Business Ethics Essay
Number of sources:12
Topic:As a manager is it important to be ethical or is it really just important to focus on making money for the firm? And if so why, or why not?
Ethics in Business: Being Ethical or just Making Money: A Case Study of Toyota Recalls
Ethics in Business
Ethics refer to a philosophical school of thought that depicts what is right or wrong. Morality refers to a set of standards and principles determined by a code of conduct in a certain philosophical or business context. Values on the other hand refer to absolute or relative assumptions attached to an ethical action. In the business context, the term refers to the school of thought that guides decision-making and policies, and depicts what is right or wrong in a business context. Business ethics touch on all business entities like employees, stakeholders, and employers; it is dedicated customer satisfaction, product quality, and social responsibility. Managers who make decisions for purposes of building power, wealth, or reputation are devoid of ethics and their fundamental philosophy hinders any ethical objectivity (Ferrel, 2010). In this paper, I present the ethical dilemma at Toyota Motor Company whereby business ethics were compromised, losses incurred, and reputation lost from what was merely a mechanical mistake.
Benefits of Ethics in Business
There are several benefits that ascribe to being ethical and practicing social responsibility. One of the benefits of being an ethical business is the fact that ethical businesses are able to attract and retain investors, customers, and employees. Investors find peace of mind when they realize that they have invested in a company that operates in an ethical and responsible manner; investors need to have their money being spent in a manner that concurs with their own moral standing. Employees feel comfortable and motivated at the realization that their actions do not permit the proliferation of unethical practices. Failing to be a good employer may push away good staff, and reduces the likelihood of attracting good starters; this undermines performance, increases costs, and reduces efficiency. Customers on the other hand find delight in the knowledge that they are buying products from a company that sources labor and materials in an ethical manner. Being unethical means that an organization loses its competitive advantages; market share is lost, popularity shrinks, and revenues are reduced. Ethics in an organization also boost morale and organizational culture; staff at a high-integrity and socially responsible organization are less prone to dissatisfaction, stress, and attrition, and thus are happy and more productive. Ethical organizations also benefit since they are less likely to face legal tussles. All companies are expected to abide to their industrial code of ethics; unethical organizations find themselves in legal problems that cost enormously. Finally, ethical companies are able to earn reputation. Even in the wake of scandals and controversies, an ethical company knows how to deal with them openly, honestly, and quickly. A reputable organization is able to achieve its goals but once reputation is lost, it is extremely hard to rebuild (Ferrell, 2010).
Ethical Decision Making Process
For companies to balance between ethics and profits and maximize profits, it needs a robust ethical strategy. The ethical decision making process is a crucial tool that can help managers and other stakeholders get the best out of ethical issues (Martocchio & Liao, 2009, 223).
The ethical decision making process is based on four components of ethical behavior; Moral awareness, moral judgment, moral motivation, and the moral character. It is a systematic approach to solving ethical problems. In order to explain this process, we need to reflect on the case of Toyota Recalls in 2009-2010.
Toyota Recall Case Study
Headquartered in Japan, Toyota is the world’s leader in motor vehicle, having overtaken General Motors in 2008. Between 2009 and 2010, the motor corporation manufactured vehicles with faulty braking systems and faulty accelerator pedals, the poor braking and accelerating mechanisms caused persistent crashes; to the extent of attracting a global concern. The mechanical problem led to the recall of over 5.3 million vehicles in 2010. Although the manufacturing fault was the initial cause of the 2010 financial crisis, the ethical dilemma was the main issue that placed the company in a full-blown disaster. The main ethical issue emanated from laxity of the CEO Akio Toyoda in admitting the company’s responsibility in the fatal accidents that followed the manufacturing fault (Tabuchi & Maynard, 2009; Evans & MacKenzie, 2010).
Stage 1: Moral Awareness. Moral awareness or sensitivity is all about recognition of an ethical problem. It is the first step in the ethical decision making process since a problem cannot be solved unless its existence is recognized (Kohlberg, 2004). It calls for both individual and organizational characteristics to recognize an ethical issue. Problem recognition requires that managers consider how both personal and organizational behavior affects others, devise a possible course of action, and establish causes and consequences of every strategy. The most essential aspects at this stage of moral action include empathy and perspective skills. In the context of Toyota recalls, the CEO should have recognized the ethical problem behind the faulty braking system. This would have been the initial stage towards finding a solution to the faulty braking system.
Stage 2: Moral Judgment. Once an ethical problem has been identified, decision makers may select the best course of action from several options developed in the first stage. Here, managers decide the course of action that is right or wrong for a given situation. This stage is a systematic process whereby the management develops a deeper sense of reasoning, from the limited egocentric perspective to the broad perspective that incorporates societal needs (Werhane, 2009, 54). First, Toyota overlooked moral judgment by first hiding the cause of the many accidents that ensued from the brake system failure. The CEO should have rapidly decided the necessary action following internal assessment reports even before the public noticed the failure.
Stage 3: Intent. The third stage in the ethical decision making process entails the moral focus or the motivation. This stage comes after deciding the course of action. It is whereby the decision makers determine the focus of their choices. It is common for moral values to conflict with other significant values. Unfortunately psychologists have established that hypocrisy and self-interests prevail over moral values (Batson et al., 2002, 334). At the organizational level, motivation takes center-stage because if the reward for a moral action is great, individuals are likely to exercise ethical conduct and report unethical practices. At Toyota, it would be argued that Akio Toyoda chose to remain silent about the fatal accidents and conceal accident reports so as to avoid financial responsibility. The CEO did not find enough motivation in the ethical deed of correcting the brake fault and save lives, rather, Toyoda though he could save money by ignoring the problem. The Managers should institute policies that facilitate reporting of unethical conduct and reward ethical practices. Toyota Motor Corporation has always been operating on a business principle of producing automobiles for the prosperity of the society; execution of this slogan would have enabled reporting of unethical practices to the industrial leaders, or ensured due diligence in the production process. Moreover, installing safe braking systems would have cost the company less than the cost of recalling 5.3 million cars, let alone the loss of reputation.
Stage 4: Moral Behavior. Executing the moral action calls for ethical character. Moral agents should be able to resist opposition, handle fatigue, overcome distractions, and develop strategies for achieving their goals without contravening moral standards. Leaders should have courage so as to implement plans despite the involved risks and costs. Integrity is important in enabling leaders to uphold choices, humility obliges managers to tackle limitations, and optimism enables leaders to thrive in difficulties. Additionally, compassion and justice enables leaders to focus on others as opposed to egocentrism, while virtues enhance moral action. These are elements that seemed to lack among the leaders at Toyota Motor Corporation as seen when the CEO could not accept the company obligation of executing ethical responsibility (Trevino & Weaver, 2003, 160). Toyoda was not a moral person despite the company having a strict moral philosophy, and this led to the ethical problems that faced the company.
Ethics, morality, and virtues are a crucial aspect to be considered if any company has to thrive in today’s business environment. Organizations that observe ethical guidelines tend to gain competitive advantages and emerge profitable as opposed to those organizations that undermine ethical conduct. Although unethical companies may try to justify actions on the basis of the utilitarian perspective, ethical companies have several benefits over unethical companies. Organizations that uphold ethics enjoy competitive advantages, customer loyalty, stakeholder satisfaction, customer satisfaction, and above all reputation. Unethical companies on the other hand are faced with problems such as attrition, stress among staff, and dissatisfaction. In addition, unethical companies find themselves in legal tussles that greatly alter operations and lower the overall profit margins. Managers need to strike the right balance between ethics and profits. If organizations are guided solely by economic ideals, they end up suffering losses that could have been avoided by proper ethical conduct. For companies to balance between ethics and profits and maximize profits, it needs a robust ethical strategy. The ethical decision making process is a crucial tool that can help managers and other stakeholders get the best out of ethical issues. The process is based on four components of ethical behavior; Moral awareness, moral judgment, moral motivation, and the moral character. It is a systematic approach to solving ethical problems.
Toyota recall Case has been used to elucidate the relevance of the various stages of the process in organizations. It is evident that it was failure to observe business ethics and morals that led to the ensuing financial stalemate rather than the manufacturing error. Moral awareness, which entails recognition of the moral problem has been featured as a crucial step in any ethical decision making process. Failure of the management to approach a problem from an ethical standpoint means that the problem will develop. At Toyota, the company management failed to recognize the moral problem, thus problems ensued. Problem identification alone is not enough, once the ethical problem has been identified, the management must discern the best course of action, which leads to the second stage: moral judgment. The stage calls for decision makers to exercise a broad sense of morality that incorporates societal needs rather than organizational or individual needs. From the case study, it has been observed that failure to incorporate societal needs in decisions leads to unethical conduct, just as Toyoda considered saving costs as opposed to the societal need of saving lives. However, a manager or an organization may recognize the best course of action, but fail to make ethical decisions due to other significant matters such as loss of profit, or job security. This brings us to the third stage: Intent. The intent calls for both organizational and individual character. Moral character must involve a sense of sympathy, guilt, and disgust for unethical conduct. At the organization level, policies should be put in place such that ethical actions are rewarded while reporting of unethical conduct is not punished. The fourth stage in the ethical decision making place involves moral behavior. And moral behavior that entails the ability to resist opposition, handle fatigue, overcome distractions, and develop strategies for achieving their goals without contravening moral standards. Values such as integrity, humility, compassion, and justice are crucial at this stage. Failure to adopt the ethical decision-making process led to car recalls that culminated in Toyota’s financial crisis in 2010. The company actions also attracted ethical speculations that led to legal suits which cost the company much more than it saved. The company was obliged to recall over 5.3 million cars and compensate for deaths and injuries that resulted from car accidents. The application of the ethical decision making process would have been crucial in evading the ethical challenge associated with the Toyota Motor Corporation.
Batson, C. D., Thompson, E. R., & Chen, H, 2002). Moral hypocrisy: Addressing some alternatives. Journal of Personality and Social Psychology, 83, 330–339.
Evans, S., MacKenzie, A., 2010. The Toyota Recall Crisis: A Chronology of How the World’s Largest and Most Profitable Automaker Drove into a PR Disaster. [Online]. Available at: <http://www.motortrend.com/features/auto_news/2010/112_1001_toyota_recall_crisis/> [Accessed August 26, 2014].
Ferrell, O. C., Fraedrich, J., & Ferrell, L., 2010. Business ethics: Ethical decision making and cases: 2009 update. Mason, OH: South-Western Cengage Learning.
Kohlberg, L. A., 2004. The psychology of moral development: The nature and validity of moral stages (Vol. 3). New York: Cengage Publishers.
Martocchio, J. J., & Liao, H., 2009, Research in personnel and human resources management. Volume 28. Bingley, UK, Emerald Jai.
Tabuchi, H. & Maynard, M. (October 2009), President of Toyota apologizes. The New York Times.
Werhane, P., 2009. Moral Imagination and Management Decision-making. New York: Oxford University Press.