The Adelphia Scandal Essay

1114 Words Jun 28th, 2006 5 Pages
The Adelphia Scandal
In 1952, John Rigas purchased his own cable company. By the late 1990's, he had turned it into the sixth largest cable company in the United States with 5.6 million customers. The business was always run as a family style business which led to fraudulent acts among family members and upper level executives. The family has been accused of stealing $3.1 billion from Adelphia and is now facing criminal charges. Adelphia was forced to file chapter 11 bankruptcy and as of April 24, 2004, the new board of directors made the decision to break up the company and sell it. The Adelphia scandal is morally wrong because the Rigas family coerced and exploited employees, harmed all stakeholders as well as stockholders, and had
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In addition, the Rigas family harmed all the stakeholders. Stakeholders are those "groups who have a specific stake in or claim on the firm. Specifically suppliers, customers, employees, stockholders, and local community, as well as management" (Freeman 56). Adelphia Coliseum, now renamed The Coliseum, had to be renamed because of Adelphia's bankruptcy. Adelphia Coliseum was a stakeholder. This made everyone who utilized the stadium a stakeholder as well. The stakeholders were harmed because when Adelphia went bankrupt, the coliseum was not completely paid for. Therefore, they had to find alternative ways to pay for the coliseum. The Rigas family was the manager of Adelphia and had a fiduciary responsibility to the stakeholders. This scandal was immoral because Adelphia did not fulfill their responsibilities to their stakeholders when it was their duty.
According to Milton Friedman, "stockholders are the owners of the corporation, and hence corporate profits belong to the stockholders. Managers…have a moral obligation to manage the firm in the interest of the stockholders" (Friedman 45). Adelphia was managed in such a way that it was not in the stockholder's interest, in fact, it was only managed in the interest of the Rigas family. It is wrong to harm the stockholders because they have entrusted the company with their money with an expected return and maybe an…

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