Decision-Making in Business and the Repercussions of Unethical Choices

In business, managers must attempt to take ethical approaches to all areas of work so as not to compromise the company, the employees, or the organization’s consumers. Specific criteria have been established for managers to follow in order to remain ethical, even when faced with unethical situations. Ivancevich, Konopaske and Mattseson identify these criteria as the following:
1. Utilitarian outcomes. The manager’s behavior results in optimization of satisfaction of people inside and outside the organization. In other words, it results in the greatest good for the greatest number of people.
2. Individual rights. The manager’s behavior respects the rights of all affected parties. In other words, it respects basic human rights of free consent, free speech, freedom of conscience, privacy, and due process.
3. Distributive justice. The manager’s behavior respects the rules of justice. It does not treat people arbitrarily but rather equitably and fairly (2012, Pg. 357-358).
By following these three criteria managers are able to help the company, respect rights of the companies’ employees and follow the law. These three criteria are what should be the foundation of every business in order to satisfy the needs of the company, its employees and follow the laws created by the government. This is not always the case, as is visible with many companies seeking to circumvent the law, disregard for employee rights, and managers looking out for what is best for the company’s bottom line but not its long-term survival, its ethical survival, or the welfare of its employees, consumers, and future generations.
Ivancevich, Konopaske and Mattseson go on to elaborate that there are exceptions to every rule, including the above discussed ethical criteria. Per Ivancevich, Konopaske and Mattseson, behavior may still be considered ethical in the particular situation if it passes the criterion of overwhelming factors, meaning that to justify the behavior, it must be based on tremendously overwhelming factors in the nature of the situation, such as conflicts among criteria (such as if the managers behavior yields both positive and negative results), conflicts within the criteria (such as if a manager uses questionable means to achieve a positive result), or an inability to employ the first three criteria (such as if the manager acts with incomplete or inaccurate information) (Ivancevich, Kopnopaske and Mattseson, 2012, Pg. 358). The authors include a decision-tree approach to the application of these criteria as an aid to managerial decision-making, included in Appendix A.
A number of companies have been accused of ethics violations, from Enron to BP; news articles and reports present these violations as an epidemic, indicative of a larger problem within the corporate structure. One company that had been lauded as having an impeccable reputation for quality and reliability was Toyota, until 2009, when both design flaws as well as corporate structuring errors came to light.
In August of 2009 a Toyota Lexus malfunctioned in San Diego, causing a crash and killing four people, a CHP officer and his family (Taylor, 2009). While Toyota issued a statement within two days of the accident acknowledging the accident and expressing concern and regret, they failed to take immediate action in the manner of issuing consumer warnings or product recalls. Specifically, Toyota failed to issue a customer warning about its all-weather floor mats, despite these being implicated in fatal accidents two years previously (Dietz and Gillespie, 2012: 17). Furthermore, Toyota continued to fail to issue appropriate and timely warnings even after the regulator’s preliminary investigation into the crash in San Diego cited the floor mats as the likely cause, Toyota did not implement a precautionary rectification until five days later when the National Highway Traffic Safety Administration (NHTSA) confirmed their analysis, nineteen days after the San Diego fatalities (Dietz and Gillespie, 2012: 17). In addition, Toyota dealers were instructed merely to inspect any returned floor mats, rather than issue a direct customer safety warning (Dietz and Gillespie, 2012: 17). In fact, Toyota did not issue any explicit warnings and advice to customers until after NHTSA issued an alert regarding the floor mats on September 29th, 2009; Toyota also finally announced a recall of 3.8 million affected vehicles on the same day, though the actual recall did not begin until a month later (Dietz and Gillespie, 2012: 17-18).
Interestingly, while Toyota did encounter a number of design flaws, including the accelerator pedal in some vehicles, as well as the floor mats, the problems cited by many were not the design flaws but rather issues within the company. Toyota’s aggressive growth strategy had, as stated by the company President, impaired the company’s culture of ‘kaizen’ (continuous improvement) and ‘genchi genbutsu’ (inspecting problems at the source) (Dietz and Gillespie, 2012: 18). In addition, Toyota’s own internal reports noted its tendency to dismiss customer complaints, that is had a poor accountability for safety, and poor safety-response procedures, as well as an “adversarial” relationship with regulators (Dietz and Gillespie, 2012: 18). Furthermore, the company’s corporate culture, while efficient, systematic and dedicated, was also conservative, rigidly centralized, and mono-national, meaning that at the time, the executive board had 29 Japanese male nationals and no foreigners. The company’s hierarchical and centralized structure limiting the speed and accuracy of information flow, stifling the agility of the corporation’s response; in addition there are reports of junior employees reportedly fearful of raising concerns (Dietz and Gillespie, 2012: 18).
Toyota experienced a large amount of fallout as a result of the automobiles’ design flaws, but experienced more repercussions as a result of the company’s repeated ethical violations. The major repercussions from the recalls and delays in Toyota’s response and thus multiple reports and multiple recalls was confusion and alarm from existing and prospective customers, the poor immediate response to customer issues did massive damage to its credibility, and the American media seized the opportunity to slaughter Toyota in the press (Dietz and Gillespie, 2012: 19). Toyota experienced a loss of consumer and employee confidence; in addition there were also a number of financial repercussions. In April 2010 the NHTSA fined Toyota $16.4m for failing to react in a timely manner, despite apparently knowing of the potential risk to consumers; while Toyota denied this allegation but paid the fine to avoid a lengthy dispute; it also settled out of court with the family of the San Diego victims in September of 2010 (Dietz and Gillespie, 2012: 19). In addition, there have been more than 150 lawsuits in California alone against Toyota Motor Corp. regarding the alleged sudden-acceleration problems and related injuries (Bensinger and Vartabedian 2010). The 150 cases have been consolidated before a single federal judge in Santa Ana, California and currently the case is still ongoing (Pettersson, 2012). The company also imposed a number of its own financial ramifications, including docking the top management’s pay by 10% and having several executives forfeit their bonuses for two years to help atone for the recall problems (Dietz and Gillespie, 2012: 20).
In addition to the negative impacts these ethics violations have had on Toyota, they have also impacted the structure of the company. Toyota has undertaken a number of self-imposed restructuring methods in order to prevent such unethical and delayed responses in the future, as well as to attempt to prevent additional design flaws. Toyota first implemented a new safety system by combining 5 accident-avoidance technologies, which is common amongst automotive manufactures and Toyota was delayed in the initial implementation (Dietz and Gillespie, 2012: 19). In addition, a major company restructuring was implemented, including a reduction of company directors from twenty-seven to eleven, and the reorganization of the departments charged with corporate planning and corporate social responsibility to quicken crisis responses (Dietz and Gillespie, 2012: 19). A new global quality taskforce, based regionally and led by the company President, was also created to improve quality, increase communication, improve regional response and autonomy, and seek support from outside experts; in addition, Toyota created two quality advisory panels consisting of outside experts to evaluate Toyota’s safety and quality control processes (Dietz and Gillespie, 2012: 19-20). Toyota hoped that by implementing their own sanctions they would demonstrate a commitment to their customers, employees, and regulators towards the creation a safe automobile society, but their unethical decisions still haunt the company and injure its financial standing. So in closing when ethical decision making is put aside or disregarded completely you can have major consequences that will impact the quality of the company, the employees who work for the company and the product output of the company. Once again it is important to stress the use of three major criteria when making ethical decisions, for the sake of the company, the employees within the company and following established law. By going outside of these factors it will show from the above readings that the company will suffer on many levels. Toyota is only one of many companies who decide to disregard making the proper ethical decisions for reasons such as saving the company and time but forget to look at the overall picture of the impact these negative decisions could have. We as managers must make sure that we are making proper decisions to protect our employees, customers and the company so that situations like the one Toyota put themselves in does not happen again.

References
Ivancevich, J., Konopaske, R., & Matteson, M. (2011). Organizational Behavior and Management. (Ninth ed.). New York: McGraw-Hill Irwin.
Taylor, S. (Sep 15, 2009) Deadly Accident Prompts Floor Mat Warning. Electronically Retrieved June 9th, 2012, from http://www.nbcsandiego.com/news/local/Deadly-Accident-Prompts-Floor-Mat-Warning-59394687.html
Diets, G. and Gillespie, N. (2012). The Recovery of Trust: Case studies of organizational failures and trust repair. Institute of Business Ethics.

Belingser, K. and Vartabedian, R. (April, 2010) Lawsuits against Toyota are consolidated. Electronically Retrieved June 9th, 2012, from http://articles.latimes.com/2010/apr/09/business/la-fi-toyota-lawsuits10-2010apr10

Patterson, E. (2012) Toyota Judge Says He May Caution Jurors About Some Witnesses. Electronically Retrieved June 9th, 2012, from http://www.bloomberg.com/news/2012-05-30/toyota-judge-says-he-may-caution-jury-about-some-evidence-1-.html

Appendix A
Managerial Decision-Tree (Ivancevich, Konopaske and Mattseson, 2012, Pg. 360)