Controversy
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| Toyota Motor Corp. logo |
Reports by the NHTSA show a 400% increase in
complaints related to the sudden acceleration after Toyota started equipping
vehicles with its ETCS-i system. Brett
Smith, co-director of manufacturing, engineering and technology at the Center
for Automotive Research stated that he is unaware of any conclusive study which
links electronics as a cause for sudden acceleration in cars. The National Highway Traffic Safety
Administration ended its investigation in 2011 after NASA failed to find any
electronic causes of unintended acceleration during a 10-month analysis. Yet, there are still multiple class action
lawsuits against Toyota pending and widespread belief of the acceleration
issues. The lawsuits claim that Toyota
violated warranty laws and consumer protection laws, among others. According to the NHTSA, Toyota acceleration
problems go back to 2002.
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| '99-'09 NHTSA unintended acceleration complaint per 100,000 vehicles |
In 2002, they had about 10 percent of the U.S. auto market and they had about 19 percent of the complaints on acceleration. Vehicle recalls are either mandated by the NHTSA or voluntarily recalled by the manufacturer. Between 2009 and 2010, Toyota recalled roughly 8.5 million vehicles internationally. The NHTSA determined that Toyota was well aware of the safety defect for at least 4 months prior to reporting the problem and fined the company $16.375 million for failure to report the defect. Toyota has recalled vehicles for sudden acceleration blaming the floor mat location, and later the pedal itself but disputed any flaws in the electronic throttle. In fact, Toyota has actually won 3 lawsuits against unintended-acceleration claims. Toyota President Akio Toyoda states that he wants to focus on improving the quality and image of his company on a global scale. Toyota continues to address complaints and is trying to manage decreases in the company’s image as well as stock value. As Toyota prepares to pay a $1 billion fine to settle the federal suit, they have reported that they are on track to earn $18.8 billion for its current fiscal year, more than the combined annual earnings of GM, Ford and Chrysler. It is believed that shareholders and investors will react positively to closure of these suits in an attempt to put it behind the brand and move forward. In fact, Toyota paid out $25.5 million to shareholders based on the claim that the company stock price was damaged due to Toyota’s failure to timely report the safety issues. An SEC investigation is still pending. Toyota faces ethical issues and litigation due to the delayed reporting to the NHTSA and delayed recall of automobiles related to the known complaints of sudden acceleration and the related injuries and deaths that resulted.
Individualism
Milton Friedman's view on social responsibility in business
was simply to follow the law. As an economist, Friedman emphasized that
corporate officers had the sole responsibility of maximizing profits for the
shareholders as long as the law was adhered to. As a for-profit
corporation, the leaders should not use corporate funds for social welfare
simply because they felt it was socially responsible. The officers should
in fact pay the lowest wages possible, the least benefits and operate business
in the most cost effective way regardless of potential external consequences as
long as they were within the means of the law. The corporation’s sole
purpose was to maximize shareholder earnings rather than spend shareholder
funds for the social well-being of others. Simply, profits above all else
as long as the law was followed.
Prior
to the recall scandal, Toyota was highly profitable, continually gaining market
share and recognized as a dependable, high-quality car maker. Toyota stock values trended similar to the
Dow Jones index. When the recalls began,
Toyota stock fell disproportionately to the rest of the market. Eventually, Toyota stock regained its place
in the market but has begun to show decreased value in the past year presumably
related to the recent law suits and settlements. If Toyota had been more responsive to the
acceleration issues reported and recalled the vehicles out of ethical
responsibility rather than by the force of law and NHTSA reporting, consumers would
have maintained more faith in the company in its delivery of quality and safety
and stock prices would not have taken as much of a hit. Recalling the vehicles sooner would have also
eliminated some of the accidents and corresponding lawsuits, ultimately saving
shareholders their stock values and profits because the fines and payouts would
have been substantially lower. If one is
to believe that Toyota was following individualism and Friedman’s viewpoint, it
can be said that both failed the organization from a profit and share value
standpoint. The short term financial
impact of a timely recall would have been substantially more cost effective
because now Toyota is paying for the recalls, the lawsuits as well as having to
invest in rebuilding its reputation as a quality and safety conscience car
manufacturer.
Utilitarianism
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| Toyota Camry speeds out of control and crashes |
Utilitarianism is an ethical belief that decisions
should be made based on the overall consequences of the actions and how they
impact everyone. It focuses on making
decisions based on the greater good for all (or as many as possible). Utilitarianism
takes into account a cause and affect mentality. These beliefs mean that corporations should
be making decisions based on the outcome of the company as a whole, the
shareholders, the employees and the consumers.
Utilitarianism focused organizations would always be seeking balance
between satisfying shareholder profits, the end users of the products sold as
well as the employees of the company.
Had Toyota felt compelled to follow a Utilitarian mission, the issues
with sudden acceleration would have been addressed with the consumers as soon
as the company was aware. Toyota would
have had concern over the safety of its consumers and would have wanted to ensure
that all of its vehicles on the roads were operating properly. Taking
utilitarianism as "consequentialist ethics" (page 30), and reviewing
the actions and consequences of the Toyota, the negative consequence was the
lack of gain for the greater good and whole.
Failing to timely notify consumers of the vehicles cost the consumers
money, their safety and the physical well-being and even life of those involved
in the sudden acceleration accidents. It also tarnished the reputation of the
company which cost the shareholders future profits and arguably cost the
employees future pay raises and other benefits due to the litigation payouts.
Kantianism
Kantian ethics focuses on the humanity aspect and ethical
duty to do what society views as right and for the greater good without
self-interest. The most basic and
important relationship is personal and humane.
Kant believed in an undeniable duty to all people and actions that are
dependent upon these relationships.
Corporations would set out to define a Maxim for Action that would
execute a business practice for the greater good of the organization as well as
the consumers of the product. In review
of the set Maxim, one wants to ensure it comes from good will to “do the right
thing”, otherwise, it must be consistent with good action or it won’t be
praiseworthy. Decisions should be
rational and logical and all of those affected should be able to make rational
and logical decisions. Kant considers
three types of motivation, self-interest, character or sympathy and the moral
law or duty. In Kantianism, the only
proper motivation is that of moral law or duty.
Toyota president has been quoted as saying he wants to build the quality
and image of the brand after the fall out of the recall scandals. However, it seems that his motive is not of
moral duty but rather self-interest to rebuild the profitability and reputation
of Toyota. Had Toyota followed
Kantianism, they would have recalled the vehicles immediately upon learning of
the acceleration issues because it would be the morally correct thing to do for
the safety and welfare of its consumers.
Failure to properly disclose the acceleration issues is against
Kantianism belief of doing the right thing for the greater good of all
involved. Not only did they delay the
recall but they continued to sell vehicles with the known issue at hand,
jeopardizing the safety of the consumer against moral duty. Had Toyota made a Maxim of building quality
and image motivated by moral law rather than by self-interest, lives would have
been saved, less people would have been injured and the law suits, litigation
and fines would have been minimal if not no-existent.
Virtue
Theory
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| Akio Toyoda, CEO of Toyota Motor Corp. |
Virtue theory involves understanding the motivating
factors behind ethical decisions and knowing that while some people are
motivated by self-interest others in fact are motivated by compassion, and
caring for the well-being of others.
This philosophy requires ethics related decisions to be based on the
character of the person making the decision and requires companies to review
its business goals and practices to reflect on setting a corporate culture and
environment of individuals that have the same virtues to create the desired
method of achieving company goals and workplace practices. Virtues are essentially positive character
traits such as honesty, respectfulness, positivity and kindness. The opposite of a virtue is a vice. Vices include greed, envy, arrogance and selfishness. The four primary virtues are prudence, justice,
fortitude and temperance.
Toyota was not
prudent in its decision to delay the recall of cars with the sudden
acceleration defect. They failed to act
with foresight, reasoning or caution in regards to the safety of the consumers
and did not choose the right means to a safe end for the consumers once they
were aware of the recall. The second
primary virtue is justice. Toyota did
not consider justice because the decision to delay recalls directly hindered
the rights of the consumers and put them in the line of danger rather than
aiding them to avoid injury. Rather than
act with fortitude or courage, Toyota management acted cowardly by being more
concerned with the cost of the recall than the safety of the consumers. Temperance takes into account moderation of
pleasurable things to avoid a sense of shame and to demonstrate humility. Toyota did not act with temperance but rather
with greed and ego for profits rather than the safety of the drivers. Overall, Toyota violated all of the primary
virtues in regards to the sudden acceleration recalls and scandal. They put self-interest before the overall moral
character considerations. In order to
have demonstrated the four primary virtues, Toyota should have recalled
vehicles immediately upon learning about the possible defect because it would
have chosen a means to the end that was worthy, it would have given proper
justice to the consumers who had purchased the defective cars, it would have
shown fortitude of making the right call in a difficult decision and would have
demonstrated temperance by balancing profits with the safety of the consumers.
References
