Ethics - Philosophy of Management

When Child Labor Is Ethical

February 17, 2012 By Timothy Mojonnier 2 Comments

Multinational corporations have experienced withering criticism for employing children in Asian factories. On the surface, this practice appears to be unethical. But is it?

When we study supply chain management, I engage my students in a discussion of this topic. Here is the scenario:

Industrial size textile factory in developing country, workers on lunch break

“Major corporations with overseas subcontractors (such as Ikea in Bangladesh, Unilever in India, and Nike in China) have been criticized often with substantial negative publicity, when children as young as 10 have been found working in the subcontractor’s facilities. The standard response is to perform an audit and then enhance controls so it does not happen again. In one such case, a 10-year-old was fired. Shortly thereafter, the family, without the 10-year-old’s contribution to the family income, lost its modest home, and the 10-year-old was left to scrounge in the local dump for scraps of metal.” —adapted from Principles of Operations Management

A student of mine from India said that the decision to hire the child was ethical; and the judgment to fire him was unethical. My student defended his position by stating that Americans do not understand the depth of poverty in India. In many circumstances, families rely on child labor, so that the family can survive. When he grew up, there was no compulsory education, so working did not deprive Indian school-age children from going to school. [In 2009, the Indian parliament legislated a compulsory education law for elementary school children.] Other students of mine who have grown up in developing countries—such as China and Bangladesh—have agreed with this line of reasoning.

After all, during the 19^th century, the U.S. was once a developing country. For many years, we condoned the practice of employing children in the workplace. Once our standard of living improved—and universal, public education became a realistic objective—we passed child labor laws that prohibited this practice. So, in the present, does showing outrage at Ikea, Unilever and Nike amount to hypocrisy?

From a philosophy of management perspective, it is useful to examine public policy decisions through the lenses of utilitarianism. This philosophy states that, in all situations, you should act in a way that generates the greatest benefit for the greatest number of people. Everyone’s interests are considered equal. Thus, if utterly poor families are only able to survive when the children can work, it is unethical to prevent them from doing so. By permitting child labor, we are promoting the greatest good for the greatest number of people. The family remains intact as a result of the income received, while the U.S. and European consumers obtain inexpensive goods from their retailers.

Although the philosophical justification for child labor is convincing, major corporations cannot withstand the negative publicity associated with these practices. Just this week, Apple indicated that they are going to have an independent firm audit its suppliers, because of criticisms over conditions at its overseas factories. So, from a public relations perspective, not a moral perspective, we cannot condone this practice.

Several years ago, Nike initiated a compromise solution. Children worked in their Vietnamese factories, but the company also provided them with food and a free education.

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Do you think that it is ethical to employ underage children in factories located in developing countries? If a multinational corporation also provided educational opportunities, would that be acceptable?

Filed Under: Ethics Tagged With: child labor

Is the Announced $25 billion Settlement with Homeowners Ethical?

February 10, 2012 By Timothy Mojonnier Leave a Comment

Unethical mortgage origination practices precipitated a $25 billion settlement with banks over alleged foreclosure abuses, including the use of forged and shoddy paperwork, a practice known as “robo-signing.” The deal will provide financial relief to an estimated one million at-risk borrowers, as described in today’s Wall Street Journal. This is a step in the right direction: holding the financial institutions accountable for the dubious practices that they perpetuated. However, millions of mortgages owned by Fannie Mae and Feddie Mac are not covered under the deal, thereby excluding more than half of the nation’s mortgages. Moreover, the real culprits in causing the worst economic crisis since the depression are not just the banks. The government, non-bank lenders, and Wall Street are also responsible.

Paying money—rather than aggressively prosecuting wrongdoers—is never a good idea. Specifically, the settlement is poor compensation to the public for the unethical practices and crimes that were committed against it. In 2001 and 2002, members from senior management at Enron and WorldCom were prosecuted and convicted for performing various criminal acts against their stakeholders. Why have we not prosecuted the wrongdoers who precipitated the current financial crisis?

The immoral acts that I am referring to are well documented in the book Reckless Endangerment, written by Gretchen Morgenson and Joshua Rosner. Since today’s settlement pertains to mortgages, let’s look at some of the shenanigans that surrounded these products. In 2004, lenders came up with two new types of toxic loans:

1) interest only mortgages, where borrowers simply had to pay off interest, but not principle. As a result, borrowers didn’t build up any equity.

2) negative amortization loans where the borrower paid as much interest as he wanted—any amount not paid off was simply tacked on to principle.

These two products accounted for just 6% of loans in 2003, but by 2005 they represented 29 percent of the market. They were particularly profitable for the lenders: Countrywide made 5% profits on every interest only loan between $100,000 to $200,000. Wall Street’s investment banks made even more money, by subsequently packaging them into investments called CDOs (collateralized debt obligations). Ratings agencies—such as Moody’s and Standard & Poors—then rubber stamped the securities as being AAA rated; however, they didn’t look under the hood to see what was really there. Moody’s could earn as much as “$250,000 to rate a mortgage pool with $350 million in assets, versus $50,000 in fees generated when rating a municipal bond issue of a similar size.”

Morgenson & Rosner described the entire process as being akin to a drug deal where the mortgage originators were drug pushers hanging around the school yard. The ratings agencies were the narcotics cops looking the other way. And the brokerage firms were the overseers of the cartel providing the capital to the “anything goes” lenders.

A coke dealer—who cuts their product with impure substances—knows the harmful effect that the drug will have on clients. Similarly, wall street firms that packaged impure, sub-prime loans into mortgage pools knew, well before their customers did, that the loans inside the CDOs had begun to go bad. The authors describe how in the third quarter of 2006, the traders at Goldman Sachs made bets against the same securities that their brokers were selling to their clients!

It has almost been four years since Bear Stearns fell, only to be followed six months later by the denouement of Fannie Mae, Freddie Mac, Lehman Brothers and the American International Group. The settlement announced today represents progress, but it is inadequate recompense to the taxpayers. The leadership of the institutions that engaged in unethical practices must be held accountable. After all, they were primarily responsible for creating the current, financial morass that we are struggling to work ourselves out of. Justice will be served only when the government redresses the larger wrongs that were committed against society.

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How do you weigh in on this issue?

Filed Under: Ethics Tagged With: wall street

The Price of Your iPad Is Higher Than You Think

January 26, 2012 By Timothy Mojonnier Leave a Comment

There is a glaring lack of ethics in terms of Apple’s supply chain management practices, as suggested by the New York Times. Many Asian suppliers are violating basic ethical principles. Here are some of the questionable practices cited:

Horrendous occupational safety violations
High suicide rates due to stressful working conditions
Long working hours: repetitive 60-hour, 7-day weeks
Employment of children as young as 15 years-old

Although Apple has responded to problems in its Asian supplier base by conducting supplier audits, the worlds’ largest company—in terms of stock market value—has been reluctant to put its foot down. The fate of a 22 year-old college graduate, Lai Xiaodong, is a case in point. He moved to Chengdu in southwest China to take a job at Foxconn, an electronics supplier that employs 1,000,000 people. He was quickly promoted to oversee a team that polished iPad cases. This process generated dust, which is a known safety hazard. Mr. Lai and 3 teammates died from a ghastly explosion, which also injured 14 other workers. After the accident, which seared 90% of Mr. Lai’s body, Apple contacted “the foremost safety experts in process safety,” and assembled a team to make recommendations to prevent future accidents. In December, 2011—7 months after Mr. Lai was killed—another iPad factory exploded due to aluminum dust. As a result, 59 workers were injured; and 23 hospitalized.

I was initially shocked after reading about the story of Mr. Lai, and Apple’s apparent lack of commitment to correcting poor worker-safety practices. Although allowing unnecessary accidents—resulting in worker injuries and deaths—cannot be condoned, we must take a more nuanced view regarding Apple’s predicament, from both a historical and cultural perspective.

In a supply chain management class that I recently taught, we discussed the ethics associated with the use of child labor in developing countries. One of my students grew up in India. He indicated that poverty in India is severe, and compulsory education is not mandated by law. To survive in this environment, some families require that their children work. Were we to impose our ethical values and prevent children from working in Indian factories, we would be depriving Indian families of sorely needed income. It is easy—but wrong-headed—to believe that our ethics and moral values are superior to the moral values held by other societies.

The reasons against using child labor are not moral as much as they are practical ones. It is bad business to permit children to build Apple’s products, if young people are simply being used as a means to an end. Consumers in the west will no longer think that it is “cool” to own i-Phones, if they have been built by Chinese teenagers. How many parents would want to be part of a 21st scene, taken from a 19th century Dicken’s novel?

In Viet Nam, Nike has implemented an innovative solution to this dilemma. Although some of Nike’s Vietnamese suppliers employ children, they also provide employees with a regular wage, free or subsided meals, free medical services and training and education. Nike, as well as western consumers, benefit from low labor costs. At the same time, the workers improve their standard of living and also receive access to education.

Regarding the various safety issues that were described by the New York Times, one has to put them into a cultural context. I recently interviewed an executive who lived in China for 13 years, setting up factories and growing American businesses. During the course of our conversation, he made the point that public safety is non-existent. When walking down the street, you have to always be on the lookout for possible hazards. There may be a big hole in front of you, which is not blocked off with barriers. Or, there could be an electrical wire dangling at eye-level. If unaware, you could walk right into it. If a lack of public safety is the norm in China, how can one expect the private sector to be any different? Would we be correct to impose our ethical standards—as relates to public safety—onto the Chinese? Specifically, should we preach that barriers should be placed in front of Shanghai’ s sinkholes?

Getting back to Apple, from a business perspective, the company must enforce strict, safety practices for all of its suppliers; otherwise, more articles—such as today’s scathing indictment in the New York Times—will appear, tarnishing Apple’s brand. Only by adding teeth to Apple’s supplier responsibility reports and recommendations, will the company avoid future, public relations disasters.

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In conclusion, with global competition, superior supply chain management results in consumers receiving products at low prices. But our western ethical tastes are repulsed at stories of worker abuse. Apple must take strong, corrective measures against suppliers who use workers solely as the means to an end, namely, achieving low, production costs. In supply chain management, good ethics makes for good business.

Filed Under: Ethics, Philosophy of Management, Supply Chain Management Tagged With: apple, china, ipad, worker safety

MF Global: Déjà Vu All Over Again?

November 4, 2011 By Timothy Mojonnier 2 Comments

MF Global may have disguised its debt levels to investors by temporarily reducing the amount of debt shown on its books at the end of the quarter before publically reporting its finances (source: WSJ). Every quarter, for seven consecutive quarters in a row, the debt was always lower at the end of the quarter. The debt levels at the end of the quarter were lower than the peak for each quarter by an average of 24%. Yet another shell game courtesy of Wall Street!

Although window dressing is legal, it is immoral, because it misleads investors who—based on publically reported information—believe that a firm is taking on less risk than what is really the case. Given MF Global’s bankruptcy earlier this week, investors must feel that they there were deceived.

I know the feeling. I bought some Lehman Bros. convertibles in 2008, based on published financial information. During that period of time, the company’s management team loaded up on a $85 billion portfolio of risky mortgage-backed securities. At the end of the quarter, the management team moved these securities off Lehman’s books, a practice that the New York Times described as a “shell game.”

It has been over three years since the Lehman Bros. bankruptcy, the largest in U.S. history. The SEC is considering a rule that would require financial companies to disclose more information about their borrowings, but has not taken action.

George Santayana, a famous philosopher, once remarked: “Those who do not remember the past are condemned to repeat it.”

Is it not time that we pass regulations that eliminate the unethical practice of window dressing that destroys the credibility of our financial system?

Filed Under: Ethics, Philosophy of Management Tagged With: shell game, wall street

A Candidate for the Business Hall of Shame

December 8, 2010 By Timothy Mojonnier Leave a Comment

“We aim for sustained earnings growth in excess of 20 percent, powered by increased revenues and margin expansion. …[Tyco’s] model has produced consistently strong results for well over a decade.”

– Dennis Kozlowski, former CEO of Tyco International from page 18 of the 1999 Shareholders Annual Report

Last week, Dennis Kozlowski, the former CEO of Tyco International, was directed by a judge to forfeit all of his compensation earned during a nearly 7-year period beginning in September 1995. In his order, the judge said that the total compensation outstanding under the agreement is well over $100 million. (Source: WSJ)

The denouement of this once famous corporate executive is not surprising. Although BusinessWeek named Kozlowski one of the 25 outstanding managers of the year in 2002, for the previous decade he had beaten down his division managers. Year after year, each division President was expected to increase profits by 20%, regardless of circumstances. If there was a hiccup, namely, profits grew less than 20%, then the division President was subjected to intense pressure to perform. If, for a second year in a row the company again failed to meet the 20% growth hurdle-rate, then often the division President was fired. In one business unit, the division’s chief financial executive traveled hither and yon in order to find acquisitions that would bolster profits. He spent almost a year in Asia frenetically searching for an acquisition so that the business unit could achieve Tyco’s 20% goal. It was a very simple—yet brutal—system that everyone understood.

I realize that it is not unusual for corporations to have aggressive objectives for their senior managers. But usually there is a more collaborative relationship—integrated through some sort of strategic planning process—between corporate management and the divisions. In contrast, Tyco’s managerial process had an unrealistic, even coarse aspect to it. It reminded me of what W. Edwards Deming said years ago. Simply having [financial] goals—without a method for achieving the goals—is useless.

However, during Mr. Kozlowski’s reign (during which time, I had a consulting engagement with one of Tyco’s divisions), Tyco did produce seemingly impressive results. Between 1995 and 1999, ostensible net profits increased from $.2 billion to $2.6 billion, and the stock price rose from $7 per share to over $51 per share. But in 2002 Kozlowski resigned as Tyco’s CEO, and the stock price plummeted. Tyco’s foundations were built on sand, and when the winds blew, it toppled over. In June 2005, Mr. Kozlowski, the son of a police investigator, was convicted on 22 of 23 counts, “including grand larceny, conspiracy and securities fraud.” (Source: WSJ) He is now serving time in New York State’s Mid-State correctional Facility.

If a corporation’s mission is to simply maximize profits anyway possible, unethical decisions by managers will surely follow. At a minimum, top management must articulate the strategies that are required to achieve corporate financial goals. And, more importantly, the CEO must exercise virtuous character traits in order to lead the many stakeholders who are dependent on the corporation for their well being. On all counts, Mr. Kozlowski failed his many constituencies, and the company almost fell into bankruptcy. In his vision for Tyco, the jailed CEO had an ethical blind spot, which was his undoing. He did not realize that ethical behavior—on the part of the CEO–is good business.

Do you agree that corporate management is responsible for more than just meeting certain financial targets? Should the goal of the CEO be to simply maximize profits? Or are virtuous character traits important to running a company?

Filed Under: Ethics, Philosophy of Management Tagged With: profit maximization

Can Business Ethics Be Taught?

September 20, 2010 By Timothy Mojonnier 4 Comments

The movie “Wall Street Never Sleeps” opens up at theatres on September 24^th. Starring Michael Douglas, it calls attention to the issues of corporate greed and moral depravity. This film is timely, because over the past decade, CEO’s at many Fortune 500 corporations have committed unethical acts. To cite a few: After having been indicted on 35 counts of fraud, insider trading and other crimes related to the collapse of Enron, Jeffrey Skilling–the Harvard MBA and former Enron CEO–is currently serving time at a federal prison in Littleton, Colorado. Dennis Kozlowski, the former CEO of Tyco International, is presently spending time in New York State’s Mid-State correctional Facility. He has been convicted of various corporate crimes, including his receipt of $81 million in purportedly unauthorized bonuses. (In the interest of full disclosure, I had a consulting engagement with a unit of Tyco during Kozlowski’s reign.)

And then there is the current economic crisis that we find ourselves in. CEO’s of financial companies involved in the subprime mortgage fiasco have avoided jail thus far. But the anecdotal evidence suggests that the behavior of some senior managers was unethical at best. Wall Street has put the business goal of profit maximization on steroids. At worst, the unbridled greed of top managers–at mortgage brokers, traditional banks, investment banks, insurance companies, and government agencies–almost caused the demise of our financial system.

In response to the moral lapses of our business leaders, many MBA programs are incorporating ethics into their curriculums. Some schools now offer courses titled “Business Ethics” whereas other schools are instead opting to integrate ethical issues into all of their courses. Newly minted graduates from these institutions will learn about various ethical theories such as utilitarianism, Kantian deontology, and virtue ethics. Regardless of the approach to teaching ethics, the fundamental question is this: Can ethics be taught? Let me relate a story that sheds light on the issue.

When I was 7 years-old riding in the back of my grandfather’s black Buick, I threw a gum wrapper out the window. My 77-year-old grandfather immediately chastised me, indicating that if everyone did what I did, then we would all be living in a trash-filled world.

Even today, when I take the wrapper off a piece of gum or candy, I sometimes entertain the thought of throwing it on the ground. But before I do so, I am immediately struck down by the words that I imagine emanating from my long-ago, deceased grandfather.

So, my behavior—insofar as littering is concerned—is ethical, because by not littering, I am helping to save the environment, which is a good thing. In the context of ethical theories, my grandfather’s admonitions would be termed Kantian. This German philosopher suggested that in examining whether to exhibit a behavior, ask what the effect would be if all of humankind did the same thing. If the behavior in question causes universally, harmful effects, then doing it is unethical.

Although I studied Kant in college, my tendency not to litter is based on the values that I internalized from significant adults in my growing-up years. In summary, I believe that our behaviors as adults are primarily based on the moral principles that we learn from our elders in our childhoods. ~~Had Jeffrey Skilling taken a business ethics course, would his subsequent behavior as Enron’s CEO been different? I think not.~~ While at the Harvard Business School, Jeffrey Skilling actually took an ungraded course in business ethics. That course didn’t affect his subsequent behavior.

How do you weigh-in on this issue? Can business ethics be taught?

Filed Under: Ethics, Philosophy of Management Tagged With: financial crisis, profit maximization, wall street

What Everybody Ought to Know About University Life

August 5, 2010 By Timothy Mojonnier Leave a Comment

Plagiarism and cheating are running rampant at universities in the U.S. An article in the 8/1/10 issue of the New York Times describes how the digital age has ushered in a tsunami of university students who are cutting and pasting text from the web, and then submitting their papers without referencing the sources that they used. At Rutgers University, “about 40 percent of 14,000 undergraduates admitted to copying a few sentences in written assignments.” Furthermore, the number who believe that “copying from the web constitutes serious cheating is declining—to 29% on average in recent surveys from 34 percent earlier in the decade.”

Anecdotally, my experience jibes with the statistics cited in the article. Since 1991, I have been an adjunct faculty member at several universities. Over the past five years, I have identified many more examples of plagiarism than I had in the prior 14 years.

Unfortunately, Gabriel’s excellent article was marred by one significant omission. Gabriel overlooked the larger, societal context in which plagiarism occurs. It is not solely limited to academia. The elephant in the room is the former New York Times’ reporter Zachery Kouwe. As described in a recent post, he lifted–without appropriate attribution–material from the Wall Street Journal. The Public Editor of the New York Times likened Kouwe’s behavior to shop lifting. Ironically, Kouwe was writing about Bernard Madoff, the convicted embezzler.

If a journalist at the venerable New York Times believes that “cutting and pasting” is acceptable, then why should we expect our students to do anything different? If once-revered business leaders–like Madoff–rip-off their customers, then how can we admonish students for ripping-off text from the Internet? I believe that cheating is a phenomenon that reflects the general lack of respect for authority in society at large. To understand the increase in plagiarism at the university level, we must delve into the root causes of these more general, societal issues.

An implicit idea raised by Gabriel concerns the notion that perhaps we need to consider taking a more nuanced view of the meaning of plagiarism. In trying to describe the reasons underlying the increase in plagiarism, Susan D. Blum, an anthropologist at Notre Dame, suggested that the Digital Age may be affecting young peoples’ conceptions about the importance of originality. After all, the millenials (those born after 1980), have grown up with music file-sharing (sometimes illegal), which has weakened the significance of copyright laws that protect intellectual property. With the advent of wikii software, websites such as Wikipedia challenge the fundamental concept of authorship.

In reflecting upon my personal encounters with students who plagiarized, I believe that there are five factors that need to be considered. First, in our local grammar school, children learn that copying text—without proper attribution—is wrong. I expect that the students who I teach were exposed to the same lesson. Second, students today face many conflicting demands on their time. Many of mine work jobs to defray the cost of their educations. In several instances of plagiarism that I have witnessed, the student saved hours of time by cutting and pasting an entire article from a website. Third, writing is difficult, and many students are coming to college without the ability to write a coherent essay. For example, an article in the April 26, 2010 issue of the Sun Sentinel describes how 55% of incoming college freshmen—at Florida state universities—are enrolled in remedial writing and math classes. The use of cut and paste technology is one way students can avoid having to learn how to write. Fourth, parents often have high expectations for their children to perform and get the best possible grades. Many children have internalized these ideals. As described earlier, if students see leaders in journalism, sports (steroid usage), and business cheat to achieve results, then some model their behavior after these leaders. Finally, the vast majority of the students who I know take the time to reference their sources. They have been taught the difference between what is right and wrong, and they opt to take the higher road.

In conclusion, I believe that the instances of plagiarism that I experienced were mindful acts. As such, they were as wrong as the crimes committed by Madoff and Kouwe. Madoff was sentenced to 150 years in prison, and Kouwe was summarily fired by the New York Times.

What do you think the appropriate consequences should be, if any, for those students who plagiarize? Mandatory enrollment in an ethics class? Do you agree with the idea that we should take a more forgiving view of this practice? What other actions do we need to take to address this current problem?

Filed Under: Ethics Tagged With: cheating, plagiarism

Are Profits and Ethics Mutually Exclusive: Where Business and Philosophy Meet

May 18, 2010 By Timothy Mojonnier 10 Comments

In 1978, I graduated from the University Of Chicago Booth School Of Business. I completed my MBA degree at night while toiling during the day as a Purchasing Manager at a food machinery manufacturer.

The classes were held at 190 East Delaware Street directly across from the John Hancock Center. Ironically, the name of the MBA program was the “190 MBA.” What a remarkably undistinguished name!

Much of what I learned three decades ago is no longer valid. But as the philosopher John Dewey once said, the measure of an education is not what you learn, but your ability to learn how to learn.

For example, the Chicago Booth faculty constantly inculcated the notion that the purpose of a business is to “maximize profits.” All of the faculty members towed the line in terms of advocating this point of view.

Some CEOs follow this dictum to the extreme. The maniacal focus on quarterly profits culminated in the 2001 downfall of Enron Corporation, which morphed into a house of cards, the foundation of which consisted of inflated and, in some cases, downright fraudulent profits and assets.

The most recent incarnation of profit-maximization gone amuck is manifested in the financial services industry. As reported in The New York Times, it is an open secret on Wall Street that many firms use end-of-the-quarter window dressing to make their financial statements appear to be better than they really are. For instance, the management team at Lehman Brothers loaded up on an $85 billion portfolio of risky mortgage-backed securities. They did not want their shareholders and stakeholders to know about this portfolio, because such knowledge could negatively impact the firm’s stock price and their executive bonuses. So the management team moved these securities off their books, which the New York Times described as a “shell game.”

This reminds me of the David Mamet movie, House of Games, in which a small-time criminal Mike (played by Joe Mantegna) dupes various naïve souls with a multitude of cons and acts of deception. Senior executives at Lehman are on an equal moral footing with Mike the criminal. The only difference is that many of the Lehman swindlers have MBAs and could concoct more sophisticated acts of deception than the fictional Mike. Unlike the movie which was quite entertaining, the cons perpetrated at Lehman Brothers resulted in the largest bankruptcy filing in US history, an event that almost toppled our financial system.

Business school education has instilled the ethos that a good manager should win at all costs. In a recent Wall Street Journal article, it was stated that many people blame the business schools for educating their students to focus on manipulating the financial system, and, in that respect, they are partly responsible for producing the managers that have been culpable for the recent corporate melt-downs. After all, the Harvard MBA and former CEO of Enron, Jeffrey K Skilling, was the mastermind of the scheme that manipulated the firm’s stock prices. The jury convicted him of various crimes, including twelve counts of securities fraud, and he is currently serving a 24 year sentence in federal prison in Waseca, Minnesota.

At one of the business schools that I teach at, DePaul University, there is a major effort to incorporate ethics into the curriculum. This represents a sea-change in thinking, namely, that the role of business is not to simply produce leaders who will be solely focused on their self-aggrandizement at the expense of society. Rather, the implication is that business has a role to play beyond profit maximization. Indeed, it suggests that ethics do matter.

What do you think? What is the purpose of business? Does senior management have any ethical responsibilities to society at large? If so, what are they?

Filed Under: Ethics, Philosophy of Management Tagged With: business school education, financial crisis, profit maximization, shell game

Hypocrisy at Toyota

April 5, 2010 By Timothy Mojonnier Leave a Comment

Toyota Motor Corp. officials hailed as a “win” their success in lobbying federal safety officials last year to limit a recall to sudden acceleration complaints to just 55,000 vehicles, saving the company $100 million, according to an internal document obtained by a Congressional committee.” (WSJ, February 20, 2010) This may be the smoking gun, suggesting that Toyota has put profits ahead of safety.

In addition, U.S. regulators believe that Toyota has known of a gas-pedal problem for more than a year, yet they blamed unintended acceleration incidents on floor mats pinning the gas pedal. Upon learning about the gas-pedal problems in a meeting with two Toyota executives, U.S. regulators “were steamed” (WSJ, February 8, 2010)

Toyota Motor Corporation President Akio Toyoda

In my opinion, Toyota has been stonewalling the National Highway Transportation Safety Agency (NHTSA) for years!

Toyota’s behavior is hypocritical, because it is at odds with their publically stated Mission & Philosophy as shown on their web site. Moreover, their third guiding principle underscores the ostensible importance that they attach to safety:

“{We}Dedicate ourselves to providing clean and safe products and to enhancing the quality of life everywhere through all our activities.”

Toyota must do more than talk the talk to regain the trust of its customers. Top management must start “walking the walk” by demonstrating that driver safety trumps profits. Otherwise, Toyota’s vision/mission statement amounts to mere hubris.

What do you think? If there are any Toyota employees out there, I would especially be interested in hearing how you weigh-in on this issue.

Filed Under: Ethics, Managing Quality Tagged With: Toyota

Shoplifting in Journalism, Business and Academia

March 8, 2010 By Timothy Mojonnier 2 Comments

Plagiarism and cheating are prevalent in business, journalism and academia. An article in today’s New York Times, by the Public Editor Clark Hoyt, described how Zachery Kouwe, a reporter, was fired last week because he lifted material from the Wall Street Journal without appropriate attribution. This is reminiscent of what I encounter as a teacher. In one class, I read a student’s essay. Midway through the paper, I thought that this student was an incredibly gifted writer. However, by the end of the piece, I realized that the material wasn’t his work. I googled a prominent phrase, and sure enough, the identical article popped-up on a Microsoft web-site.

With the prevalence of cut and past technology, it is easy to copy other peoples’ work. Generally, there is nothing wrong with cutting and pasting as long as the author appropriately references the original sources. In the New York Times article Kouwe’s acts were described as the equivalent of “shoplifting gum,” as opposed to, say, shoplifting “color TVs. “ By copying the entire article, my student shoplifted the entire color TV!

Ironically, Kouwe was writing about Bernard Madoff’s Ponzi scheme. Kouwe and my student were as mindful in ripping-off their sources of material as Madoff was in swindling his investors. When one mindfully cheats others, one is acting unethically. It is the responsibility of leaders in business, academia and journalism to take corrective action when the people whom they lead cheat others. In the absence of this moral leadership, societal relationships break down.