The purpose of this paper is to discuss how Adelphia Communications’ leadership, particularly the Rigas family, violated the trust of the public and its investors through unethical and illegal business practices. First, a synopsis of the Adelphia scandal will be presented. Next, a brief overview of ethics and how they apply to maintaining good business and public trust will be discussed. Following the ethics overview, an outline of deontology and Kant’s Categorical Imperative will be covered. Finally, the business practices and ethical issues with the Adelphia scandal will be analyzed using the deontological framework and Kant’s Categorical Imperative.
Adelphia Communications is a company that specializes in telecommunications including cable television and internet service, founded in 1952 by John Rigas. On July 1st, 1986, the company went public. Its new public status meant that it was now required to comply with new regulations, which included filing auditor-approved annual reports with the Securities and Exchange Commission (SEC), and establishing a Board of Directors. Though these new regulations are put in place to protect the company’s new investors and the company itself, we will see that these regulatory requirements did not prevent shady business practices that ended poorly for the company and decimated public trust.
After going public, Adelphia began to quickly grow, becoming the world’s sixth largest cable company in the United States by 2002, the same year that the company became entrenched in scandal. With the influx of capital, Rigas expanded his business and acquired new investors. At the time of the scandal, Adelphia’s annual revenue was $2.9 billion and had 5.5 million subscribers across 32 states and Puerto Rico (Barlaup, 2009). Rigas, proclaimed as being an aggressive businessman, surely felt pressure to keep investors satisfied in order to secure more capital for expansion. Poor business performance meant losing investors and revenue. Faced with keeping an appearance of a healthy and profitable company, Adelphia established a practice of manipulating reports to inflate earnings and exclude billions of dollars in liabilities. According to James Brown, a former Adelphia executive, “it became a part of the corporate culture of Adelphia to conceal information that might be disadvantageous for the company” (Barlaup, 2009).
Records falsification was not the only illegal activity the Rigas family was wrapped up in. The family used company funds, unbeknownst to their investors, to finance personal endevours and interests. Examples include using corporate money to build a $12.8 million golf course on the Rigas property, using the company plane for personal vacation trips including a safari to Africa, and funding for two Manhattan apartments for his family (Markon, 2014). Not only this, but John Rigas purportedly used the company jet to fly a Christmas tree two times to his daughter in New York...