism, “According to some deontological approaches, certain moral principles are binding, regardless of the consequences.  Therefore some actions would be considered wrong even if the consequences of the actions were good.  In other words, a deontologist focuses on what is “right” (based on moral principles or values such as honesty), where as a consequentialist focuses on doing what is right to maximize societal welfare” (Treviño and Nelson 42-43).  These authors explain that the intention of consequentialists is to focus on the end result, and not on the decisions themselves.

In the end, the American Express made the decision to absorb the debt from De Angelis’s scam.  However, one might ask, why would the company make this decision?  The first option, one that a deontologist would argue, is that the company wanted to make the right choice to be completely ethical.  A deontologist would argue that American Express did not want anyone else to suffer because of the swindle, and they decided to take the high road and help the innocent parties involved.  Treviño and Nelson describe deontology, “Deontologists base their decisions about what is right on a broad, abstract, ethical principles or values such as honesty, promise keeping, fairness, loyalty, rights, (to safety, privacy, etc.) justice responsibility, compassion, and respect for human beings and property” (Treviño and Nelson 42).  If American Express’s actions were purely for the sake of being ethical, then they would have been acting honestly, fairly, and loyally to those affected by the swindle and not seeking to benefit from the decision.

The other option, and the more likely option, is that American Express absorbed the debt to give the public the impression that they were trustworthy and honest.  This would mean that the company was not focusing on doing the right thing for the sake of being ethical, but instead for the benefits that they would reap by absorbing the debt.  This reasoning is a direct example of consequentialism, because it would mean that they were focusing on the positive consequences of their decision more than acting ethically for the sake of doing what is considered “right.”  Stephen Darwell, the author of Consequentialism, states, “What makes the values nonmoral, again, is that they involve evaluations of outcomes or states rather than distinctly moral evaluations of agency or character” (Darwell 1).  He is arguing that consequentialism focuses on the outcomes of one’s decisions, and not the “moral evaluations” of those involved.  Darwell would most likely interpret American Express’s choices by saying that they were thinking of future business and the image that they would create, instead of doing the right thing with no benefit to themselves.  This way of thinking would mean that American Express was not as ethical as they had made themselves to be since they intended to reap the benefits of their decisions and not acting entirely altruistic.

In 1965, Norman Miller covered story of Anthony De Angelis and the affect the swindle had on American Express in his book The Great Salad Oil Swindle.  While exposing the true events of the swindle, Miller discovered that American Express had been falsifying inventory inspections and receiving anonymous phone calls that warned the company that De Angelis could not be trusted.  However, Miller discovered that despite American Express’s suspicions, the company had turned a blind eye and continued to do business with Anthony De Angelis.   Miller writes, “Why did American Express Field Warehousing ignore the warning that Allied was cooked?  Was it because the storage firm could not afford to lose Allied’s business?…All hands at American Express Field Warehousing, then, were agreed it would be foolish to stop doing business with Allied” (Miller 83-83).  Since the relationship between the two companies was generating so much profit for American Express, they were reluctant to dig deeper into Allied’s operations and discover the truth.  When Allied’s swindle was made public, American Express declared that they would absorb all the debt in an attempt to make themselves appeal more ethical.  Until Miller’s book was released, many people believed that American Express was making the selfless choice to absorb the debt, and did not realize that they were reaping long-term benefits that make their actions more consequential then deontological.

American Express’s intentions are what distinguish the company’s decision from being purely ethical or acting ethical for their own benefit.  If American Express had absorbed the debt from Allied’s scandal purely for altruistic reasons, then they were adopting the principles of deontology.  However, if American Express’s intentions were focused on their own image and the appearance of acting ethically, then their actions would be more along the lines of consequentialism.   Unfortunately, we can’t know for sure what American Express’s true motives were after the Salad Oil Scandal was exposed.  However, the company’s shady relationship with Allied Crude Vegetable Oil Refinery and the evident benefit of portraying themselves as ethical lead me to believe that they did not act out of selfless reasons.  Therefore, these actions seem to lean more towards consequentialism, which is why I fervently believe that American Express’s actions are not ones of integrity, but instead are ones of self-interest.

Third Party Ownership in Soccer: Fair or Foul?


The world of sports has been one of the most competitive arenas for hundreds of years.  Nothing defines competition better than pinning two teams against one another on a field with diametrically opposed objectives, letting them showcase pure their athleticism in order to attempt to strategically achieve victory.  The intense nature of competition within sport has led teams and clubs to resort to any legal means necessary to gain a competitive advantage over the others.  The sport of soccer, commonly known overseas as football, is the most popular sport in the world, which even furthers the need and desire to become known as the most dominant team across all leagues.  It is a wide held belief that teams that are better off financially have an advantage against smaller clubs that lack the funding to stay competitive.  Teams with large budgets can actively recruit high-profile players, footing the bill with no problem.  Smaller teams, on the other hand, may find it difficult to come up with the finances to purchase big name players, and as a result, cannot afford to remain competitive.  It is this reason that many teams resort to certain financing techniques, one of which is known as third party ownership.  I will delve into the details of this practice in this piece, and go into even further detail as to why it has become known as highly controversial.  I will then look at the practice from differing ethical perspectives, explaining how each school of thought would view the concept of third party ownership.

            Third party ownership in soccer is when an investor purchases a stake in the economic rights of a player in hopes that the player’s value will increase and provide a high return on investment when the player is transferred to a different club.  To put it in easier terms, I will walk through the process that an investor goes through.  Investors look for players in professional leagues that they view have great potential to grow in value.  The investor then pays the club that owns the player a certain amount of money to receive a percentage stake in a player’s economic rights.  For example, if I was interested in player X, I could pay his club $1 million dollars for a 50% stake in the player.  Player X then has back-to-back seasons of superior athletic performance, and as a result, his value has skyrocketed.  Now, in order for me to capitalize on my investment, player X must be transferred.  A transfer occurs when the player is still under contract with his original club, and is then purchased by a different club for a certain transfer fee.  Without a transfer, my initial investment disappears, and I make nothing.  For argument’s sake, a new club shows interest in player X and the two clubs agree upon a transfer price of $5 million.  Because I have a 50% stake in the player, I will receive $2.5 million of the $5 million, and the club who originally owned player X receives the other half.  As an investor, I was able to grow my initial $1 million investment into $2.5 million by taking an active bet on the development of player X.  The obvious question that comes next is why would a club agree to these terms?  “Many clubs, particularly in southern Europe, are struggling to raise revenue and obtain bank loans following the 2008 credit crisis and resort to transfer investments for cash… Clubs get a quick infusion of money but sacrifice a bigger payday a few years later, when they negotiate the sale of the player and share the transfer fee with an investor” (Duff).  As mentioned before, smaller clubs with financial limitations need to find creative ways to raise the appropriate cash to stay competitive.  They can use this flow of cash to purchase other players now, without having to wait to transfer their current players.  The investors in this situation are generally investment funds, corporations, or wealthy individuals, but even some sports agents have been partaking in this practice with their own players.  “Some 15 percent of agents own stakes in players they represent, according to a survey of 269 agents by CIES” (Duff).  The practice as a whole has been under scrutiny over the past few years, and some people and organizations have called for the prohibition of third party ownership across the world.

            Before I dive into the ethical schools of thought on the practice, it would be helpful to understand why certain people view the practice as unethical and wrong to begin with.  UEFA, the Union of European Football Associations, has been making their stance on the issue well known over the past few years, citing four main reasons they find the practice needs to be eliminated.  First of all, it should be noted that the top division in both England and France have already made the practice illegal for clubs, but UEFA is calling for FIFA, the Fédération Internationale de Football Association, to ban the practice across all professional soccer.  The first reason UEFA cites is that it is wrong to purchase the economic rights to a human being, and then to trade that person like an asset or stock.  Secondly, conflicts of interest surely arise when investors own stakes in multiple players from various teams.  There would be reason for these investors to use manipulation in order to achieve desired outcomes, and UEFA and FIFA both agree that the sport can do without manipulation.  An additional reason third party ownership is being called into question is the practice facilitates a culture of multiple transfers and contract instability.  Because money is only made when a transfer actually occurs, there is immense pressure for these trades to occur.  The last reason UEFA cites is that it goes against the idea of financial fair play that FIFA is trying to promote (UEFA).  “The risk here is that financial fair play will be fundamentally distorted because the clubs that use third-party ownership to defray costs will have an unfair advantage over those prohibited to do so—like English and French teams” (Marcotti). It is for these main reasons that many have deemed third party ownership a controversial and unethical practice, but looking at it from a few ethical perspectives, there could be some differing opinions on the matter.

            Depending on the ethical mindset third party ownership is viewed from, it can be deemed either ethical or unethical.  The conflicting views of consequentialism and ethical egoism versus Kantian ethics display the main differences well. Consequentialism “seemingly demands (and thus, of course, permits) that in certain circumstances innocents be killed, beaten, lied to, or deprived of material goods to produce greater benefits for others. Consequences—and only consequences—can conceivably justify any kind of act, for it does not matter how harmful it is to some so long as it is more beneficial to others” (Alexander).  In basic terms, the ends justify the means.  Ethical egoism determines “an act is morally right if and only if, of all available acts, it provides the greatest balance of benefit to harm for the person performing the act” (Humber, 18).  Advocates of third party ownership could morally justify the practice through these two schools of thought.  Those who oppose third party ownership could present an argument from a Kantian ethics perspective.  There are three main categorical imperatives that Immanuel Kant presents and they are as follows:

  1. Act only on maxims which you can will to be universal laws of nature.
  2. Always treat the humanity in a person as an end, and never as a means merely.
  3. So act as if you were a member of an ideal kingdom of ends in which you were both subject and sovereign at the same time. (Bowie, 4)

The first two portions are the ones that reveal third party ownership as an unethical practice.  Looking at the previous four reasons cited by UEFA, we can look at how each school of thought would view the issues at hand.  Taking an economic stake in a human being as to grow personal wealth is the first item to look at.  Consequentialists “specify initially the states of affairs that are intrinsically valuable—often called, collectively, ‘the Good.’ They then are in a position to assert that whatever choices increase the Good, that is, bring about more of it, are the choices that it is morally right to make and to execute” (Alexander).  In this case the Good is available capital to keep them competitive, and allowing investors to purchase a percentage of a human being’s economic rights is just a means of doing so.  Ethical egoists would look at this from the investor’s perspective and say that because the investor is able to purchase a stake in a player to increase their own wealth, the mere increase in personal capital makes the action ethical.  The conflicting Kantian view is based on the second principle of which he forms his ethical thoughts.  In this case, investors and clubs are not treating the person as an end, and are only treating them as a means.  Using a person to gain capital is treating the person like an asset in a stock portfolio.  It also seems to break the first rule.  Theo van Seggelen, secretary-general of the International Federation of Professional Footballers, has been quoted as saying “‘there’s not any other profession in the world where investors can buy stakes in a human being’” (Duff).  It would not be acceptable to own the rights to someone in a universal context, and when combined with the idea that investors and clubs are using a human for financial growth, it is clear that a Kantian ethicist would view this practice as unethical.  The idea of conflicts of interest and manipulation occurring as a result of third party ownership is also looked at differently between the schools of thought.  Once again, consequentialists and ethical egoists would determine the manipulation and conflict of interest as merely a byproduct of creating better financial positions.  Kantian ethics would think otherwise.  Right now, third party ownership is legal in most leagues, and “FIFA [says] that investment of a third party is now only illegitimate if and when the ‘third party has the right to influence the club’s choices in employment and transfer-related matters’” (Downie).  Investors can claim they have no influence over transfers, but looking into the contracts they have with clubs proves otherwise.  Some contracts can be structured in such a way that the “investment may automatically switch to another player if a contract expires on [the investor’s] footballer, and teams may pay a penalty if they don’t move an athlete before his contract ends” (Duff).  The fact that a team could incur a fee when not transferring a player undoubtedly seems like influence over a club who is already in a poor financial situation.  When it comes to agents owning stakes in their own players, they too are faced with a conflict of interest because they may attempt to force a transfer when it may not be in the best interest of the player.  Once again, Kantian ethicists could view the players being used as a means to an end.  The last two reasons UEFA cites can be grouped together for argument’s sake.  Creating contractual instability and going against the idea of financial fair play can be viewed in the same light from ethical perspectives.  Once again the consequentialist and ethical egoist would not concern themselves with the semantics of the rules, so long as they are achieving their desired goal and improving their personal situation.  Clubs want more money to stay competitive and investors want more money on their investments, and creating this unstable contractual environment while creating an unfair advantage is not in the basis of their decision making.  From a Kantian point of view, third party ownership creates these outcomes, and these outcomes are not desirable outcomes for a universal law.  Without contract stability, contracts could become an irrelevant practice that means nothing.  A Kantian ethicist would claim “if a maxim that permitted contract breaking were universalized, there could be no contracts (and contracts would cease to exist). No one would enter into a contract if he or she believed the other party had no intention of honoring it” (Bowie, 5).  This can be related to third party ownership because players are entering into contracts that rarely reach their expiration, and therefore seem irrelevant and self-defeating.  A Kantian view would also see going against financial fair play could not be universalized.  Giving yourself an advantage over others that cannot partake in the same process could not be a rule followed across all aspects of life, and therefore would break the categorical imperatives.  Depending on which ethical perspective you choose to view third party ownership, you could view the practice as ethical in achieving a desired goal, or unethical in the process of which it occurs.

            As the organizations within soccer debate this topic, it is important for them to view third party ownership through different lenses.  It is a widely contested topic, and before any decisions on its legality can be made, all points of view should be taken into consideration.  From a small club’s point of view, they may feel they need to practice it in order to keep up with clubs who naturally earn more money through ticket sales, endorsements, and television contracts.  From other clubs’ perspectives, they may see it as an unfair advantage for teams to raise capital to purchase players they would not have been able to in the first place.  The investors in this practice generally view third party ownership as a positive, hence their participation.  They see the potential for high gains in short time horizons, and are not as concerned with the effect it has on the game of soccer.  They simply treat the players as an asset in a portfolio.  The players, like the clubs they play for, may have a conflicted view on the practice.  For one, they could benefit from investors looking to increase their transfer value, and as a result they could benefit directly from the move.  On the other hand, they may not want to be transferred to a specific team or at all, and could have their own agents pushing them in the wrong direction for the development of their career.  In conclusion, third party ownership is a hotly debated issue that, depending on which ethical perspective is taken, could be deemed either ethical or unethical.

Wal-Mart Can Do Better Than This


How many people walk into Wal-Mart and just look up and around amazed at how vast the entire store is? How many people have gotten lost in a Wal-Mart store or at least separated for a period of time from those they came in with? How many people have gone to a Wal-Mart and actually gotten their workout in for the day because of how much they aimlessly walked around? How many people have come out of Wal-Mart and couldn’t find anything they wanted and came home with everything they didn’t need?

Basically, everyone has heard of Wal-Mart. Some may have heard of its impressive supply chain management, while to most others, Wal-Mart is simply known for its everyday low prices and huge assortment of inventory, providing its customers with practically everything they could possibly need. The main problem to consider here is how many Wal-Mart employees leave the store after their shift satisfied with their job?

Wal-Mart’s corporate culture is built around the idea of cutting costs to provide its customers with the low prices that they expect. The employees, however, are becoming victims to this low-cost strategy. Minimum wage is hardly enough to support one person, let alone a family. It seems as if the corporate structure of Wal-Mart is doing everything it can to keep its employees below the poverty line. Wal-Mart labor protests have arisen in the last year and were aimed at pressing Wal-Mart to increase wages, stop cutting workers’ hours, and to treat employees with respect (Greenhouse). The disgruntled Wal-Mart employees just wanted better working conditions and better wages. And these protesters did not all come from the same Wal-Mart store or even the same state, they came from over 28 stores and 12 different states (Greenhouse). Wal-Mart’s business strategy is designed to keep its employees helpless; a practice that hardly seems to be the least bit ethical. The employees of Wal-Mart deserve to have decent pay and the company’s hindering of this basic right is unethical.

Besides offering low wages to Wal-Mart employees, gender bias is present in the company’s corporate culture. Women earn even less and are often treated with less respect than their male coworkers. Barbara Ehrenreich states in her book, Nickel and Dimed, “I feel oppressed, too, by the mandatory gentility of Wal-Mart culture. This is ladies’ and are all ‘ladies’ here, forbidden, by storewide rule, to raise our voices or cuss. Give me a few weeks of this and I’ll femme out entirely, my stride will be reduced to a mince, I’ll start tucking my head down to one side” (Ehrenreich 156). In her book, Ehrenreich described the oppression that she felt during her time at Wal-Mart. She ended up actually having to quit because she could not afford to work there anymore, her pay not being enough to sustain her living in even a very cheap motel. Her conclusions are consistent with other evidence that comment upon the low wages and long hours that encompass the Wal-Mart working environment.

In the Dukes v. Wal-Mart Stores Inc. case, many Wal-Mart employees banded together to voice their grievances to the Supreme Court. These women were seeking compensation and recognition of the gender discrimination that occurs within their working environment. Unfortunately, the case was thrown out due to a technicality. The plaintiff’s lawyers had improperly sued under a part of the class-action rules that was not primarily concerned with monetary claims (Liptak). In the end, the court did not actually make a decision for whether or not Wal-Mart had in fact discriminated against the women. One of the dissenting justices even stated that there definitely was evidence that gender bias was an element of Wal-Mart’s corporate culture (Liptak). Women filled 70% of the hourly jobs and only 33% held managerial positions. The company uses a centralized personnel policy that allows for subjective decisions by local managers. These practices often give way to the problem of stereotypes swaying personnel choices and this makes decisions about compensation and promotion vulnerable to gender bias (Liptak).

Dr. Richard Drogin, a statistician and professor, has compiled a statistical analysis in regards to the Dukes v. Wal-Mart Stores, Inc. litigation. His analysis of Wal-Mart employees shows that the women employees are concentrated in the lower paying jobs, are paid less than men in the same job, and are less likely than men to advance to management positions (Drogin 46). Despite the fact that women have more seniority, have lower turnover rates, and have higher performance rating in most jobs, these gender disparities still persist (Drogin 46). Drogin shows that these disparities in the difference in earnings, pay rates, and promotion rates are statistically significant. For example, look at this graph of the average earnings of men in comparison to the earnings of women (Drogin 12).

gender graph

The evidence from the above graph should speak for itself in regards to the gender bias that is clearly a part of the Wal-Mart working environment. Overall, in 2001, women earned about $5,200 less than men, on average (Drogin 12). Within the hourly workforce, women earned about $1,100 less than men and the disparity is even greater among management positions, as clearly displayed in the graph. That year, women earned about $14,500 less among management employees at Wal-Mart (Drogin 12). Not only are women disproportionately working in the lower paid jobs within the stores, but they are also earning less than the men who are holding the same job (Drogin 12). This alarming information brings to light a significant ethics debate.

If Wal-Mart had an official policy of practicing deontological ethics as a part of its corporate structure then there is no way that it would be able to treat its employees the way the company currently does. Deontologists base their decisions about what is right on broad, abstract ethical principles or values such as honesty, fairness, rights, and respect for human beings (Trevino & Nelson 42). Gender bias within Wal-Mart stores would be against the core values of the company. If there was a disparity, then that would simply be ethically wrong and would need to be immediately remedied. Wal-Mart managers taking a deontological approach would insist on having a fair and honest practice when considering which employees to promote and wouldn’t let stereotypes or personal bias affect their decisions. These managers would have a duty to uphold fairness and honesty throughout their work. For those deontologists that focus on rights more than duties, values, or principles, they would make sure that all Wal-Mart employees had access to the basic rights of healthcare and that these employees would have the chance to live above the poverty line. Ehrenreich states in Nickel and Dimed that, “there’s something wrong when you’re not paid enough to buy a Wal-Mart shirt, a clearanced Wal-Mart shirt with a stain on it. ‘I hear you,’ she says, and admits Wal-Mart isn’t working for her either, if the goal is to make a living” (Ehrenreich 181). Wal-Mart should employ a system of deontological ethics to govern its behavior in order to eliminate these types of problems where Wal-Mart employees themselves can’t afford the items in the stores. Performing good ethics and treating employees with respect is absolutely essential for effective business practice (Trevino & Nelson 3).

Wayne F. Cascio describes in his journal article, “Decency Means More than ‘Always Low Prices’: A Comparison of Costco to Wal-Mart’s Sam’s Club,” that practicing bad ethics correlates to bad business. He critiques the way Wal-Mart conducts business especially regarding the company’s employment practices, relationships with suppliers, and the company’s impacts on local economies. Wal-Mart’s obsessive focus on the single core value of always having low prices is not a particularly sound business decision. Costco, in comparison, is able to hold down costs but also pay higher wages. Costco stresses the importance of being good to your employees and uses the high wage strategy to ensure long-term success. Paying workers higher wages reduces turnover, increases productivity, and is just overall good business (Cascio). The key stakeholders of consumers, workers, and shareholders all benefit from a cost-leadership strategy. In comparison to this approach, Ehrenriech describes one of her Wal-Mart coworkers and says that, “In her view, Wal-Mart would rather just keep hiring new people than treating the ones it has decently (Ehrenreich 184). Wal-Mart’s decision to pay low wages to its employees is simply bad business. The turnover rate, loss of production, and overall feeling of employee dissatisfaction with their job is something that Wal-Mart really needs to improve upon if the company wishes to remain competitive and stay out of negative media attention in the future.

In conclusion, I believe Wal-Mart needs to reassess the strategy the company is using to govern its people management procedures. Deontological ethics should be at the root of this new business strategy that will determine what decisions are to be made in the future. Ehrenreich states, “In orientation, we learned that the store’s success depends entirely on us, the associates, in fact, our bright blue vests bear the statement ‘At Wal-Mart, our people make the difference.’ Underneath those vests though, there are real-life charity cases, maybe even shelter-dwellers” (Ehrenreich 175). Currently, I do not believe that Wal-Mart truly stands by its claim that “our people make the difference.” If Wal-Mart employees really were that treasured by the company, then they would be compensated better and wouldn’t be treated as poorly. Higher wages (equally distributed between male and female employees) would lead to an increase in productivity, a lower turnover rate, and positive growth for the company. The satisfaction of Wal-Mart’s employees should become top priority and is an overall good business strategy.

Works Cited

Cascio, W. (2006, August). Decency Means More than “Always Low Prices”: A Comparison of Costco to

Wal-Mart’s Sam’s Club. Academy of Management Perspectives, 20(3), p26.  Retrieved from Ebsco Host.

Drogin, R. (2003, February). Statistical Analysis of Gender Patterns in Wal-Mart Workforce. Drogin, Kakigi & Associates.

Ehrenreich, B. (2001). Nickel and Dimed: On (Not) Getting By in America. New York, NY: Henry Holt and Company.

Greenhouse, Steven. “Wal-Mart Labor Protests Grow, Organizers Say.” New York Times. 18 March 2013. Web. 9 October 2012.

Liptak, Adam. “Justices Rule for Wal-Mart in Class-Action Bias Case.” New York Times. 20 June 2011. Web 5 March 2013.

Trevino & Nelson. (1999). Managing Business Ethics. John Wiley & Sons, Inc.