Business Ethics – Zero Pedal, Essay Example

Product Defect Decision

If the company knows about the defect of the product, and the possibility that it can cause accidents, it is their legal and ethical responsibility to make amendments. In this case, it is clear that the management faces cognitive barriers to good ethical judgment (Trevinio and Nelson). The barrier has been identified as a behavior to “Ignore consequences that affect few”. As the defect of the product is only likely to occur over a certain temperature, the management dismisses the proposal to change the design. According to Herkert (164), the management and engineers should consider the risks related to product reliability and take professional responsibility.  Further, the management underestimates the risks, and have a false illusion of control. I would tell Doug about the issue, however, the main pressure that creates a dilemma would be that my predecessor probably lost his job for doing the same. I would focus on my obligations and the principles I work by, and try to make Doug understand that the potential consequences of an injury caused by product defect would be worse than spending extra money on development. I would argue based on the cost benefit analysis.

The Question of Annual Fees

Paying an annual fee for the company would increase the cost of launching the product, however, it would be in line with the organization’s objective: increased sales and popularity. While asking for the fee for stocking the product as a company could be reasonable, the manager’s request indicates that he is intending to make a decision based on the company’s ability to bribe him. This is a warning sign, and it tells me more about the product and environment than the simple fact that the management of the store is corrupt. If the manager thought that they could make a profit on Zero Pedal, they would not ask for a bribe. Secondly, there is no guarantee that the store would sell even one of the bikes, and Green Move would still need to pay. I would not pay the bribe, even if it would not be illegal, however, would negotiate with the manager about providing sales incentives for the store upon successful business collaboration. Paying an annual fee would only be ethical if all the companies had to pay the same price. If they do not have to, Green Move is gaining a competitive advantage from paying the manager an incentive, which is unethical.

Cost-Benefit Analysis Application

It is recommended that the company applies the Cost/Benefit analysis on the two possible solutions: changing the design to reduce risks, and assuming that the bike would not be used in extreme weather, therefore, it is fine to go ahead with the design. While the application of the Cost/Benefit analysis would only focus on immediate costs and benefits, it does not highlight the risks associated with each decision. As Kelman (33) states: “In areas of environmental, safety, and health regulation, there may be many instances where a certain decision might be right even though its benefits do not outweigh its costs”, This statement is relevant to the current case, therefore, the application of the analysis would only be beneficial to convince the management of the potential damages, but a full risk analysis also needs to be undertaken. (similar as the Pinto case).

Working Conditions at Solar Group

As the working conditions in the company manufacturing the solar panels are legal based on local regulations, one would assume that Green Move does not have anything to do with them. However, there is an agreement between the two companies that children should not be working in the plant. However, as a customer of Solar Group. Green Move could put pressure on the company to improve working conditions. Terminating the agreement would result in a potential loss of several jobs. This would not benefit any of the stakeholders: neither the employees of Solar Group, Green Move as a company, or customers looking to buy the product. Negotiation about working conditions should be held between the two companies, in order to eliminate potential risks of reputation loss.

Appropriate Standards of Working Conditions

Appropriate standards should be applied in the Bangladesh company, based on human needs, and not doing wrong. Corporate social responsibility needs to be considered, beyond legal and economic responsibilities. Ethical responsibilities include doing no harm. Working in poorly lit and badly ventilated rooms can affect workers’ health, therefore, the conditions need to be improved. Fair Labor international regulations exist, and these define standards that apply to American companies. The fact that the wages of workers are below American rates are not relevant to this issue, as they are above the nationally determined minimum wage, therefore, they are legally acceptable. While working conditions are acceptable based on Bangladeshi regulations, they are endangering the health of employees. The FLA Workplace Code of Conduct (web) states that “Companies affiliated with the FLA are expected to comply with all relevant and applicable laws and regulations of the country in which workers are employed and to implement the Workplace Code in their applicable facilities. When differences or conflicts in standards arise, affiliated companies are expected to apply the highest standard”. While the above regulation only applies to members of the organization, it provides a clear guideline for appropriate standards. As Green Move has been able to put the close about child labor in the contract, therefore, they could modify the contract to include standards for working conditions.

Brand Impact of Online Publication

The company could lose not only reputation, but future business as well, as a result of the journalist’s whistle-blowing. Apart from reputation loss, the publication would also result in investigation and this would make going public with shares a decision that causes more damage than benefit for the company. As the textbook states: customers care about ethical business processes, so do business partners, societies, and industries. This means that the company can lose more than just reputation. Customers would abandon the brand, and look at it with criticism. Potential partners would also look for new business alliances. As sales will drop, the company will spiral into negative income, and make a loss. Smaller scale production would result in redundancies, cutbacks, and lower profitability of the product.

Bidding for the Lease

Viktor should not bid on the lease, and look for another property. While bribery is a way “things are done” in Russia, it is not compatible with the ethical principles of America. Moreover, there is no guarantee that another bidder would not offer more money in the “second” envelope. If things are not done in a transparent manner in Russia, it means that the cost of operation in the country would be higher than expected, and in order to get permission, business license, and other documents, Viktor would need to create and fill several more envelopes. The ethical dilemma is that the business could move forward, expand, and reduce operational costs for a small amount of money placed in the second envelope. However, Green Move would have no control over the course of the application, and cannot ensure that all the documents are completed according to legal requirements of Russia. This would make the company vulnerable, and if found out, partly responsible for the wrongdoing.

Expanding Operations

Green Move is recommended to expand its operations to a country where lease, employee costs, and taxes are low, while the legal and administrative system is transparent and reliable. Russia is not one of these countries. While operational and overhead costs are low, there is a great level of uncertainty, and this means that the project costs and risks cannot be assessed effectively. Green Move should look for another country to expand its operations into.

Organizational Issues Analysis

The breaches were based on decisions to consider company interest having a higher priority than the interest of the public and stakeholders. Further, the management was looking at immediate impact of the decisions, neglected risk analysis, and assumed that they were in full control of the situation. Finally, the company did not consider the interest of stakeholders. By not taking the risk of acting unethically seriously, they disadvantaged all stakeholders. The factory in Bangladesh would eventually lose the business provided by Green Move, and employees would become jobless. Retailers that planned to make profits on the sales of Zero Pedal would lose out. Customers will not get a cost-effective and green transportation solution, if it gets recalled by industry regulators. If the company goes public, shareholders would lose a substantial amount of money invested in the firm. Finally, due to reduced profits, the company would potentially need to cut back on profits.

Residual Risks

There is a reputation risk involved in the unethical conduct of the company. Trevinio & Nelson state that “Firm’s long-term reputation is an asset that everyone must protect”. The risk was underestimated by the management, and this can result in several negative consequences, such as loss of reputation, reduced financial power, customers would stop trusting the company, and the sales figures would go down. Further, potential partners would not engage in business transactions with the company, if the unethical conduct was made public. This could even mean that Green Move would lose money and eventually go out of business. Regarding product safety, customers who find out about the defect could sue the company for endangering their lives, and not providing warnings. While the pontiffs would need to prove that the company knew about the issue, they would be able to get a testimonial from the previous marketing manager, who was allegedly fired because he pointed out the issue. Other risks include further demands for payments and bribes. If an official or manager is once asking for a pay off, there is no guarantee that they would not do it again. Finally, as there would be no paper trail of the money paid to the agency in Russia, the officials can simply take the cash and give the lease to another customer.

Fixing the Green Move

In order to “fix” Green Move, the company’s board of directors needs to create ethical guidelines and a clear norm of behavior. The document needs to be signed by all employees, and has to clearly state who is responsible for training, reporting, and highlighting issues. The company also needs to align its ethical principles with its mission and vision. As Green Move is a company creating greener transportation solutions, it needs to embrace not only legal and economic responsibilities, but ethical and philanthropic ones, as well. The company’s ethical norms need to be reinforced by the management. The organization’s values should serve as guiding principles for ethical norms. Short term, the company should break up relationships with partners that engaged in unethical business conduct. They would either need to terminate the contract with the Bangladeshi company, or work on solutions to improve working conditions. Finally, the management needs to act with integrity, take responsibility, and admit their mistakes.

Government Responsibility

Through its agencies, the government needs to supervise business activities to ensure that they are ethical and do not endanger citizens. In this case, the bike did not need approval,  however, in the future, the government agency responsible for the industry would possibly consider introducing safety regulations in order to eliminate problems with overheating and over-accelerating. Tests would in the future be introduced as standard before approving the marketing of products like Zero Pedal. Consumer protection charities and agencies are likely to lobby for new regulations, and this would make the production, development, and marketing of these products more costly. However, it is the government’s ethical responsibility to protect the interest and health of its residents.

Works Cited

Fair Labor Association. FLA Workplace Code of Conduct. 2013. Web.

Herkert, J. Professional Societies, Microethics, and Macroethics: Product Liability as an Ethical Issue in Engineering Design. International Journal of Engineering, Vol. 19, No. 1, pp. 163-167, 2003. Print.

Kelman, H. Cost-Benefit Analysis: An Ethical Critique (with replies) AEI Journal on Government and Society Regulation (January/February 1981) PP. 33—40. 1981. Print.

Trevinio, L. and  Nelson, K. Managing Business Ethics: Straight Talk about How to Do It Right, 5th Edition  Wiley. 2010. Print.