Running Head: UTILITARIAN ETHICS AND THE CASE OF THE SOLE REMAINING

SUPPLIER

UTILITARIAN ETHICS AND THE CASE OF THE SOLE REMAINING SUPPLIER

1. Background

The case of the remaining sole supplier revolves around the ethical dilemma faced by a

company which supplies the key transistors that operate on the fairly new health technology

product called the heart pacemaker. The situation takes place in 1975 when the pacemaker

technology was just being introduced by another company which sourced the transistors from

several companies. However, due to failed installation incidents that have led to patients

dying, transistor suppliers have cancelled their contracts with the pacemaker company until

there is only one contract supplier left. After considering many incidents involving failed

pacemakers, the board of the supplier company meets to weigh the risks of executing the

contract and face the possibility of lawsuits due to unreliable specifications of the pacemaker

company to test the transistors supplied. The board decides to cancel the contract altogether

and stop supplying the pacemaker company with the transistors it needs to manufacture the

heart pacemaker.

2. The Key Utilitarian Ethical Problem

The utilitarianism philosophy holds the view that the morally right action is the action that

produces the most good or the greatest utility or happiness. The philosophy is consequential

in that the right action must be understood in the context of the consequences that resulted

from it (Driver, 2009). Under the utilitarian principle, the consideration of good or utility

takes into account the general or overall good that encompasses the good of others as well as

one’s own good (Driver, 2009). In its original form, Jeremy Bentham presented utilitarianism

as that philosophy that subscribes to the greatest good for the greatest number. Over time,

utilitarianism has evolved to focus on the concept of upholding the greatest good, period.

In the Sole Remaining Supplier Case, an ethical dilemma is presented to the transistor

supplier when the pacemaker company contends that their unilateral action is immoral as it
UTILITARIAN ETHICS AND THE CASE OF THE SOLE REMAINING SUPPLIER

deprives pacemaker recipients of any chance to survive or live normal lives. The pacemaker

company underscores that the transistor supplier as the sole remaining supplier of their

company has the moral obligation to render the contract as live or it will cause the pacemaker

company to lose its business and endanger the lives of heart patients who could possibly

benefit if such a breakthrough life-saving device were obtainable.

The Board of the sole remaining supplier debates on the dilemma, saying that the transaction

with the pacemaker company has not been profitable enough to engage the supplier company

in the risk of a lawsuit from unhappy pacemaker customers. The standards of equipping the

transistors in the pacemakers have been unsatisfactory that it has caused some product lapses

that may have caused death rather than save the lives of its intended beneficiaries. Contrary

opinion within the Board however points to the ethical obligation of the transistor supplier to

sell to the technology-evolving pacemaker company or wipe out whatever chance there is for

pacemaker recipients to resume ordinary lives.

3. What Bentham Would Advice The Supplier

Jeremy Bentham, acknowledged as the father of utilitarianism, proposed a moral and political

philosophy that rested on three principal characteristics, namely, (1) the greatest happiness

principle, (2) universal egoism and (3) the artificial identification of one’s interests with those

of others (Sweet, n.d.). These characteristics serve as the moral compass for pursuing the

action that promotes the greatest amount of happiness (for the greatest number of people).

Bentham believed that laws play a role in bringing together diverse individual interests to

pursue a collective good and that the greatest impartial good comes from the pursuit of action

that seeks pleasure and fear pain (Sweet, n.d).

Bentham will probably advise the transistor supplier to carefully weigh the consequences of

each action, whether to terminate the supply contract or continue to do business with the

pacemaker company, in the light of whether the action will contribute to the pursuit of the
UTILITARIAN ETHICS AND THE CASE OF THE SOLE REMAINING SUPPLIER

collective good as prescribed by law and how the prescribed action should proceed to ensure

the resolution of attaining the greatest good for those with an interest in the ethical dilemma.

Given the existence of a live contract and underscoring the moral obligation of the parties

involve to promote a collective good, Bentham would proceed to give the advice as it unfolds

in the case analysis. The consideration of utilitarian philosophy should lead to the actual

outcome of the case as discussed in one of the references (Shanks, 1996). In his commentary,

Shanks reveals the utilitarian resolution to the ethical dilemma faced by the transistor

supplier. One is to carry out its moral obligation to consider beyond its profitability concern

and look at its legal obligation to make and advance the new pacemaker technology for many

who otherwise would be deprived of a chance to live a normal quality of life. This meant to

do the right thing and do well by continuing to serve the transistor requirements of the

pacemaker company as its sole available supplier. The other is to involve itself in the

business processes of the pacemaker company to ensure that the transistor installation

specifications for the pacemaker met quality standards and lessen the risk of failed pacemaker

installations as well as compel the pacemaker company to improve on the breakthrough

medical technology. This required a strong enforcement of a new tight contract that protects

the interest of the sole remaining supplier in the event that the pacemaker company failed to

live up to the quality standards designed to benefit the pacemaker recipients. This move was

effectively seen to remove the risk of legal liability, which was the prime concern really

rather than profitability issues for its shareholders, arising from the haphazard state of

technology of the new pacemaker prior to the resolution of the ethical dilemma in the case.

4. Utility Test of the Case Problem

Step 1: Identify the alternative actions that are possible and the persons and groups

(the stakeholders) who will be affected by these actions.

UTILITARIAN ETHICS AND THE CASE OF THE SOLE REMAINING SUPPLIER

There are several alternative courses of action that the sole remaining supplier may resort to,

namely:

A. Dissociate the transistor business from the pacemaker company.

This alternative will affect the ability of the pacemaker company to render its product

and service to its market consisting of heart-endangered patients seeking for life-

saving solutions to their health problem. Such a move will likely be spearheaded by a

management-endorsed decision to cancel the contract on the argument that it will

protect shareholders from losses that may be brought about by the risk of potential

lawsuits related to lapses committed by the pacemaker company in the delivery of the

pacemaker which has the transistor produced by the sole remaining supplier as key

component.

B. Continue to supply the transistors for the pacemaker company until the end of the

contract and risk possible litigation action from affected pacemaker recipients or their

families or as a class suit

This alternative affects the financial status of the sole remaining supplier as it

essentially puts itself as party to potential litigation action by pacemaker recipients or

their families or even a class suit even against the pacemaker company. This is

because the sole remaining supplier may be perceived as accomplice in the sub-

standard delivery and performance of the breakthrough technology at that stage. With

this alternative, there is bleak promise of hope for the pacemaker recipients if the

pacemaker company does not undertake to make a better product by putting the

transistor to better use.

C. Continue the supplier relationship with the pacemaker company but carefully review

the terms and conditions of the contract in order to compel the pacemaker company to
UTILITARIAN ETHICS AND THE CASE OF THE SOLE REMAINING SUPPLIER

implement rigid transistor installation standards and improve the new medical

technology in order to better serve the end-product market

This alternative involves the community beyond the supplier-business relationship as

it centers on ensuring customer satisfaction on the part of the pacemaker recipients

and enhancing safe health safeguards. There is an element of social responsibility here

that will redound to the benefit of the sole remaining supplier as it engages itself to

commit to make its downstream alliance succesful on its own business.

Step 2: For each of the most promising alternatives, determine the benefits and costs to

each person or group affected.

Alternative 1. Cancel the contract unilaterally

The sole remaining supplier pays more attention to the risk of facing lawsuits in relation to its

involvement as the pacemaker company’s only supplier of transistors, a key component in the

medical device. The supplier company stands to lose some modest profits from the

transaction were it to cancel the contract outright. Since there is a supplier contract however,

there is good reason to believe that the pacemaker company will likely protect its own

business and counter defense strategy that could also cost the supplier company a lot of

money for terminating the contract on its own.

Alternative 2. Enforce the contract without amendments

Given the propensity of the pacemaker company to apply less rigorous standards in the use

and installation of the transistors according to quality specifications that will ensure the best

performance of the pacemaker, this alternative will prove harmful to the supplier company as

well as to the pacemaker company and even the pacemaker recipients because all parties are

exposed to the risk of loss. In the case of the business enterprises, they run the risk of losing a

lot of money and assets if a lawsuit materialized for failed pacemaker operation due to

substandard installation of the transistor causing the loss of life of pacemaker recipients.
UTILITARIAN ETHICS AND THE CASE OF THE SOLE REMAINING SUPPLIER

Alternative 3. Negotiate a new contract with stringent product use standards and monitoring

of the pacemaker company’s business processes

This will be a costly adjustment for the pacemaker company because stricter standards may

mean enhancement of business processes and procedures and even of resources to ensure

better performing pacemakers for the recipients. Ensuring the correct application and

specification of the transistors for the use of pacemakers may likewise mean added cost for

the supplier company as well but this alternative is a risk-mitigating alternative. Without

amending the contract in a great degree, the sole remaining supplier will not be better off.

Neither would be the pacemaker recipients. The success of a medical breakthrough such as

the pacemaker promises to yield favorable business to its marketer and developer and to the

sole remaining supplier in terms of foreseen competitive market advantage and proprietary

revenue generation especially for the pacemaker company.

Step 3: Select the action in the current situation that produces the greatest benefits over

costs for all affected.

The greatest benefit over costs, or the potential for it, is best represented by Alternative 3

where active engagement by the supplier company to the development and design of the

breakthrough medical device underscores its moral and social obligation to the stakeholders

of its own business: its downstream market and the derived consumers of that market who

ultimately stand to benefit from the breakthrough technology. It is a business idea that indeed

has proven to save lives.

Step 4: Ask what would happen if the action were a policy for all similar situations.

If this action were applied to similar situations, we will probably see the rise of the sole

remaining supplier as a best practice example of corporate social responsibility in action. The

message should be that it pays to promote stakeholder interests and create added value as a

company. Looking out only for shareholder interest denies other stakeholders the benefit of
UTILITARIAN ETHICS AND THE CASE OF THE SOLE REMAINING SUPPLIER

being better off. Rather, all other stakeholders would be worse off without this policy

application. Implementing a similar situational policy allows careful consideration of the

options available and should generate the best one that promotes the greater good.

5. Common Good Test

Step 1: Specify what parts of the common good are involved.

The common good involves the interest of the general public not only the protagonists of the

looming business war.

Step 2: Explain why we have obligation to promote or protect the common good.

A business which operates in the bigger environment, especially social, has the obligation to

do what is good and right and best for as many stakeholders and for the common good.

Businesses must seek to serve the interest of society because businesses succeed or fail

according to how their environments promote their own corporate good. There is a

biosymbiotic relationship to the idea of promoting the common good, because ultimately the

very fabric of a moral and orderly society is preserved and/or promoted.

Step 3: Does the proposed action conflict with this obligation?

The proposed action supports the interest of the common good, as it considers the obligations

and duties of corporations to be concerned not only of profiting but also yield satisfying

outcomes for its customers, in this case the pacemaker recipients as the ultimate customers.

Both the supplier and the pacemaker company are morally obliged to render the service of

making the breakthrough product work because so many lives depend on it. Without the

development of a good technology advancement, so many lives would first be sacrificed in

the name of reasonable profit-making.

6. Compare and Contrast

As a business case, I think the utility test is more relevant because it directly addresses and

brings to the fore the bottomline issues that are central to any business consideration. The
UTILITARIAN ETHICS AND THE CASE OF THE SOLE REMAINING SUPPLIER

business is forced to carefully weigh the consequences of its action in terms of the benefit

vis-a-vis the cost. On the other hand, the common good test attacks the problem from the

recognition of the moral and social obligation to care about society that a business should

have as a prelude to how it enhances the financial function of ordinary business. It is the

common understanding that businesses are not always moral or ethical in their practices in

the pursuit of their goals. So this test may be a weak test to compel businesses to be socially

responsible. Both tests though underline the role of ethics and good business behavior that

promotes social values that pay back to the business enterprise in the end. For me, it is just

clearer when the utility test is used as a measure.

UTILITARIAN ETHICS AND THE CASE OF THE SOLE REMAINING SUPPLIER

BIBLIOGRAPHY

Driver, Julia. (2009). The History of Utilitarianism. The Stanford Encyclopedia of

Philosophy Summer Edition. Retrieved from http://plato.stanford.edu/entries/utilitarianism-
history/#JerBen.

Shanks, Thomas S.J.(1996). The Case of the Sole Remaining Supplier. Markkula Center for
Applied Ethics, Santa Clara University. Retrieved from
http://www.scu.edu/ethics/dialogue/candc/cases/supplier.html.

Shanks, Thomas S.J. (1996). Commentary on the Case of the Sole Remaining Supplier.
Markkula Center for Applied Ethics, Santa Clara University. Retrieved from
http://www.scu.edu/ethics/dialogue/candc/cases/supplier_comments.html.

Strategies for Effective Ethics. (2012). Markkula Links Connecting Theory and Practice.
Retrieved from http://ethicsops.com/EthicsTestsLinks.php.

Sweet, William. N.d.. Jeremy Bentham (1748-1832). Internet Encyclopedia of Philosophy.

Retrieved from http://www.iep.utm.edu/bentham/.