Ethics are moral principles of knowing right and wrong. All human action comes under the ethics of right or wrong. In the corporate world, ethics may be known as moral business principles. As defined by Crystal (2010), “Business ethics is the behavior that a business adheres to in its daily dealings with the world” (Para. 1).
The company’s business ethics relate to the organization, its employees, consumers, and the surrounding community that may be the world. In business ethics, the line between right and wrong may be thin and misty. One of the world top automakers Toyota came to a serious event in 2009, the event made Toyota tend that misty line of right and wrong. The media reported the event of several Toyota vehicles with sudden acceleration issues.
Toyota’s world and business took a turn around with this event. The objective of this paper is to define clearly the Toyota issue; the basis for the issue; identify ground rules that manifested the Toyota situation; and discuss what ethical deficiency that brought the Toyota issue to light. The paper will address the ethical systems that were at work for key individuals in the organization and how the leadership of the company handled the situation. The role of middle management and executive management in causing or resolving the issue and a proposed plan for revising the company’s ethical standards will also be illustrated.
Toyota Issues on recall Toyota one of the biggest world automakers ran into some ethical problems with the accelerator of its several types of vehicles. The issue was that several vehicles had pedal entrapment while still running the vehicles causing it impossible to stop the vehicle. According to Cole (2011), “there were several issues: potentially sticky gas pedals, pedal entrapment and software glitches that affected braking on some models” (p. 31).
The issue led to massive recall of Toyota vehicles. In trying to fix the problem, Toyota recalled all floor mats in its vehicle to fix a problem in which the gas pedal can become caught on the edge of the floor mat. Toyota stated that the mat can cause the vehicle to accelerate uncontrollably. Thereafter another recall was made involving accelerator pedals that can stick on their own. For reasons best known to Toyota concealed the truth from the public and Toyota tried to fix problems after the issue become public. After the media reported the serious problem in Toyota’s vehicles, the public was enraged on how Toyota is handling the acceleration problem.
The issue of focus in this paper is how the management of Toyota handled the situation viewed from the eye of a consumer. 3 The Toyota organization culture is secretive and non-communicative even with employees. The in-sider joke among Toyota American employees, working for Toyota is like working for the Central Intelligence Agency (CIA), and information is shared only on a need to know basis. The organization hierarchical decision-making structure reduced its ability to respond to the problem.
As for Toyota transparency, a hearing by the United States lower house judged found the company’s initial responses ambiguous. One of Toyota senior VP Irving A. Miller warned the executive coordinator to come forward with the information of the accelerator pedals malfunction but was warned not to mention his concerns about the mechanical failure in his meeting with the National highway safety administration (NHTSA).
Upper management underestimated that Toyota North American customers expect certain ethical attributes concerning the quality and safety of products and customer’s safety. Several ethical issues were in violation beginning with upper management by hiding the mechanical failure of the braking system. It seems there was a do not ask do not tell policy at work.
This mechanical failure could lead to loss of lives. This could be a calculated strategy by the company not to accept financial responsibility for the recalls. Toyota was willing to risk the lives of their customer over financial gains of its company. All this does not make Toyota a virtuous company. The president of Toyota Akio Toyoda went on record stating “We pursued growth over the speed at which we were able to develop our people and our organization.”
The Company’s vision is guiding principles and core values that express the beliefs and values shared by the organization (Liker & Hoseus, 2008). 4 In 2007 Toyota was the number one in the United State after improving quality because of an escalating pattern of recalls in the United States and Japan. There had been ethical concerns that Toyota executives' reluctance to issue a recall over a suspected defect had led to a death in a southern Japanese city.
There was a call for Toyota to slow down growth but the president, Watanabe defend the growth has Toyota’s future (Treece, 2007). But the ethical behavior and responsibility differed between employees and management; in that subordinates were often afraid to speak up and question management decisions. “People shield those in power from unpleasant facts, fearful of penalties and criticism for shining light on the rough realities” (Collins 2010).
Further, Toyota executives did not heed investor’s warnings and kept growth at the same pace. In 2010 the new president Akio Toyoda described Toyota as Stage 3 after he had read a book by Jim Collins, an American management guru that describes the five stages a thriving company passes on its way to failure. “First comes hubris born of success; second, the undisciplined pursuit of more; third, denial of risk and peril; fourth, grasping for salvation; and last, capitulation to irrelevance or death” (Collins 2010).
The recall analysis shows that Toyota was slow to act on many different levels. One example was Congress had to threaten a subpoena for Toyoda testify before Congress. Executive management resolved the issue by recognizing the scale of Toyota’s problems, “by proclaiming their urgency and then by drawing on the firm’s strengths to fix them, Mr Toyoda has already taken the first, vitally important, step towards salvation” (The Economist 2011).
Conclusion There is no question that Toyota’s image and profit suffered after the tacky accelerator, pedal entrapment, and software glitches issues. The media greatly amplified the malfunctioning pedal issue because of the loss of lives. The matter became a right and wrong issue and ethical obligations of manufacturers to their consumers. The issue became a leadership crisis and how open Toyota executives were to their customer.
Regardless of Toyota’s dependable top score on vehicles manufacturing, the issue of the 2009 recall damaged the reputation of the company and the impact of consumer confidence is still felt in 2011. The Toyota recall issue has highlighted the ethical ways top executives handle consumers’ issues and had led to a plan of action for better executive communication with their consumers.
- Cole, R. E. (2011). What really happened to Toyota? MIT Sloan Management Review, 52(4), 29-35.
- Crystal, G. (2010). What is business ethics? Retrieved July 16, 2011 from http://www.wisegeek.com/what-is-business-ethics.htm.
- Liker, J. K., & Hoseus, M., (2008) “Toyota Culture”. The Heart & Soul of the Toyota Way. McGraw-Hill New York, NY. Retrieved on July 14, 2011 from http://healthy organizations .net