Week 1 – Assignment: Evaluate the Price of Unethical Behavior

Introduction

Several firms have been implicated for their involvement in unethical business practices, ranging from sexual harassment among employees to actions that put the public’s safety at risk. One such company is General Motors (GM) which faced fierce criticism and lawsuits for manufacturing and installing ignition switches that did not meet the required specifications in some of its car models, leading to the deaths and injuries of several drivers. Although GM faced legal suits and committed to compensating its victims, the outcomes of the events had far-reaching effects, including compromising its relationship with internal and external stakeholders and worsening its financial performance.

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Historical Scenario

While lawsuits facing GM escalated in 2015, the literature reveals that the ignition-switch problem began several years before. Most stakeholders failed to play their role in curbing the situation and explaining why the issue occurred for an extended period. Wanasika and Conner (2018) state that the problem started in 2002 after the company’s engineer, Ray DeGiorgio, approved the new ignition switch manufacturing. Despite other engineers recognizing the defects, the engineer approved its installation in some car models. Besides, the company failed to disclose the issue to the public and advised its dealers to tell customers complaining about the stalls to reduce the weight of their key rings (Wanasika & Conner, 2018). In essence, approval of the manufacture of a defect switch by the company’s contractor, its installation in cars that landed on the market, and failure to inform consumers about the defect set in motion the issues surrounding GM.

Besides approving a defective component, the stakeholder’s failure to review the reports and take timely action also set the issues surrounding GM’s case in motion. For example, Wanasika and Conner (2018) observed that after reviewing the ignition-switch failure reports in 2004, the GM engineers argued that the problem was trivial and lacked safety issues. When the GM brand quality group learned about the moving stalls in 2005, it failed to identify the problem. Similarly, despite the numerous accidents associated with the ignition switch and Young’s report about non-deployment of the airbags, the Executive Field Action Decision Committee (EFADC) refused to authorize the vehicle recall, arguing that there lacked sufficient information (Wanasika & Conner, 2018). Fundamentally, GM’s issues that led to bankruptcy and lawsuits can be traced back to the involved parties’ reluctance to solve the problem despite the numerous accidents and injuries related to the ignition switch.

Prevalence of the Unethical Behavior

Fundamentally, ethics are the moral principles that guide people’s behavior, while unethical behavior is an action that fails to meet what is considered morally correct. An analysis of the GM case suggests that guanxi practices within the firm may account for the occurrence of unethical behavior for as long as it did. Wu et al. (2019) describe guanxi practice as the “use of social relationships to make exchanges, manufacture indebtedness, or accomplish tasks, particularly in human resources management” (p. 2). Put differently, guanxi practices are strong relationships built with others, which may deem an exchange of favors or a moral obligation towards others. In this context, GM’s prevalence of unethical behavior was likely triggered by guanxi practices among the executive team and other employees. As is evident from the case study, the management wrote a confidential memo to its staff, urging them to avoid using “judgment words” for the company’s reports and presentations. The article also reveals that, ultimately, fifteen workers were fired, and five were disciplined after being deemed at fault in the Valukas report (Wanasika & Conner, 2018). Arguably, the transactional relationship between GM’s executive team and the staff generated a moral obligation for the latter to follow the management’s instructions regardless of whether they approved the decision.

Besides guanxi behavior, unethical leadership likely promoted unethical behaviors in GM. Findings from current research reveal that ethical leadership and coworker’s ethicality with ethical outcomes such as organizational citizenship behavior (OCB) and intentions are positively related to ethical leadership (O’Keefe et al., 2017). Findings by Owens et al. (2019) also show that leaders are responsible for cultivating their followers’ moral capacity in terms of moral self-efficacy and behaviors. These findings imply that leaders play a critical role in fostering ethical or unethical behavior among the staff. In this context, some of GM’s higher-level employees that might have been considered role models to the junior team were involved in unethical practices. The example set by the high-level employees may have led to the infiltration of the unethical practice in all levels of management, contributing to its prevalence for almost five years.

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Outcomes of the Events

Furthermore, an evaluation of the case study suggests that GM’s outcome had a detrimental effect on its performance and its relationship with internal and external stakeholders. For example, research shows that the firm’s financial performance worsened in 2006, leading it to file for bankruptcy (Wanasika & Conner, 2018). In addition, the company experienced a fallout with external stakeholders such as consumers, the NHTSA, and contractors because the former failed to meet the quality requirement. In essence, the outcomes of events in GM did not only adversely affect its financial performance but also its relationship with internal and external stakeholders. Besides, the firm’s punishment in remedial action might not have been justified because it may have mitigated the damages to consumers and loss of lives through timely action.

Conclusion

Despite firms such as GM being implicated in unethical practices, professionals in such organizations typically fail to understand their ethical breaches. This issue may mainly emerge because ethics are primarily personal rather than global principles. Arguably, one person’s ethics may differ from another. Therefore, it may be difficult for business professionals to identify ethical breaches because of the business environment variation.

 

 References

O’Keefe, D. F., Messervey, D., & Squires, E. C. (2017). Promoting ethical and prosocial behavior: The combined effect of ethical leadership and coworker ethicality. Ethics & Behavior, 28(3), 235–260. https://doi.org/10.1080/10508422.2017.1365607

Owens, B. P., Yam, K. C., Bednar, J. S., Mao, J., & Hart, D. W. (2019). The impact of leader moral humility on follower moral self-efficacy and behavior. Journal of Applied Psychology, 104(1), 146–163. https://doi.org/10.1037/apl0000353

Wanasika, I., & Conner, S.L. (2018). General Motors: The ignition switch from hell. Journal of Case Studies, 36(2), 66-81. http://www.sfcrjcs.org/

Wu, R., Ming, S., & Huang, F. (2019). Guanxi and unethical behavior in the Chinese workplace: Job satisfaction as a mediator. Social Behavior and Personality: An International Journal, 47(3), 1–14. https://doi.org/10.2224/sbp.7294

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