BPMN 3123

MANAGEMENT ETHICS

GROUP ASSIGMENT

Submitted to:

PROF MADYA ALI YUSOF BIN MOHD ZAIN

Prepared by:

NAME MATRIC NO.

1. ARMA BINTI MOHD ZAIN 232579

2. SYARIFAH NUR AMIRA BINTI SYED ABDULLAH 232496

3. IBTISAM BINTI MOHD HATIM 232914

4. NOR SOFI AMALINA BINTI JAMALUDIN 232386

5. SYAIFUL AMRI BIN LUQMAN 232411

Submitted date
22th APRIL 2016
1.0 INTRODUCTION

General Motors commonly known as GM is an American multinational

corporation headquartered in Detroit, Michigan, that designs, manufactures, markets and

distributes vehicles and vehicle parts and sells financial services. General Motors is divided into

five business segments such as GM North America (GMNA), Opel Group, GM International

Operations (GMIO), GM South America (GMSA) and GM Financial.

The company was formed on September 16, 1908, in Flint, Michigan, as a holding

company for McLaughlin Car Company of Canada Limited and Buick. Then, it controlled by

William C. Durant. At the beginning of the 20th century there were fewer than 8,000

automobiles in America and Durant had become a leading manufacturer of horse-drawn vehicles

in Flint before making his foray into the automotive industry. GM's co-founder was Charles

Stewart Mott, whose carriage company was merged into Buick prior to GM's creation. Over the

years Mott became the largest single stockholder in GM and spent his life with his Mott

Foundation which has benefited the city of Flint, his adopted home.

Wagoner became president and chief executive officer in June 2000 and was elected

chairman on May 1, 2003. Under his leadership, GM suffered more than $85 billion in

losses. Wagoner stated that the worst decision of his tenure at GM was "axing the EV1 electric-

car program and not putting the right resources into hybrids. In the Automotive industry crisis of

20082009, Wagoner came under renewed pressure as GM sought financial support from the

U.S. government in an attempt to avoid bankruptcy. During the latter half of 2008, Wagoner and

GM maintained that bankruptcy was "not an option that GM is considering," despite rapidly
running out of capital. This stance was called "presumptuous" by some observers.[16] Within 9

months, GM was to declare bankruptcy.

On the brink of bankruptcy, Wagoner knew he had to ask for help. He knew that with the

failures of major lending and banking agencies and the bailouts being offered by the government,

that this may be his only chance to save the company. Eventually, congress made it possible to

give GM a bailout option. But even with the option available, Wagoner and fellow company

executives failed to meet requirements of the bailout terms. Wagoner was forced to resign and

GM was bought out by the new GM Company and the government retained control of the new

company. With the governments involvement in bailing out GM and other banks, came harsh

criticism from those who warned against socialism and protecting capitalism and the free market

values.
2.0 QUESTIONS

1) How would Locke, Smith and Marx evaluate the various events in this case?

John Locke (1632-1704), an English political philosopher is generally credited with

developing the idea that human beings have a natural right to liberty and a natural right to

private property. He felt the government should only have a very limited role in peoples

business and everyone has natural right. When the Old GM came to government and asked

for a bailout, Locke would probably have felt that GM was giving up its natural rights. They

would no longer be a free market because they were selling their souls to the government for a

bailout even though they promised the government they would pay them back in a set amount of

time but it did not happen. Therefore, Obama came into office and created the New GM also

known as General Motors Company.

Adam Smith (1723-1790), the father of modern economics is the originator of this

utilitarian argument for the free market. According to Smith, when private individuals are left

free to seek their own interests in free markets, they will inevitably be led to further the public

welfare by an invisible hand. He would have felt that if GM would stay a free market and stay on

its own, it would possibly even prosper more than if it were to ask for the governments

assistance. He believed in the invisible hand which was market competition. His view would

have been that if GM would make something the people of the general public would want, then it

would indeed succeed and make money. He also would have argued that if demand was high for

something and people wanted it badly enough, people would drive the price up. Therefore, the

company would make more of a profit from their vehicles and not have to ask the government

for the bail out. Smith would most likely say that it was not due to the failure of this theory of the
invisible hand that GM tanked. It was due to the lack of vision and good management. He would

have most likely said that if those two elements had been there, then the invisible hand theory

would have worked and GM would have prospered.

Karl Max (1818-1883) is undoubtedly the harshest and most well-known critic of private

property institutions, free market and free trade and the inequalities they are accused of creating.

Marx would argue that the government stepping in and wholly owning or at least partially

owning these automotive and working classes. So, there is still room for corruption at the

expense of the workers and society in general. Marx would argue that there needs to be a total

elimination of privatization and that the means of production would be collectively owned by all

members of society with work being divided among those with certain talents and not social

status.
2) Explain the ideologies implied by the statements of the letter to the U.S. Congress signed

by 100 leading economists, Joseph Stiglitz, Bob Corker, the republican resolution on the

bailouts, Roberts Higgs and Michael Winther.

George W. Bush administration asked the U.S. Congress to pass legislation creating a $700

billion fund called the Troubled Asset Relief Program (TARP). A reluctant the U.S. Congress

approved the TARP bill which authorized the U.S. Treasury Department to use the funds make

the 100 leading economists signed the letter to the U.S. Congress.

They as economists want to express to Congress their great concern for the plan proposed by

U.S. Treasury Department to deal with the financial crisis. They are well aware of the difficulty

of the current financial situation and they agree with the need for bold action to ensure that the

financial system continues to function.

The reasons U.S. Congress refused to approved the TARP bill are:

1) Its fairness. The plan is a subsidy to investors at taxpayers expense. Investors who took

risks to earn profits must also bear the losses. Not every business failure carries

systematic. The government can ensure a well-functioning financial industry, able to

make new loans to creditworthy borrowers without bailing out particular investors and

institutions whose choices proved unwise.

2) Its ambiguity. Neither the mission of the new agency nor its oversight are clear. If

taxpayers are to buy illiquid and opaque assets from trouble sellers, the terms, occasions

and methods of such purchases must be crystal clear ahead of time and carefully

monitored afterwards.
 3) Its long-term effects. If the plan is enacted, its effects will be with us for a generation. For

all their resent troubles, Americas dynamic and innovative private-capital markets have

brought the nation unparalleled prosperity. Fundamentally weakening those market in

order to calm short-run disruptions is desperately short-sighted.

For those reasons, they ask Congress not to rush, to hold appropriated hearings, to

carefully consider the right course of action and to wisely determine the future of the financial

industry and the U.S. economy for years to come.

3) In your view should GM bailout have been done? Explain why or why not. Was the

bailout ethical in terms of utilitarianism, justice, rights and caring?

In my view, yes the GM bailout should have been done. This is because the GM Bailout

saves millions of jobs in auto cars sectors. Not only in auto car sectors, the other sector like retail

sector, housing sector and restaurant also benefited from the GM bailout. When GM not done,

jobless people sure spend less many sector of US economic will be affected. When GM bailout

not done, the US government will need to spend on the jobless benefits of people which increase

expenses of the government. The social problem may cause by jobless people, crime in US like

robbery may rise because the increase in jobless people.

The GM bailout cost a lot of money and in the end just prolonged the inevitable of GM

going bankrupt. So, GM has asked government to help them, in this the utilitarian principles

choose the action that produce a many benefits between GM bailout and Not GM bailout.

Basically the tax payers did, and will for years, end up paying for the mismanagement of the

automotive and banking industries. But there is also the fallout from letting them fail and what it

would have done to our economy and the workers that depended on those jobs. In free trade and

free enterprise and privatization its show how the utilitarian principles benefits occurs in GM

bailout. Moreover, GM bailout in justice it eventually not ethically. This is because according to

justice there is need to treat entity equally without any fraud and take advantages for others

weakness. If GM receive bailout, other company also need to get bailout. This is impossible to

bailout all problem company. So, Gm should not be bailout according to justice.

However, I feel that some kind of government control should been done mixture in place

of private companies that lack the management, the government can take responsibility for
providing assistance and appropriate regulation so that it will not affect our economy and

society. So finally I would say that I'm ok with bailout degree. Ethically, I believe that it serves

and beneficial from the standpoint of utilitarianism and loving. But from the point of justice it is

unethical and right view as it imposes a lot of negative impact on all taxpayers and service not so

evenly but there are also quite a bit of justice for the gross mismanagement of money with these

companies. There are a few elements of justice to all tax payers and there was relatively little

justice for the gross mismanagement of money by these companies.

4) In your judgement, was it good or bad for the government to take ownership of 61

percent of GM? Explain why or why not in terms of the theories of Lock, Smith, and Marx.

From my judgement it was a good for the government to take ownership of 61 percent of

GM company this because in 2008 if the president bush do not agreed to bailout the GM

company this General Motors company will gone out of business .This action effect the

government to take a risk to give $50 billion to GM company that no one was sure that the

amount would be pay off. But it result the U.S. government have owning 61 percent share of GM

company that was $500 million of shares in that company. This because after got the bailout the

GM company slowly establish successfully this because in 2010 GM reported it got $4.7 billion

of profit and it was it GM companys first annual profit since 2004. The GM also reported that

45,000 union worker would receive bonus checks that have averaging of $ 4300.

But it will give different result when we followed John lock theory this because John lock

theory tell us all about natural right. For him he felt that the government should only have a

limited roles in peoples business, he felt that everyone have its own natural right so it was

bad according to John lock when GM company come to the government and asked for bailout

this because for him GM would no longer be a free market because they were selling their soul

to the government for a bailout, even though they promise to the government they would pay the

amount in a set of times because John lock not agree with centralization by government.

Adam smith theory is a free market and utility. He is a total utilitarian viewer and

according to his of free market and utility theory the decision making should be done by

individual and not a government. He not agree with the government to take 61 percent of GM

ownership because he felt that if GM would stay a free market and stay on its own, it would
possibly even prosper, more than if its depend on the government because he believe on

invisible hand which was market competition.

Karl Mark is modern socialist. Marx argue that if GM use privation and capitalism

ideologies it will brought GM to knees and he felt that the government should stepping in or

owning or at least partially owning GM company because he felt that there are need to eliminate

the privation and that the means of the production would be collectively owned by all members

of society with work being divide among those with certain talents and not social status.

Therefore, if the government own 61 percent of the GM company ownership it was good because

in Karl Marx theory of mix economy there is government intervention to avoid free market

monopoly every things.

3.0 CONCLUSION

General Motors (GM) is one of the major companies of Automotive and famous in the

United States and in other countries. In year 2008, GM plunged the firm is increasingly incurring

huge losses and facing bankruptcy. The fall of GM is due to inefficient management operations

cause them to drop incurring losses. At that point the government had intervened in GM

company. The US government has taken a 61% stakeholder in GM. Political involvement of the

United States government has been increasing the share of profits for GM. From an economic

perspective, it is hard to justify a huge government bailout for a declining industry. It is a very

expensive and inefficient way, to prevent unemployment. If the government really have $25

billion to try and protect jobs in the car industry, they might be better off letting General Motors

go under, then use this money to try and retrain workers and stimulate investment in the towns

most affected. At least the government would have something to show for their money, rather

than pouring it down the black hole of General Motors accounts. The government could then say

at least it is trying to help deal with the very high human cost of General Motors bankruptcy.
REFERENCES

(2016). General Motors chapter 11 reorganization. Retrieved from

https://en.wikipedia.org/wiki/General_Motors_Chapter_11_reorganization

Chris Isidore. (2013, December 9). Treasury Closes The Book on GM Bailout with Final Stock Sale.
Retrieved from
http://money.cnn.com/2013/12/09/news/companies/gm-bailout-stock-sale/

Eric Beech. (2014, April 30). U.S. Government Says It Lost $11.2 Billion on GM Bailout. Retrieved from
http://www.reuters.com/article/us-autos-gm-treasury-idUSBREA3T0MR20140430

Freakonomics. (2008, September 23). Economists on the bailout Web. Retrieved from
http://freakonomics.com/2008/09/23/economists-on-the-bailout/

Gerald Hart. (2011). Applying Utilitarianism: Are Insider Trading and the Bailout of GM Ethical?
Retrieved from
http://sevenpillarsinstitute.org/morality-101/applying-utilitarianism-are-insider-trading-and-
the-bailout-of-gm-ethical

Joannetanyp . (2014, April 5). Gm Bailout Web. Retrieved from

http://www.antiessays.com/free-essays/Gm-Bailout-604214.html