Sometimes the headlines literally write my cases for me. The latest example is General Motors’ recall, ten years too late, of several cars with a faulty ignition switch. The defect was discovered as early as 2001, but GM failed to issue a recall until this year. Congress is now investigating (Bennett and White, Congress to Investigate Recall, Wall Street Journal 3/10/14), which should be interesting because the government agency tasked with monitoring the automotive industry, the National Highway Traffic Safety Administration, may also have been aware of the problems, but failed to act.
In addition to Congress, General Motors has launched an internal investigation. The defects reportedly resulted in up to thirteen deaths. General Motors has settled several individual lawsuits already, although the terms of those settlements are always confidential. The problem for any other potential plaintiffs is that as part of the government-sponsored bailout from the recession, General Motors filed for bankruptcy in 2009 and reorganized. The terms of the bankruptcy were that the “new” General Motors is not liable for any negligence caused by the former company. (Spangler, Todd, GM urged to waive bankruptcy immunity for recall lawsuits, USA Today, 3/12/14). The company is being pressured to set up a fund for victims of injures caused by the defect, because otherwise those victims will be forced to get in line with the other creditors of the pre-bankruptcy GM, which means they would receive pennies on the dollar (if that).
Obviously this case is full of legal issues: negligence, products liability, administrative law, and bankruptcy law, to name a few. But the bigger question is an ethical one: why would GM know of a defect, but fail to issue a recall until many years later? My LA245 class considered this question when we studied ethics. As we learned, it is expensive to do a recall, and can be complicated because there are many different laws around the world with which to comply. Although we really don’t know what happened at GM, I suspect that executives there fell prey to several pitfalls; particularly the dangers of cost/benefit analysis. In the grand scheme of cars sold, GM received relatively few complaints. Why spend all that money and time for a recall? Ethical fading means that business people tend to focus on the business elements of a decision, and the lives of its customers fade into the distance. I always assume that the executives at GM are not callous people; they are just blind to the ethical implications of their decisions. That is why practice in making ethics decisions is so important — the more you make those arguments, think about all sides of a decision, practice voicing your objections in a reasonable way, the easier it will be when your company gets bad news.
6 Comments
Matt DeGennaro posted on March 17, 2014 at 2:47 pm
It’s sad to see big companies that think they can get away with things like this. When making a decision to recall their vehicles or nor, it is evident that GM executives prioritized profitability over being ethical. In society today, we see companies time and time again trying to cut corners and eventually having to face the consequences of their actions. I personally like seeing how companies respond when they are put under the scope of investigation. They tend to make horrible excuses that any reasonable person knows is false. I’m curious to know that, if GM did do a cost/benefit analysis, how they valued a human life. In the end, this is just another sad example of how money can get the best of people.
Michaela Ragaisis posted on March 19, 2014 at 2:21 pm
I think the fact that GM is not liable because of their bankruptcy/ bailout is ridiculous. The fund they’re putting together does not reverse the injuries and deaths they caused from their negligence and they should be held more accountable.
Arielle Assayag posted on March 19, 2014 at 3:53 pm
This case immediately reminds me of the Ford Pinto case we referred to in class and how Ford looked at the release of the pinto as a cost analysis weighing the profits with the potential lost lives. This is another example of a company looking at decisions only as a business decision and ignoring the ethical aspect.
I think that GM didn’t issue a recall even after the deaths because it would have hurt their reputation tremendously, and especially at a time where they might not have been able to afford detrimental exposure. They also understood the cost to recall the vehicle would have been expensive and since the deaths didn’t receive too much attention first, they ignored their ethical responsibilities and stayed quiet.. This another perfect example of ethical fading and its very sad to see larger corporations get away with it, at least for as long as they did.
Shannon Clark posted on March 25, 2014 at 9:08 am
This also reminded me of the Ford Pinto case. I think that businesses are inherently going to make a cost/benefit analysis decision in favor of their company. The idea of distancing yourself from the victim comes into play as well. When you’re thinking of a death as a statistic and not a person with a family and loved ones, it is easier to make those callous decisions. Even afterwards, once the deaths have occurred and a recall should take place, the company’s ability to distance themselves from those affected helps them to justify their decisions.
I agree that the only possible way to avoid these horrible circumstances are to continue to teach people about ethics and, more importantly, ethical pitfalls. Even having those thoughts in the back of executives’ minds may sway their decision towards the more ethical. However, I do think that businesses will always be selfish, in a way, and extremely prone to overlook these harms. Overtime, that may change. But for the time being, I think that most companies will continue to fall into ethical pitfalls.
Daniel Mello posted on April 27, 2014 at 4:34 pm
Great blog post, I have been following this ethical nightmare closely myself. I heard through a newscast on NPR about a week ago is that the “old” GM (“old” because I wonder how much bankruptcy restructuring changed its corporate culture) had a toxic organizational culture. There were a few engineers that supposedly knew about the defect, but were too reluctant to report the issue to upper-level management due to the company’s reliance on disciplinary measures as its incentive system.
This did not surprise me. I could see the parallels to much of my prior experience. For example, in researching the organ donation incentive schema with you, we realized early on that positive incentives (such as giving priority status to donors) rather than negative incentives (warnings about thousands perishing) worked better. Another example is in the ACA: many were outraged to hear they would have to pay a penalty for no healthcare. Lastly, thinking about what incentives best work on my high school students, positive reinforcement creates good behavior whereas punishment just makes the both of us frustrated.
I wonder: if there is some sort of conclusive causal relationship between negative incentives and the manifestation of secrecy, fear, anger, deceit, and underhandedness; then could negative incentives themselves be considered unethical? Something to consider!
charternautico.com posted on November 29, 2018 at 5:05 am
Me ha gustado el punto de vista de enfoque de esta temática. Se nota especialmente que no se ha argumentado de la forma habitual sobre este tema. Gracias.