Tuesday, November 24, 2015

Goodyear Tire & Rubber Co.:Unlawful Payments and Bribes (2007-2011)

The popular Goodyear Co. blimp
The Goodyear Tire & Rubber Company, was founded on August 29, 1898, is the first manufacturer of tires. The Company’s business is to develop, manufacture, distribute and sell tires and related products and services across the world. The Company operates in four segments: North America; Europe, Middle East and Africa (EMEA); Latin America, and Asia Pacific. The segments in Europe, Middle East and Africa develops, manufactures, distributes and sells tires for automobiles, trucks, buses, aircraft, motorcycles, earthmoving and mining equipment, and industrial equipment throughout Europe. In the Middle East and Africa, products are manufactured under the Goodyear, Dunlop, Debica, Sava and Fulda brands and other house brands. During 2007 to 2011, the two Goodyear holdings subsidiaries made over $3.2 million in unlawful payments and bribes of over $1.5 million were paid to employees of local government-owned businesses, law enforcement agencies, tax and other local authorities for the purpose of making tire sales. Goodyear recorded this in its books back in 2012 as $10, 000 transactions. These bribes were brought to the attention in July 2011 through an anonymous tip left on a confidential ethics hotline by an employee.
Goodyear did not detect or prevent these improper payments because it failed to conduct adequate due diligence when it acquired Trendsetters, and failed to implement adequate Foreign Corrupt Practices Act (FCPA) compliance training and controls after the acquisition. An investigation was done internally and by SEC and in February 24, 2015, the U.S. Securities and Exchange Commission (SEC) publicized that they had reached an agreement with Goodyear Tire &Rubber Co. Goodyear would pay more than $16 million to settle charges of Foreign Corrupt Practices Act (FCPA) accounting violations. These charges against Goodyear are considered commercial bribery and official corruption by Goodyear’s subsidiaries in Kenya and Angola. The bribery payments was falsely recorded in the books and records of Trendsetters and Trentyre as legitimate business expenses, which were then consolidated into Goodyear’s books and records is a violation. 
Richard J. Kramer, CEO of Goodyear Co. as of 2010

The stakeholders in this case include the employees and their families, customers and more uniquely the Kenyan business and government officials. The direct stakeholders were the employees that had knowledge of what was happening and thought it was unfair and unethical. Looking at this case from the employee’s point of view, all employees want to work for an employer or a company that is ethical and fair in their practices and if they can see the unethical behavior just for profit, they will question if they are valued as employees for this company. Moreover; the Kenyan business owners that are taking bribes to help their businesses be competitive among their peers carry these tires even if they have knowledge of the quality of the product. Next we have the customers who are buying from these businesses because they are carrying more of the Goodyear brand tires on their shelves. They do not have a clue whether the product is of good quality but do not have many choices on the shelves. If the product is faulty they have to come back and repurchase which is dishonest. The last stake holder in this case is the government officials of Kenya because they are contributing to the unethical behavior in the country. They are the ones that should be eliminating big cooperation like Goodyear from coming into their country and corrupting local businesses. 


Individualism according to Milton Friedman states the only goal of a business is to profit within the constraints of the Law. Tibor Machan also view individualism as “classical individualism” which means the only direct goal of the business is to profit and their primary obligation the business person has is to maximize profit (power p slide, 3).
In this case we clearly see this was Goodyear tire company main goal, Individualist would say that this theory was followed because they not only paid local business but they went to the extreme when they paid the Kenyan and Angolan government officials over $3.2 million in illicit payments for profits. Individualism pose that motivation of investors is to invest in socially responsible businesses.
The primary concern was why Goodyear tire was involved in such unethical manner of bribery, which prompted failure to make and keep accurate books and records. Under Individualism, employees were not being treated ethically. Goodyear primary goal was to profit and that was shown in the rise of sales.

Goodyear Co. employee
Utilitarianism identified with the theory of maximizing the overall act or of producing the greatest good for the greatest number. The Acts that accomplish this aim are good; those that do not are bad. This theory states that it is a consequentialist ethics, good and bad act are determined by their consequences. Ultimately, Utilitarian’s consider the cost and benefits of actions for all affected not just the company involve but the stakeholders (Salazar, 20).
The cost and benefit for stakeholders affected are the government officials and the business owners. The benefit the business owners had is gaining cash for promoting the Goodyear brand of tires. The second stakeholders were the government officials because they were the ones that were pocketing the cash for not reporting this fraudulent act and finally, the company and their shareholders because they were the ones gaining more, they pay out cash to sustain high sales of their products. But in the end they were reported and the consequences were not worth the unethical act.


Immanuel Kant develops the theory Kantianism and it poses the theory of being rational and having good will. He believes that act rationally don’t act inconsistently in your own actions or consider yourself exempt from rules. He also believed that be motivated to good will, seek to do what is right because it is right (PP slide pg1) Categorical Imperative, states that a person decides whether an action is permissible or impermissible, so therefore, the formula of the categorical imperative is the Formula of Humanity that explain it is wrong to take advantage of people for your personal gain.
In Goodyear case this theory shows how this company failed the categorical imperative because they used the employees of local government-owned businesses and other local authorities for their own benefits. As a result this action is considered impermissible. This is exemplified when the two Goodyear subsidiaries made over $3.2 million in illicit payments, and the bribery payments were falsely recorded as legitimate business expenses. Both the payments and the resulting revenue were consolidated into Goodyear’s financial reports. This could have been avoided if this company was being ethical in their business practice.

Goodyear Co. Global headquarters in Akron, OH
Virtue Theory
Virtue theory focuses on the rationality on the person being virtuous or not. If the traits that allow “the market to work at full efficiency” is equal to those that “allow the market to work harmoniously in society”, then the virtues of a business person is equal to the virtues of a citizen (Point slide pg. 2). The four main virtues of business are Courage, Honesty, Temperance/Self Control, Justice/Fairness and they depend on the thing’s function or the thing’s circumstances. Aristotle believes that rationality is what differentiates or shapes characteristics of people or business. So individuals need to be rational to function and if it achieves its function then it will be happy. So if we live honest and virtuous lives we will function well.Comparing the Goodyear tire company case to the virtues we can clearly see that they did not act courageously because they failed to implement the necessary rules that could have avoided this controversial issue. Instead management engages or failed to detect those illicit payments to employees of local government-owned businesses and other local authorities (manatt.com). Secondly they failed to report their actions according to the law by hiding these payments by falsely recorded as legitimate business expenses, this shows that they were not honest in their behavior. They were no temperance because they failed miserably by not implementing the rules to govern the business. If management was engaging in this behavior there was no reasonable expectation set for the employees to follow. The last virtue is justice, Goodyear Tire Company showed no justice because they did not care whom they were hurting in order to gain profits. Their practices were not fair because they were using bribes to get ahead of their competitors. They also had no empathy for their competitors because they did what they did to make sure they were considered the top selling brand tire company.

Justified Ethics Evaluation
My view in this case is; this issue could have been avoided if Good Year Tire Company had mandated a company policy. When they had taken over the subsidiaries in these countries they should restructure the organization. If not; training or seminars should have been done when they took over letting all employees be aware of their motto or mission statement. Also advising the consequences if any these policies were broken. These actions that was done to make high tire sales was unethical and it effected all parties involve. Also shame on these countries law officials for encouraging this by taken part of this act, knowing it will impact their economy. The local business and the customers that is getting hurt in the process of these bribery. So when they had acquire these companies they should have look at their financial books to make sure they are in good order because maybe this was the same reason that cause the previous owners to fail in creating profitable and ethical business. Nevertheless; even though this issue has cause them a great deal of financial stress, they were able to show integrity by admitting this issue did occur and work internally to make the necessary corrections and also working with SEC to aid in resolution.


 Desjardins, Joseph. (2014). “An Introduction to Business Ethics” (5th Ed.).  New York, NY McGraw Hill Companies Inc.

Dulaney, Chelsey.  Goodyear Tire to Pay $16 Million to Settle African Bribe Charges “The Wall Street Journal.  Web.  24 Feb, 2015. http://www.wsj.com/articles/goodyear-tire-to-pay-16-million-to-settle-sec-charges-over-african-bribes-1424796482.
Fons, Randall J. &Serfoss, Nicole K. “With No Civil Penalty, Goodyear FCPA Settlement Highlights Benefits of Cooperation and Remedial Actions”, Web. 3 March, 2015. http://www.mofo.com/~/media/Files/ClientAlert/2015/03/150303GoodyearFCPA.pdf?utm_source=Mondaq &utm medium=syndication & utm_campaign=View-Original
Salazar, Heather. The Business Case Manual: The Authoritative Step-by-Step Guide to Understanding and Improving the Ethics of Any Business. Print.
Libby, John F.  &Wolff Jacqueline C .Manatta Jones Global Strategies, LLC, Web 19 March, 2015.   

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