Crowd Funding: A Case Study at the Intersection of Social Media and Business Ethics

CASE DESCRIPTION The primary subject matter of this case concerns ethical issues involved with crowd funding. Crowd funding is the use of social media to raise funds for various purposes, ranging from community-based endeavors to personal wants. There are several ethical issues surrounding crowd funding: what people actually do with the money; how to deal with people who do not fulfill their promises; whether or not websites should limit funding to specified goals; whether or not recognized artists should be prohibited from participating, in effect competing against aspiring artists. Specific attention is given to the case of artist/musician Amanda Palmer, who raised over $1 million on Kickstarter.com for an album project that had only $100,000 as an initial goal. She later admitted that she spent the rest of the money that was raised on personal expenses. This case has a difficulty level appropriate for a junior or senior level course, although it may be used at a first-year graduate level, depending on the amount and complexity of the background information that is assigned. This case requires from one hour (if the instructor's goal is class discussion only) to four hours of preparation (if the instructor's goals involve presentations by individuals or teams of students). This is a timely topic of much interest to young students who are heavily influenced by social media, and particularly those entrepreneurial students who might view social media as a means of raising funds for their projects. CASE SYNOPSIS Social media, especially in the form of crowd funding, presents many ethical issues. For the websites and platforms, what sorts of projects should be funded? For the artists, what types of projects should be funded and for what amount? For investors, which artists should be funded, for how much, and what should one do if the artist does not fulfill their promises? This analysis focuses on the real-life case of Amanda Palmer, an artist/ musician who posted a $100,000 album project on Kickstarter.com. Palmer offered several levels of incentives for contributions, from autographed copies of the album, to concerts at the contributor's home. Within a short period of time Palmer raised over $1 million. She later admitted that she used some of the additional funds for personal expenses. This case raises numerous ethical issues. For the websites: should they allow established artists to raise funds through their websites? Should those who seek funding be limited to the amounts necessary to fund their projects? Also, should the proprietors of the websites monitor those who seek funding to determine how they actually use the money that is raised? For the contributors: should they contribute to projects that already exceed the requested amount by the artists? And how should one deal with artists who spend contributions frivolously or do not fulfill their promises to contributors? For the artists: what is the appropriate amount of funding to request for project? How should an artist deal with excess funds that are contributed to a project? Are there ethical obligations to contributors, especially when many of them may know that they are contributing funds in excess of a project's requirement? Social media continues to transform individual lives and cultures. From Facebook to Twitter, social media influences behaviors and choices, and raises numerous ethical issues. In the context of these new forms of communication some actions that were formerly acceptable are now deemed to be unacceptable. Likewise, some activities once viewed as marginally acceptable or even embarrassing are now considered socially acceptable. Venting one's frustrations about work or the boss around the water-cooler was fine, but posting such feelings on Facebook has given rise to a number of legal and ethical problems. Conversely, panhandling or asking for a handout on the street or at the mall was once socially unacceptable or generally frowned upon, but today doing it online is considered not only acceptable but fashionable. …