Ethics and Sustainability - Toyota Cars Recall - Essay Example

HET 105 – Professional Skills - Telecommunications Ethics & Sustainability Report May Ethics and Sustainability The case of Toyota Cars Recall Part 1. Ethics General Problem description An ethical issue existed in the dilemma of Toyota Car Manufacturing Company in 2009. This problem was revealed by US Transportation Secretary Ray Lahood (CBS News, 2010) that Toyota made a “huge mistake by not disclosing safety problems with the pedals of its manufactured when it was discovered in September 2009, but issued a recall only late January of 2010. The mistake involved 2.3 million vehicles of Toyota. CBS News also said that The National Highway Traffic Safety Administration had received reports of 89 deaths, 57 injuries and more than 6200 complaints on brakes acceleration in Toyota vehicles from year 2000 to 2010. Toyota got into a situation wherein disclosure could be damaging to both the company and to its customers. An ethical problem existed wherein a decision has to be made between what is bad and what is good. Toyota is also faced with a decision to act based on legality or efficiency of actions. Discussion and description of the ethical issue The first steps in analyzing ethical issues are getting the facts to guide decisions and next are the appeal to values because the facts does not tell us what to do, but values directs us to moral issues of decisions. Relevant facts of the case Documents showed that the Toyota knew of the problem with the sticky pedals in late September but did not issue a recall until late January. Why did they hide it from the public? Was it their intention to continue selling damaged vehicles and let buyers beware and face accidents? What facts are not known? Who discovered the damage, but did report it to higher ups? When the damage was known by higher ups, what actions were done? There is very little information on the internal events about the damage, who discovered it and other related details. What has been established is that Toyota knew of the damage as early as September of 2009 but made announcements only in late January in 2010. In five months time, there could have been accidents due to faulty breaks that could have been avoided. What individual groups have important stake in the issue. Are some concerns more important? Individual groups who have important stake in the issue are customers of Toyota; the management and stockholders and the government. Some concerns that got Toyota into a mess, I believe, is the fear for outcome of decisions that would adversely affect Toyota’s operation. Outline the existing outcome Now that we have the facts, we can now establish the moral guidelines within which a framework of decision could be formed. The dilemma of Toyota shows following courses of action 1. Not to disclose to the public the defects of the cars 2. To report instantly to the public the problem of the faulty brakes. Who will be affected by each action? Those who will be affected by the first action are the Toyota customers who are facing dangers of accident due to faulty break system. Report said that there are about 2.3 million Toyota vehicles affected by the damage. In the second action, when Toyota announced to public the damage and recall of the cars, those affected are the stockholders and management. Confidence of customers on Toyota is threatened thereby there is a risk of decline of sales. Investors will also lose confidence on the stability of the company thereby shaking the profitability of the company. What benefits will be derived from each action In the first option, sales of the company continue while company looks for remedy in the damaged brake system. Company keeps silent about the damage, and accepts complaints as if it is a normal thing in manufacturing. The company and stake holders are ultimate beneficiaries. In the second option, the benefit of the customers becomes the priority of Toyota. It considers first the repair of the damaged vehicles over profit, thereby keeping customers satisfied. Toyota maintains customers worldwide, and the recall of vehicles accounted for losses in the company that further aggravated its financial losses due to economic downturn. Framework of decisions are based in utilitarian, rights, fairness and common good approaches as outlined by Velasquez, et al. In utilitarian approach, decision should be based on what options give out greatest benefit and least harm; and in this stance, What good will it bring to the customers who are the lifeline of the business; and how much harm is expected from the move. Decisions should be done if the good is more than the harmful ones. (James Conley) Here, there is a need to know who will be affected by each action, what benefits will be derived from each action, then finally choosing the action that will give out the greatest benefits and least harm. It should be one that provides the greatest good for the greater number. The second is based on the deontology or rights approach of individual to choose for himself/herself, such as the right to the truth; the right of privacy; the right not to be injured; and the right to do what is agreed. In deciding whether the Toyota options are moral or immoral using the second approach, it is important to consider the question of “does the action respect the moral rights of everyone.” Actions are said to be wrong when they violate the rights of individuals, the when the violation is more serious, the action is considered more wrongful (James Conley, n.d.) Then in our case, if Toyota takes on the first option, decision is wrong because it infringes on the individual rights of the individual. Third approach is the fairness or justice approach which appeals to fairness and avoids discriminations on its actions. When Toyota chose first option, it is not fair to customers who will not get best satisfaction from the car purchased. Customers are discriminated upon over the choice for profit rather than safety. And last, is the common good approach that bases decisions on the assumptions that “a society is comprised of individuals whose own good is inextricably linked to the good of the community” (Velasquez, M. et. al) This approach calls for community members to be bound by the pursuit of common values and goals. For example, policy decisions are focused on common good such as affordable health care, just legal system, effective public safety, etc. Evaluate the outcome: How can the decision be implemented with the greatest care and attention to the concerns of all the stockholders. ? Ethical behavior in business is critical. When business firms are charged with infractions, and when employees of those firms come under legal investigation, there is a concern raised about moral behavior in business. Hence, the level of mutual trust, which is the foundation of our free-market economy, is threatened. The pressure on Toyota management is how to implement its decision to recall the defective cars in the market worldwide. The implication of these decisions could greatly affect the profitability standing of the company; and how would the customers react to this admission. The ethical behavior of Toyota becomes critical, because now the company is under under legal investigation and is charged with infractions. The company has been slapped with million dollars of fines aside from the losses it has incurred in the recall and repair of cars with damaged brake systems. Under the circumstances, concerns are raised on their moral behavior in business. For example, their action of not reporting the damage to the public at once is being questioned. Thus, the level of trust is being eroded. Describe a better outcome Is there a better outcome in the dilemma of Toyota? The issue starts with the conflict that states Toyota sacrificed the core value of safety for profit. However, we are probably missing the point of the real challenge of Toyota; not of disregarding safety for profit, but in sensing a balance between the two. David Gebler (2010) contends that the public assumes some degree of risk in any product, and for that assertion, said that car manufacturers do not claim to have 100% perfection. The question here is what is the margin of perfection, or how does Toyota decide “what is safe enough”. The ethical issue lies within the management; first who had the information but did not report it to the higher management, next, is to find out whether the stake holders, both internal and external have been included in the decision-making process. There is very little information from Toyota records that point to the transparency of reporting of this ethical issue. What has been gathered are the apologies of top management for the defect and the recall of the damaged cars for repairs to appease the frustrations of the customers. The lesson to be learned in this process is the role of transparency that demands voices of those affected be heard in the multiple process of arriving at a decision. Another outcome that can justify the decision is doing a cost benefit analysis of the decision, analyzing the costs of recall vs. long term benefits for the company. Part 2. The SUSTAINABILITY Was Sustainability considered or evaluated.? Sustainability reporting has been defined as “publicly disclosing an organization’s economic, environmental and social performance” (Cebuholdings.com) This kind of reporting has gained wider acceptance. It gives stakeholders and the community information on what the company has been doing to contribute to the environment, its social responsibility and economic performance. We will now look at Sustainability Reporting of Toyota to see if it has complied with the Global Reporting Initiatives Sustainability Reporting Guidelines (GRI). The GRI should include a “CEO statement, key environmental and economic indicators, company profile, descriptions of relevant policies and management systems, stakeholder relationships, management performance, operational performance, product performance and a sustainability overview”. (Mallenbaker.net. n.d.) The 2009 Sustainability Report of Toyota includes an Executive Message, the corporate Philosophy and structures, environmental aspects, social aspects and economic aspects needed in a GRI. Sustainability has been emphasized in the guiding principles of Toyota that states among others, “to dedicate ourselves to providing clean and safe products and to enhancing the quality of life everywhere through all our activities.” (Sustainability Report 2009)See copy of guiding principles below) Source: Toyota Sustainability Report, 2009 If sustainability was considered how could it be improved? Overall, the sustainability report touches everything on what the GRI guidelines required. But the report did not mention negative things like damage reporting, customers’ complaints and anything about the ethics incident. However, the message of the Chairman is clear when he stated Toyota’s philosophy of putting the customers first in their priority of concerns and asked those concerned to embrace this philosophy to overcome difficulty. The most pressing difficulty that challenged this statement is the ethical issues of faulty brakes reporting. How Sustainability reporting could be improved in this particular situation If Toyota is concerned about sustainability it should include information on the problem and what have they done about it so stakeholders will understand the whole issues. It should be a matter of concern for all stakeholders who have invested in Toyota, a reassuring message to all buyers of Toyota cars that will come up as an image building, and for the benefit of the company. In earlier part of the report, it has been stated that there has been lack of transparency in the decisions of Toyota that puts doubt on many interested people. In the subsequent reporting, it is recommended that Toyota make a clear statement on the issues, what is its background, and account to the stakeholders what has been done to solve the problem. Reports of what they have done are sketchy and are known only through media news reporting, but none could be more reliable if it is coming from authoritative sources like the company itself. GRI has been an accepted form of reporting done worldwide which is a counterpart of financial reporting, and it could help the company if same information is included in their GRI for 2010. Conclusion Business Ethics and sustainability development reporting are the recent additions in responsibility reporting of a company. Most often businesses meet ethical dilemma in its day to day activities that it is important that a Code of Conduct is established, understood and followed by everyone in the company. Based on the data analysis gathered, the code of conduct was breached by internal management of Toyota, but responsibility was not clearly defined. The code of conduct of Toyota needs some review and amendments to draw responsibilities of actions to avoid a repeat of similar incident. Works cited CBS News. “Feds Examining 70,000 Toyota Docs for Lapses. April 6, 2010. Cebu Holdings.com. “What is sustainability reporting? What is covered in a sustainability report?” n.d. 25 May 2010 < http://www.cebuholdings.com/faq/what-sustainability-reporting-what-covered-sustainability-report> Conley, James. “Ethics” n.d. In Reference for Business. 26 May 2010 Gebler, David. “Toyota Ethics: Questions to get to answers” April 2010. Blog: Business Ethics. 26 May 2010 Mallenbaker.net. “Global Reporting Initiatives.” (n.d.) Mallenbaker.net. 26 May 2010 < http://www.mallenbaker.net/csr/gri.php Sustainability Report 2009. Corporate Philosophy and Structures. 26 May 2010 Velasquez, Manuel, Andre Claire, Shanks, Thomas, S.J., and Meyer, Michael. “Thinking Ethically: A Framework for Moral Decision Making” 1996. Santa Clara University. 25 May 2010 Read More