Summary of the Ethical Dilemma that the Organization Experienced
In February 2014, General Motors started recalling some of its car models made before 2007 because of their ignition switches which could abruptly shut off the car when one was driving and disable the car’s airbag, steering and brake wheels (Isidore and Marsh 7). The company summoned back a total of 800,000 vehicles in February of that year (Isidore and Marsh 5). A few months later, the company had ordered back close to 13 million cars worldwide with 11 million of those in the United States (Isidore and Marsh 4). These actions were necessitated by the accidents that led to severe injuries and deaths as a result of the failure of the ignition switches.
As it would be revealed later, the issue with manufactured by General Motors had been known by the company officials, but they never took immediate action (Isidore and Marsh 7). The company first detected the default with the ignition switch on their Saturn Ion during a test drive before production. They later discovered that they had the same hiccup with the Chevrolet Cobalt car model but failed to redesign it citing high costs of redesigning (Jennings and Trautman 187). It was only after a series of accidents and probes by different agencies that they started bringing back the cars to the company for repairs.
The Organization’s Reaction to the Dilemma
When General Motors discovered the fault in the ignition switches of its cars, it had to choose between avoiding more production costs that would reduce their profit margins and the need to ensure the safety of their customers. They decided to avoid extra productions costs. The company started receiving complains about the flaws with the ignition switches and conducted an internal investigation to establish the seriousness of the problem. Their internal inquiry confirmed the problem and as such its engineers recommended the redesigning of the keys. The management initially approved the proposal but later backtracked because of the high costs that would be incurred in making the changes required. It was not until 2007 that it began to install newly designed switches in its cars (Valukas 3). After further inquiry revealed that most of the accidents that involved their car models manufactured before 2007 were a result of the faulty switches, they initiated a recall beginning February 2014 (Isidore and Marsh 10).
The Organization’s Reaction to the Situation Affecting Each of the Major Stakeholders
Every organization has groups of stakeholders that are usually affected directly or indirectly by their business decisions. General Motors had to contend with the reaction from various interest groups following the revelation of the problems with their car models. The customers, government agencies, and business partners were affected most by the disclosure.
The first group that was affected by the situation was the customers of the company. The most important group with interest in an organization are the customers to whom they provide services or sell their products (DesJardins and McCall 34). The main aim of any business entity is to provide exemplary services that will satisfy their customers. The customers of General Motors were vital to the company because they offered the market to which the company sold their cars. They were, therefore, the most affected by the company’s decisions not to recall their cars when they first discovered the problem with the cars’ ignition switches. Following the deaths and injuries as result of accidents caused by the sudden shut off of the cars, several consumers and consumer groups filed suits against the organization.
The lawsuits have filled individually and some through class action lawsuits. The reaction by the organization to the customers’ complains started by their decision to begin recalling the cars that were affected by the ignition switch problem. By June 2014, the company had spent close to one million dollars in compensations to the families that were affected by the tragedy. It also agreed to pay 900 million dollars to settle criminal charges that were filed against it by the affected customers (Isidore and Marsh 10). Ken Feinberg was hired to handle the compensations and determine how much each victim would get. Despite the reaction from the company, there have been numerous suits with more anticipated to come. The company had attempted to fight some of the lawsuits filed for accidents after 2009 when it filed for bankruptcy, but the Supreme Court recently ruled against their application. The company, therefore, has to deal with the lawsuits, criminal charges, and litigations leveled against it by its customers.
Another group of stakeholders that reacted to the scandal was the various government agencies concerned with the safety of the citizens of the United States. The United States Congress and the Department of Justice initiated criminal and civil rights violation investigations against the company. The company’s Chief Executive Officer Mary Barra appeared in Congressional Committee hearings and responded to the various concerns of the members of Congress on the problem of the flawed ignition systems. The company has since spent millions of dollars in settling criminal charges leveled against it by the United States government. Another government agency that reacted to the situation was the National Highway Traffic Safety Administration (NHTSA) that fined the company 35 million dollars. That amount is the most that can be imposed by the agency for such cases. There have also been lawsuits from different state governments with various state attorneys filing for civil and criminal charges because of the delay by the company to recall its faulty cars.
The company’s business partner, Japan’s Suzuki also reacted to the situation and recalled around 18400 cars that General Motors had manufactured for it (Isidore and Marsh 12). The cars recalled by Suzuki were those made for it by the company in the South Korea and sold in the United States.
Opinion on Whether the Reaction was Ethical
The reaction by the company to the ethical dilemma it faced was not ethical. By being a business entity, General Motors had the ethical responsibility of ensuring that it maximized its profits for the benefit of the company’s shareholders. However, the responsibility of an organization does not stop with the ensuring it generates profits to its shareholders. It has the moral responsibility to ensure that the customers who use their products are safe when they do so. The decision to go ahead with the production of the cars even after realizing that there was a problem with the ignition switch went against their moral responsibility of ensuring the safety of their customers (Jennings and Trautman 187).
Choosing profits over the safety of customers also went against the utilitarian principle of ethics. According to the utilitarian theory, an ethical decision is one that maximizes the welfare of all the parties affected by the decision (Desjardins and McCall 25). The maximization of the welfare of the firm’s customers was not taken into consideration by the decision to go ahead with the production of the cars following the revelation that there was a problem with their ignition systems. The long-term effect of the decision also proved detrimental to the firm’s shareholders as their profits reduced by great margins following the revelation of the scandal (Jennings and Trautman 187). The reaction to the dilemma was therefore unethical considering the number of deaths caused by the accidents and the dip in profits that followed the revelation of the ignition switch scandal.
The firm’s reaction after the scandal was exposed can be said to have been ethical. This is because it initiated the recall of the flawed cars to repair them to avoid causing more deaths. It also conducted internal investigations and fired the employees that were directly responsible for the problem to avoid future occurrence of similar situations. It also reacted ethically by accepting responsibilities and compensating families and victims of accidents caused by the faulty ignition switches (Jennings and Trautman 187).
Several Alternative Responses That the Organization Could Have Taken and the Probable Consequences of Each
There were alternative responses that the organization could have taken when they were faced with the ethical dilemma. When they were first confronted by the dilemma, the company could have halted any further production of cars with the switches that they realized had problems. The company confirmed the problem with the ignition switch in 2003 but waited until 2007 to make changes to its design (Isidore and Marsh 12). During this period, they produced and sold cars that resulted in deaths and injuries to the users. Had the management of the company halted further production of the cars with the faulty ignition switch in 2003, many accidents could have been avoided.
They could have also avoided paying the hefty compensation to victims and some of the fines imposed on them by government safety agencies. Another alternative response could have been to inform their customers of the problem when it was first discovered and begin the recall immediately. The company did not initiate the recalls until ten years after the discovery of the ignition switch problems (Isidore and Marsh 11). An investigation into the matter found that there was a culture of secrecy within the company that led to the company keeping the realization of the problem from the public (Valukas 3). Making the public aware of the problem could have resulted in decreased sales but could have afforded them the time to correct the problem at a much earlier stage instead of continuing to make profits at the expense of the safety of their customers.
How the Relationship between the Organization and Its Stakeholders Changed
The relationship between the company and its customers was the most affected one by the situation. Even after the settlement of some of the lawsuits, the company continued to face charges from its customers. At the end of 2014, the company had spent close to 1 billion dollars in compensation to victims and their families, but the amount was expected to rise as more lawsuits were being filed (Kessler 13). The series of lawsuits and litigations are a result of an adverse relationship that was a result of the negative publicity following the revelation of the problems with the ignition switch of their cars (Cheng 12). However, the relationship between the organization and investors was not affected as its stocks continued to sell at higher prices despite the scandal (Kessler 17).
Conclusion
Organizations may be faced with ethical dilemmas from time to time. When this happens, managers of such organizations need to ensure that they uphold the highest possible ethical standards in the decisions they make to minimize damages that might result from unethical decision making. The case of General Motors is an example of an ethical dilemma that was not ethically handled at the beginning by the management of the company. The company covered up the problem with the ignition switches for ten years. This represented an unethical decision that caused many people their lives and left many with serious injuries.
As a result, various stakeholders reacted to the situation thereby compounding the challenges of the organization. The consumers filed numerous lawsuits against the company leading to billions of dollars being spent on settlement of some of the cases. Government agencies also opened investigations against the company which resulted in fines being imposed on the firm. These are some of the consequences that can result from unethical decisions like the one general motors made. Even though the company has stabilized under the leadership of its CEO, Mary Barra, it is important to note that in the business environment, situations will arise that threaten the growth or sustainability of the organizations. The successful navigation of these situations depends on the ability of the management to make timely ethical decisions that will help in the containment of the circumstances.
Works Cited
Cheng, Yang. “Who is leading whom in the General Motors Recall: Understanding Media Impacts on Public Relations Efforts, Public Awareness, and Financial Markets.” Research Journal of the Institute for Public Relations, vol. 3, no. 1, 2016, pp. 1-25.
DesJardins, Joseph, and John McCall. Contemporary Issues in Business Ethics. Cengage Learning, 2014.
Isidore, Chris, and Rene Marsh. “GM to pay $35 Million over delayed Recall.” CNNMoney, 2014, Web.
Jennings, Marianne, and Lawrence J. Trautman. “Ethical Culture and Legal Liability: The GM Switch Crisis and Lessons in Governance.” BUJ Sci. & Tech. L., vol. 22, no. 1, 2016, pp. 187.
Kessler, Aaron. “Earnings Beat Estimates, but Ignition Switch Scandal Takes Toll.” The New York Times, 2015, Web.
Valukas, Anton R. Report to Board of Directors of General Motors Company regarding Ignition Switch Recalls. 2017, Web.