P619 ORGANIZATIONAL BEHAVIOR AND LEADERSHIP TITLE: CONSIQUENCES OF UNETHICAL DECISION MAKING A Case Study of TOYOTA Motors

Instructor: Papageorghiou N.George
Prepared By Kashif Iqbal Alexander Nwaka Joachin Nnorom Ding Tao Xiurong Chen Ganesh Uprety S20101244 S20101245 S20101246 F20082262 S20081312 F2006758

1. Abstract (Summary)
This paper provides an analysis of relevant study of TOYOTA automobile maker and the findings related to the consequences of unethical decisions. Good ethics, whether at work or home, demands self-knowledge. Whereas some groups want to see ethics as a skill or a particular part of organizational transformation, practicing good ethics ultimately comes down to you and how you make decisions. Education, family background, social setting, and political and religious affiliations shape what you see and what you do not see. The study provides some useful tips to improve the decisions.

2.

Introduction

Toyota Motors a very popular automobile maker having large market shares around the world. Now a days Toyota company is facing high obstacles and fallen down into crises as a consequence of some unethical decisions. Details tell us, since 2000 Toyota has expanded its production line from 5.2 million to 10 million with 17 more productions sites. This unsustainable production made inevitable for company to procure auto-parts from overseas sub contractors, thereby making it difficult to oversee every procedure involved in the quality control process. Moreover due to growing competition company putt an immense pressure on its subcontractors to cut production prices at least 30%, resulting in diluted quality. This is evident from the reports of news papers and BBC news. According to a analysis of complaints by auto safety control firm Quality Control System found that number of

complaints received by National High Way Traffic safety Administration tripled since introduction of electronic throttles in Toyota vehicles and due to break problems many people have died in road accidents. However Toyota continued a similar careless attitude in response to these complaints and normal tendency remained to blame the drivers and go on. After an immense pressure by customers and high media coverage to these complaints Toyota turned to accept the flaws and started recalling different vehicles back for necessary rectifications. These decisions of Toyota are criticized as unethical because the security procedures and risks of precious lives were compromised over profitability plans which lead the company towards destruction. An estimated amount of vehicles recalled back due to break paddle and floor mat problems is more than 8 million this amount is surpassing its 2009 total global of sales of 6.98 million vehicles. What are the results received as consequences of unethical decision, are illustrated below.

More than 40 people (On record) have died and several have been injured because of vehicle break problems.

• • • • •

Toyota recalled its almost more then 8 million vehicles. The estimated vehicles recall cost is more than 2 billion. Toyota Company has loosed 4 to 5% of its market share. Lexus GX460 sale is halted by the company. The US Government imposed a fine of $16.4 million. It is a largest fine ever imposed by the US Government on an automobile maker.

Company’s public image is affected as this recall is perceived as “Forced” rather than “Voluntary”.

Source: [A report by the BBC 22 Feb 2010 "Toyota Receives Request for Recall Documents,']

3.

LITERATURE REVIEW

3.1 Relationship between Ethics and Business The relationship between business and ethics is inherently entwined. A successful company is a company which can effectively recognize and cultivate the relationship which exists between the two. Leigh Goessl (2010). However, C.V. Rajan (2010), Sees this relationship as being comparable to the relationship that exist between marriage and morality. A good marital relationship has several essential moral ingredients: commitment of loyalty to each other by the partners, none of the spouse ever having any extra marital affairs, commitment to healthy upbringing of the children, earning decent income by unquestionable means for running the family, maintaining a responsible relationship with the society and contributing even if in a small way for its welfare. Businesses that exhibit and promote strong corporate codes of ethics are more prosperous in the long run because they show a commitment to an expectation of sound moral behavior. This shows a dedication to society, customers, employees and the business itself. It will also enhance the company’s reputation (goodwill) if it is generally known as an ethical company and ultimately bring more value to the organization. Donna Burgess (2009).

It is true that due to the competitive nature of global economy today, leaders of firms seem to be under immense pressure to remain profitable and to show good returns to stakeholders, but this does not justify unethical decisions. It should be known that as leaders of firms exhibit unethical behaviors and even try to justify their actions when they know that it is wrong, this gradually become part of organizational culture. People follow by example and lack of moral judgment will spread. It is easy to blame “the system” yet people forget that the “system” is made up of decision making individuals. Leigh Goessl (2010). The relationship between business and ethics is intrinsically linked; people fail to recognize this connection. To operate under the principle “business is business” is not accurate and responsible (ethical) decision making is an important component of doing good business. 3.2 Effects of Unethical Decisions on the Society One only needs to recall the Enron incidence or high profiled business professionals like Bernie Madoff to know how poor ethical practices affect the society. Robert Grice (2009). Some of the specific effects are: • Loss of Confidence

One definite consequence of poor ethical and moral practice is loss of confidence and trust in businesses. Company rely on their ability to maintain trust with stakeholders in order to maintain profitability over time. A loss of trust can reduce drastically customer’s loyalty and motivate customers to turn to competitors. Other unethical activity likely to sway customer’s loyalty is the issue of corporate social responsibility. Bernie Madoff (2009) • Loss of Resources

A second effect of unethical and immoral practice on the part of business organizations is the loss of resources. The Phony profits and inflated stock prices collapsed over time, for instance, leaving the shareholders to absorb the losses. • New Legislation

Another effect of unethical practice on the part of businesses is the introduction of new legislation that applies to all companies. The SarbanesOxley Act (SOX) of 2002 is an example of accounting legislation enacted in response to accounting scandals in companies like Enron, Tyco, and Adelphia. SOX imposed strict accounting requirements on all publically held companies and made executives personally responsible for public accounting records. Robert Grice (2009).

4.

Suggestions

Above discussions gives an strong evidence that unethical decisions can be catastrophic for any organization. Organization profitability can by affected. Employee’s morale effected, being unable to answer the queries of customer’s complaints, when customer suffered from defective products. Company reputation gets negative impact. The ways through which decisions are taken in organizations should be rectified. The strength of will is required to face and resolve the ethical challenges and to confront barriers that inhibit the ability to proceed toward right action. Before taking any big decision the top management should think all possible outcomes especially ethical considerations must be taken into account as addressing ethical issues is always beneficent in long term planning. The centralized decision process is a very slow process as information flows from different small segments to a central location for a decision. More over centralized decision making has some draw backs, first a very few

people in organizations can not keep their selves up to date with number of issues thus it becomes difficult for them to move at the speed required by issues. Like in Toyota case the information flows towards HQ (C-Suite of Company) for decision making, the regional team that knew of the issue for years and probably had their friends buying unsafe cars did nothing. You might think this is not ethical. Today trend is toward more and faster and thus the customers who depend on us also experiencing the same trends. What makes companies different is responsiveness. Responsiveness depends upon how a company listens, discerns, learns, and organizes itself to respond quickly. In the light of above issues it is suggested that companies should delegate some decision making rights to sub offices to take immediate decisions on some critical issues with information to top management. The group decision making policy should be applied. The experience of line managers and field workers should also be used in formulation of a new decision. A centralized complaint management system is recommended in which complaints should be given different critical flags according to their criticality and some well defined procedures should be formulated to deal with severe issues. Access to these complaint management systems should also be given to some stake holders like wise in case of Toyota Company the National High Way Safety Commission should have access to such Information Systems in order to quickly launch their complaints with some suggestion if any exists. Communication gaps should be removed between top, middle and frontline management by the help of weekly and monthly meetings and instant issue logs should be generated whenever any problem is reported. These issue logs should be turn around and signed by all top managers.

CONCLUSION
In the final analysis, managers and organizations must realize that ethical and social responsibility issues deservers top priority. The Companies should acquire fast responsiveness for these issues with the help of modern technologies, delegated rights and group decisions. There should not communication gaps between top to line management levels. Conclusively, Granted the unethical companies may initially make significant gains financially and deliver the profits, but at what cost? When companies make unethical decisions it can result in defective or rushed products, Uncorroborated firing of employees and false presentations of products to consumers as the case with Toyota company. Is this good for the company? This is an illusion. Yes, these factors will all cut costs and give apparent profit, but it's inevitable that poor choices will impact negatively on the business in the long-run. This research work aims at exposing more practical effects of unethical decision as evidenced by the Toyota incidence.

REFERENCES

Internet Sites:  http://www.socialworker.com/jswve/ • http://epublications.bond.edu.au/business pubs/68

Journals:
 Kathleen

Boland, (spring 2006), Ethical Decision-Making Among

Hospital Social Workers, Journal of social work values and ethics, Vol. 3, pp 1, cedar crest college

 Leigh Goessl, (may, 2009), understanding the relationship between business and Ethics. Article 01, Retrieved April 23, 2010, from http://www.helium.com/search/search? search_query=how+poor+ethical+decisions+can+hurt+a+company&s earch_context=Unknown
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