Tuesday, April 4, 2017

Hampton Creek: Miracle Mayo Causes Criminal Charges

Controversy:
Just Mayo (Product of controversy)

Hampton Creek is a company that sells organic plant-based foods. Headquartering out of San Francisco one can see this company is in the right place. Founded by Josh Balk and Joshua Tetrick in December of 2011. Hampton Creek has a range of products that claim to be organic and healthier than the average. Hampton Creek however ran in to issues pertaining to it’s footprint of production. “Hampton Creek raised $90 million from venture capitalists and other private investors”(Benner).  “Hampton Creek never publicly admitted its numbers were wrong. It scrubbed its site of sustainability claims, and the Cookie Calculator vanished”(Zaleski). Hampton Creek was caught lying about the footprint they had produced making products. After hiring the LUX company of Boston to do research on their products. The research/marketing company had shown they had come up with different numbers than Hampton Creek had shown. Hampton Creek had been advertising how efficient it's company was, compared to other companies their numbers where great. “A single egg-free, dairy-free Hampton Creek chocolate chip cookie saved 35 grams of carbon emissions and almost 7 gallons of water”(Zaleski). To cover up their mistakes they hired a network of people to buy back their false product. Hampton Creek has entered into a case of unethical behavior. Tetrick had told the public that his buy back program was simple and costing only $77,000. "Buybacks surged in 2014, Hampton Creek expensed about $1.4 million under this unusual category over five months, compared with $1.9 million of net sales in the period"(Zaleski). Hampton Creek was not only losing money to lack of sales, but lost money to the buy back program. "She was directed to buy 20 bottles a week of Just Mayo from each Whole Foods store in a large territory. She was also told to hide what she was really doing"(Zaleski). This resulted in a surplus of mayo at this one "Creekers" home. In business people want honest and trustworthy work and words. When a company says something like the following: told to hide what she was really doing, says something is up. Hampton Creek claims it is a practice for quality control of it's product. It would make sense if they bought 1 to 2 a month just to really test quality. Instead, they made this women buy so much that the donations she made had seen  surplus. The other controversy to all of this is that the mayo doesn't even contain egg. Egg is one of the ingredients that deems something mayo or alternative to mayo. This takes away from the mayonnaise market because it would significantly cut Hampton's costs. That means that Hampton could buy a large share of the market due to a surplus of cash.


Stakeholders:
Josh Tetrick CEO of Hampton Creek 
The stakeholders of the scandal are the consumers who bought the product, also the people who work for Hampton Creek. The major stakeholder is the company Hampton Creek who has lost revenue due to the choices made. The consumers are not just the people who go and take the product of the shelf. Consumers include the companies that buy in large quantities to sell to the public. "Tetrick used supermarket sales figures much as he used the environmental claims—to raise venture capital from a cast of billionaires including Salesforce.com founder Marc Benioff, tech investor Vinod Khosla, Hong Kong developer Li Ka-shing, and entrepreneur and venture capitalist Peter Thiel"(Zaleski). Hampton had raised $220 million from these investors. The other investors wanted to remain anonymous because of the scandal behind Hampton Creek.


Individualism:
This is the theory that tells people to do what is right for the person. Your needs come before others needs. This thought was the one Mr. Tetrick was having when he made the decision to lie to the public. Tetrick was clearly trying to maximize his profits, not matter how he had to do it. The catch to individualism is that is has to be within a legal standpoint for it to work. With Hampton Creek that is not the case. Committing fraud on the foot print of its ingredients, and lying about the prices they paid to get ingredients. These helped to fluctuate the numbers in their favor, leaving them to be the fastest growing food company of 2013-2014. The individualistic person would not see it this way, however it was a good thing. The company had mad a massive profit within a year of being a start up. To most analyst of the business that is an astounding feat to have made. “ We’re not trying to optimize at every turn, thinking, ‘What’s the margin?"(Benner ). Tetrick was only acting on behalf of his company when he made his choices. The best way to maximize the profit is to cut cost, this is exaclty what Tetrick had tried to do.

Kantianism:

Inflated sales
" An ethical behavior, action, or decision is one that is rational, allow and help people to make rational decisions, and respects all individuals' needs and differences"(Salazar, Chp4 ppt). Within Hampton Creek it does not seem like many rules had been broken, when it comes to individualism. With Kantianism it is the opposite because Tetrick did not use a rational thought to produce more profit. Hampton Creek had not practiced being ethical when they decided to start a "buy back" program. This may have a goo will intention by trying to make money, but not for the public. Individual gain is good when it is legal and helpful. If Hampton Creek was able to really cut cost with a high efficiency it would help. A healthier product at a lower price would help to reverse the effects of world hunger. When a company claims they make more with less than everyone assumes that they are green. A green company is about environmental protections and correct protocol. Hampton Creek is an organic food company and that is in goodwill. Hampton Creek does display some Kantian types of thought in business. Unfortunately not everyone can do these things correctly, good intentions don't always mean it's right.

Utilitarianism: 
"Utilitarianism tells us that we can determine the ethical significance of any action by looking to the consequences of that act"(DesJardins 29). This approach allows someone to look at the situation from outcome. The verdict of the case really should show how ethical the practice had been. "Every single rule that you think exists, is probably wrong and was probably created by people no smarter than you and no smarter than me. We can look at all those rules and totally ignore them and do whatever we want”(Zaleski). This shows that Tetrick was not about the people but about his profit in a short term. With this mindset Josh Tetrick set out to raise profit and gain shares as fast as he could. Cutting into the mayo market even though mayo technically has to contain eggs. Knowing this Tetrick knew he could make money from not using the one ingredient that matters. "Hampton Creek exaggerated the number of plant samples it had analyzed. One person said that the actual number was below 1,000. Another said, "when they were saying 4,000, it was probably closer to 400. At least 5x less than it was claimed, and that's conservatively"(Biz). When things are said about a company that pertain to these acts that are usually seen as unethical. Hampton Creek took part in trying to get ahead by cutting corners. A utilitarian thinker would see Hampton Creek as selfish, only trying to make profit. Hampton Creek was said to be a green organic food company that is for the people. Cutting corners, promoting good intentions, and then lying about it aren't seen as ethical.

Virtue Theory:
Quantity of mayo purchased in a day
The virtue theory has 4 business practices that will pertain to pure virtues. The four are courage, honesty, temperance, and justice. Hampton Creek showed courage in the wrong way. Courageous to get in a competitive market such as food. Not courageous in the way that they had made up for losses, and ill-gained profit. "Act so as to embody a variety of virtuous or good character traits and so as to avoid vicious or bad character traits"(Salazar 22). Did Josh Tetrick practice good characteristics ? When CEO of a company it should be in your best interest to make profit. The simple fact that may be missing is that making profit needs research, consumers, and honesty. Cutting corners to make profit is not a virtue that anyone should hold. Honesty is the next one on the list, and Hampton Creek is not in good standing. "She spent almost $12,000 purchasing the product, she says, and she could tell the buybacks had nothing to do with quality control. “But I really didn’t think about it because I cared so much about the cause”(Zaleski). Hampton Creek has not displayed a level of trust with the public, sketchy business practices aren't virtuous at all. As previously stated buying 1 to 2 jars a month wouldn't be unreasonable, it shows you actually use the product. To have other people go out and buy absurd quantities is the problem. It shows the opposite of honesty for the people involved, and a level of distrust in your product. Temperance was not used in the drive for making a large profit to impress investors. If temperance was used than there would have been a lot more research conducted, but Hampton had used "pumped up" numbers. This leads us to the last aspect on the list and that is justice. Justice is not found when ill mannered practices are taking place. The only beneficiary of the corners cut is the company, which lead one to belief they are just profit based. A company that is solely profit based may have good intention, but their virtues must be clear. 

Justified Ethics Evaluation:
In the end Hampton Creek can not be seen as ethical. Hampton Creek was all about being a organic company that was about changing the way food is made and produced. Trying to gain a high share of the food market by cutting corners can not be justified as ethical behavior. Not only is it that they cut corners they also exploited people who wanted to make a difference. Hampton Creek had passed itself as a company trying to make a difference witting the food community. Using organic materials that were said to leave less of a carbon foot print. These materials are more expensive meaning the revenue would have to be able to keep up with demand of this great product. That was not the case, quality control was being done well into the establishment of the company. They tried to disguise this as "fundraising" but it was not adding up. According to the 4 ethical theories none of the practices conducted are able to deem Hampton Creek ethical. The only chance it has is by an individualistic person viewing the company. An individualist has the ideology that making the most profit for a company is the only thing to do. Maximizing profit is not wrong at all, that makes sense to most businesses. The way it gets done it the problem that other people would have with Hampton Creek. If this was aloud to continue then they would have been able to change the market. Hampton Creek would have been able to put other business out of practice because of the cost cuts. Hampton Creek is still around as a company, making other products that are organic. Hampton Creek would have been one of the fastest growing companies in America if they weren't caught.

References:

Benner, N. W. (2016, August 19). Hampton Creek, Maker of Just Mayo, Is Said to Be Under Inquiry. Retrieved February 18, 2017, from https://www.nytimes.com/2016/08/20/business/hampton-creek-investigation-just-mayo.html?_r=0

Carson, B. (2015, August 05). Sex, lies, and eggless mayonnaise: Something is rotten at food startup Hampton Creek, former employees say. Retrieved April 01, 2017, from http://www.businessinsider.com/hampton-creek-ceo-complaints-2015-7

Hampton Creek is making food healthier and tastier. (n.d.). Retrieved February 18, 2017, from https://www.hamptoncreek.com/

WhiteWave Foods. (n.d.). Retrieved February 18, 2017, from http://www.whitewave.com/


Zaleski, O., Waldman, P., & Huet, E. (2016, September 22). How Hampton Creek Sold Silicon Valley on a Fake-Mayo Miracle. Retrieved February 18, 2017, from https://www.bloomberg.com/features/2016-hampton-creek-just-mayo/
profit, so the
only
obligation
that the business person has is
to maximize profit for the
owner or the stockholders.

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