Takata Corporation is a Japanese auto components manufacturer with headquarters in Tokyo. Takezo Takata founded the company in 1933 and it specializes in automotive safety equipment (Gilda, 2020). The company began by producing lifelines for helicopters. Later, in the 1960s, they began selling seatbelts and built Japan’s initial crash test facility for putting seatbelts through real-life applications. Later on Takata became Takata Corporation, and in the early 1980s, it expanded to Korea, the United States, and Iceland (Bagley, 2018). The corporation had a good reputation, and the Takata team worked hard to achieve its core goal of safeguarding people throughout the world. During the 1990s, this forward-thinking corporation grew abroad, establishing manufacturing plants on four continents.
The Facts of Business Misconduct Case
Takata Corporation provides a diverse range of solutions to automobile manufacturers all over the world. This includes safety belts, comprising webbings, winches, hooks, and mouth plates. The corporation also manufactures airbag systems, which include drivers, passengers, front, curtains, ankle, and motorbike airbags. It also produces steering wheel parts, for example, frames, rims, accessories, decorative parts, switches, heating as well as devices. In addition it manufactures electronic parts like airbag microcontrollers and satellite sensor systems, lane departure alert systems, and carriage load sensors.
According to Cross and Miller (2020) Takata Corporation had a major problem in the year 2013 where the company’s poor actions resulted in the largest auto recall ever. Despite their engineers’ warnings, Takata management chose to save money by selecting less expensive materials to manufacture airbags (Gilda, 2020). It is disgraceful that one of the world’s largest automobile suppliers created dangerous automobiles that killed and wounded numerous people. Bagley (2018) has termed this incident as the greatest and most complicated product safety recall in US history. This is clear since all of the vehicles that had been manufactured between the years 2002 and 2015 were impacted by this malpractice (Gilda, 2020). Many car manufactures were affected including the biggest brands in the world, such as Toyota, BMW, General Motors, Volkswagen Group, Hyundai, and many others.
Another mistake committed by Takata Corporation was concealing of vital information. Gaines and Miller (2018) have shown that in June 2015 that the company was knowledgeable of 88 total bursting: 67 of them took place at the driver’s side and 21 occurred on side of the passenger. This is from a total of over 1.2 million airbags installed in cars manufactured during the 15-year period (Gilda, 2020). In 2015, the company made a public apology and went into bankruptcy on June 26, 2017 (Gaines, & Miller, 2018). Following this major safety recall, multibillion dollars of fines, and catastrophic recall expenses ensued. Hundreds of billions of dollars in expenses and liabilities have resulted from nearly a decade of legal battles and recalls. According to some estimates, the cost of recalling a product might reach $10 billion (Gilda, 2020). Takata Corporation approved the sale of essentially all of its assets and enterprises to Key Safety Systems on April 12, 2018 (Gaines, & Miller, 2018). As a result, Takata has completed the sale of its company to its main competitor, KYS, which is Chinese-owned and situated in the United States.
Ethical Issues Raised
The major ethical issue, in this case, is that Takata Corporation knowingly manufactured faulty products and went ahead to sell them to consumers. The root cause of this problem, according to Cross and Miller (2020) was airbags that used ammonium nitrate-based propellant without a compound dehydrating agent. This signifies that if the car was subjected to elevated heat for an extended period, or simply due to the vehicle’s age, it could explode, potentially harming or killing everyone inside. Gaines and Miller (2018) have shown that by 2016, 15 people had died as a result of this issue and nearly 37 million automobiles were affected by this recall. Gilda (2020) alleges that Takata was aware of a serious airbag problem years before filing papers with federal regulators. After learning of this, the National Highway Traffic Safety Administration (NHTSA) demanded that all the affected vehicles in the entire USA be recalled (Gaines, & Miller, 2018). The Takata faulty airbags have been connected to 19 deaths and over 100 injuries, with some of the accidents being horrifying, with metallic shards piercing a driver’s head and face. (McShane et al., 2018). Thus, the damages caused by this faulty airbags cannot in any way be compared to the profits gained by the company.
It is clear that Takata Corporation committed unethical conduct by choosing to prioritize profits instead of customer safety. Their decision to prioritize a company’s profit over the most fundamental regard for its stakeholders resulted in major issues. Takata Corporation has entirely lost the public’s faith and reputation and this also has ruined the image of other motor vehicle manufacturers (Bagley, 2018). The company’s decision to plead guilty was ethical, but creating defective airbags and providing faking tests for almost fifteen years was definitely not. When it comes to ethical principles, it’s shocking that this malpractice happened at a Japanese corporation, given their solid moral standards. There were instances of company officials committing suicide after engaging in unethical behavior, and yet this corporation continued this malpractice for more than fifteen years.
When it pertains to utilitarianism ethical theory, this could be justified in a certain way. Since airbag systems are most commonly activated in humid and hot environments, it is possible that some defective airbags would never be activated. Performing a cost-benefit analysis Takata management could not have predicted that their vehicles would be recalled one day and that they would be on the verge of bankruptcy. The prospect of paying $1 billion in penalties and being forced to pay to make changes to replace the faulty airbags for over 70 million vehicles was not taken into account when this decision was made (Bagley, 2018). This conduct is unethical because there were other options that may have been pursued.
The deontological theory of judging ethical behavior states that an act should be judged after carrying out a series of rules rather than solely on the consequences of the act. Corollary one states that an act is immoral if its widespread adoption would jeopardize a practice, one can deduce that if each airbag manufacturer did this kind of behavior, no airbag might be safe (Cross & Miller, 2020). In light of the second corollary, it says that no one ought to be a free-rider by using the work of others. Following this reasoning then Takata Corporation should not falsify the test results in order to avoid having to recall faulty airbags and make adjustments (Bagley, 2018). Again, if each airbag manufacturer did this, then there is no need for airbags because they would no longer be accomplishing their function of saving lives in crashes.
Corollary three also not passed, because, as previously shown, lying and falsifying test results is not appropriate, and if every company did so, the world would have been a dangerous place to live in. Since the decision to intentionally manufacture faulty airbags fails all deontological tests, it is, therefore, unethical. When this ethical case is examined through the perspective of distributive justice theory, we can see that Takata’s faulty airbag inflators are found in automobiles of all price ranges, making all automobile users Takata’s stakeholders. Therefore, Takata Corporation should have invested more funds in research and development (McShane et al., 2018). However, they were just concerned with making profits, cutting costs, and endangering people all around the world.
Interpretation Why Takata Acted As It Did
United States investigators and prosecutors charged three Takata officials with faking test data in order to conceal a fatal airbag malfunction. Takata then consented to charges of fraud as well as submitting false data, and was fined one billion U.S. dollars (Gaines, & Miller, 2018). Because more than nineteen people have died as a result of these defective airbags, Takata officials’ prosecution has heightened the controversy, leading to congressional investigations and it pushed Takata to bankruptcy. The charges are a series of attempts by the US authorities to clamp down on white-collar crime, such as pleading guilty from corporations and their top management. For example, Six Volkswagen officials were indicted by US prosecutors for their participation in an emission levels scandal, and the carmaker pleaded guilty to conspiracies and other offenses.
Takata Corporation’s top management decided to intentional commit fraud and hid it from its customers even from the beginning. According to the Gaines and Miller (2018), the National Highway Traffic Safety Administration (NHTSA) discovered that Takata’s leaders were aware of this fraud as early as 2001, and the investigation was carried out in 2016, more than 15 years later. There is also confirmation that one of the directors sent an email message to a colleague indicating that he had no choice but to falsify the results (Bagley, 2018). We can obviously see that these Takata officials pleaded guilty and that the corporation has been fined a billion dollars, indicating that they are aware of the defect. Thus, Takata executives were motivated by profits and chose low-quality materials to make more money. When the scandal was detected, they went ahead to falsify test results in order not to cover the costs of recalling the faulty airbags.
A Summary of What Takata Should Have Done
Takata never should have thought of doing this, in my opinion, since even the loss of a single soul is just too much, therefore, over nineteen is too high. This terrible move has cost the company billions of US dollars, harmed their brand irreparably, and may result in jail time for their top management. The Takata airbag issue should serve as a warning to businesses about how they should not conduct themselves ethically. Airbags were designed to save people, not to be used as a trap that causes death. We can see that Takata management has kept this problem concealed from their stakeholders despite knowing about it for years. The human aspects, as well as substandard materials, are the primary causes of this major ethical blunder.
Journal Entry
Every profession of practice expects its practitioners to follow a code of ethics. In our instance, a code of conduct is required to be observed in order to ensure effective corporate progress. Principles, rules, standards, and values that regulate human behaviors and activities in business organizations are referred to as business ethics. Companies should follow ethical principles, such as the value of integrity, in which a company prioritizes doing the right thing over generating profits (McShane et al., 2018). The company executive must do the right thing and demonstrate moral integrity. Businesses are also obligated to be just in whatever they do under the sense of fairness, but they should not abuse power in any way. In their profession, corporate leaders should also adhere to the value of honesty (Gaines, & Miller, 2018). They should present accurate information and not intentionally give false information to deceive and mislead people. However, this is not always the case, today’s society has far too many commercial malpractices.
With regards to product safety, businesses should ensure the safety of the products they manufacture, particularly those that may cause a fire or pose an electrical, physical, chemical, or technological danger. Goods that may endanger children should also be on the priority list. A good example is Tris a company that manufactured contaminated children’s pajamas. Companies should not be motivated by profits alone but consider their customers. If a product is banned in a certain country due to harmful effects, they should not import it to another country. A company called DowElanco chose to sell its harmful herbicide in Costa Rica after the product was banned in the USA.
While advertising businesses should refrain from making certain claims which cannot be supported by data since they are false. Sensa advertised that its powdered food additive improved the scent and taste of food, causing users to feel satisfied and eat less. According to Cross and Miller (2020), the statement misled customers and made unsubstantiated weight-loss promises. The company was fined $26.5 million as part of a settlement, and they were also accused of refusing to disclose they bribed customers to endorse their product (Gilda, 2020). When it comes to pricing, businesses should avoid doing anything illegal. They should constantly take a step back and consider the pricing from the standpoint of the buyer. This is due to the fact that it is not a quick-sale firm but establishing a long-term enterprise, so keep this in mind to prevent any unethical pricing mistakes (Bagley, 2018). Examples of unethical pricing practices include price fixing, bid rigging, price discrimination, skimming, and monopolistic gouging of goods.
References
Bagley, C. E. (2018). Managers and the legal environment: strategies for business. Cengage Learning.
Cross, F. B., & Miller, R. L. (2020). The legal environment of business: text and cases. Cengage Learning.
Gaines, L. K., & Miller, R. L. (2018). Criminal justice in action. Cengage Learning.
Gilda, R.J. (2020). Business ethics: ethics study guide. OrangeBooks Publication.
McShane, S., Olekalns, M., Newmna, M., & Martin, A. (2018). Organisational behaviour: emerging knowledge. global insights. Cengage Learning.