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Bankruptcy as a Strategic Financial Tool

What are the ethical implications of corporations such as United Airlines and General Motors which utilize bankruptcy as a strategic financial tool to reduce their pension and health benefit obligations?

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The ethical implication is that companies that hide from financial obligation by invoking bankruptcy are liars in the highest degree. This is what Kilpi (n.d.) meant when he said that the fundamental ethical problem in bankruptcy is that insolvents have promised to pay their debts but cannot keep their promise.

The bankruptcy law is being abused by companies to run away from paying benefits of their employees.

Using this law, United Airlines got a favorable ruling from a federal bankruptcy judge allowing the company to terminate its pension plans covering some 134,000 workers and retirees (Mattera, 2005).

The troubled airline, which declared bankruptcy in December 2002, said that it would stop funding its pension plans while it ...

Solution Summary

This solution discusses how bankruptcy is used by companies in dodging financial obligations.

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