Monday, March 3, 2008

Is Bankruptcy Immoral?

O.k., so the title's a little misleading. There is nothing inherently immoral about a business folding. There is the possibility that immoral business practices resulted in the bankruptcy, however. Assuming that the business performed on the up-and-up, though, what responsibility does the company have to its customers and creditors during the bankruptcy process?

Some would suggest that the very purpose of bankruptcy is to avoid paying a company's debilitating debt. Yet is that the purpose? I see bankruptcy as a means of temporary relief for a struggling company, protecting it so that it can consolidate and re-focus. This should not be used as a means of shirking responsibility. By watching my father, a credit manager for a major manufacturing company, I have seen the effects of flaky bankruptcy defaults on manufacturing creditors.

The reason for this most recent rant is the news of the upcoming bankruptcy of the Sharper Image; you know, the over-priced electronics store. The Sharper Image has stopped honoring its gift cards. Essentially, it has stolen the money that people have paid without rendering service or product. Sharper Image is only another in a long line of corporations and their subsidiaries that take a selfish stance on doing business. Corporation first, customer second, employee last. It has become common for businesses to default on creditors and loans, but to steal from their customers? That is positively shameful and immoral. I would suggest that people should quit buying from the Sharper Image and prevent them from successfully reorganizing.

I was taught that you always pay your debts. You practice business in such a way that you don't owe what you can't pay. An illustrative true story: my grandfather started up a business with a partner and both invested into machinery, furniture, etc. One day my grandpa showed up to work and found that everything was gone. He thought that they had been robbed, but soon found out his partner had sold everything and skipped town with all the business's assets. With debts to banks and angry customers, my grandpa worked multiple jobs until he had paid-off the entire debt. While Grandpa could have taken the matter to court and tried to fight payment, his name and honor was on the line. He did what was right. That is morality at work. If you owe, you pay.

As the economy continues its downward trend, we may expect more businesses to tighten their belts in various ways. What we should look for, however, is how they keep themselves afloat. When we see businesses that honor their word and take care of employee and customer despite narrowed profit-margins, we should give them our business, keeping them solvent. Those who are willing to squeeze their employees and their customers, doing whatever it takes to make a buck, should be put out of business. Let us remind the financial analysts and C.E.O.'s that there is an ethical way to make a dime.

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