TheGeneral Motor’s Corporate Social Responsibility and the Massive CarRecall
TheGeneral Motor’s Corporate Social Responsibility and the Massive CarRecall
Understandingand adhering to the policy, legislative, and institutional frameworksthat guide the modern CSR in the present business environment. Thisis because the law and policy makers expect organizations to pursueother goals (such as assuming their obligations to the society), inaddition to the profit making objectives. The image of anycorporation improves depending on the CSR programs it adopts and thestakeholders’ awareness about those programs. Servaes & Tamayo(2013) established a positive association between the organization’svalue and the consumer awareness of the CSR strategies used by theorganization to demonstrate its concern about the wellbeing of thecommunity in which it operates. The purpose of this study is toanalyze the CSR considerations following the development of a faultyignition switch by the General Motors. Although the General Motorshad some reasons to delay the process of redesigning the ignitionswitch, social responsibilities should have outweighed excuses.
Thecause of the defect in the ignition switch
Someof the GM’s cars that were fitted with a faulty ignition systeminclude the Pontiac G5, Chevrolet Cobalt, Saturn on, and ChevroletHHR. Their ignition switches were designed to house the car keys,disable the airbags, shut off the car, and disable the ABS system(Ruel, 2014). The unforeseen challenges with this type of ignitionswitch include the capacity of the key ring to move the sphericalmechanism when driving and the possibility of the car switching offor disabling the airbags without warning. Although these faults wereunforeseen during the design phase, the GM engineers noted some thesechallenges in 2001 and others in 2004 (Morran, 2014). The GM’smanagement was informed about the fault, but it perceived that theprocess of redesigning the switch system would be too expensive toundertake. Consequently, the General Motors continued producing andselling cars, although the company knew that users these vehicleswere at the risk of fatal accidents.
Thecar recall was not just a recalls, but it meant a lot since both theNational Highway and Traffic Safety Administration and General Motorwere aware of the ignition defects. For example, a report showingthat the ignition of Saturn Ion has some defect was prepared between2001 and 2002, while the engineering inquiries that resulted in thediscovery of defects in Chevy Cobalt were performed in 2005 (Cox,2014). In addition that fact that the GM has always denied liabilityfor the accidents and deaths of the users of its cars prove that itintended to sweep the issue under the lag. The company has filed abankruptcy case with the objective of escaping the liability forfatal accidents caused the defective ignition switch. It has beenreported that the GM accepted to expand the scope of the corporateliability to victims of fatal accidents after being subjected topressure (Cox, 2014). This means that its management did not have thewill to assume its social responsibility for the wrong decisions madein the past.
Ethicalconsiderations in the GM case
Themanagement of the General Motors failed to demonstrate ethicalpractices to both the shareholders and customers. Under theutilitarian theory f ethics, actions or decisions can be judged to begood or bad depending on whether they maximize happiness or pain to alarge number of people (Ruel, 2014). This implies that the deliberatedecision made by the GM’s management can be judged on the basis ofits consequences to the users of the cars fitted with the faultyignition system. It is estimated that the defective ignition switchhas resulted in the death of about 12 people while a dozen survivedinjuries (Morran, 2014). Although the General Motor has made anexcuse by stating that the drivers of the cars involved in fatalaccidents were over speeding, it has been proven that the primarycause of these accidents was the defective ignition rotation (Ruel,2014). The GM’s management acted negligently and failed to take anaction (redesigning the ignition system) that would maximize thehappiness or the safety of the car users. The decision to ignore theengineer`s proposal to change some features the system was atrade-off between the dollar cost and consumer safety.
Theeconomic model of the organizational social responsibility holds thatbusinesses should pursue maximum profit in order to increase theshareholder value (Ruel, 2014). Although the management of theGeneral Motors under the leadership of the Mary Barra (CEO) avoidingthe process of redesigning the switch to save on costs, the outcomeof this decision proves to be expensive than the switch systemredesign. For example, the GM announced that it would spend about $300 million during the first quarter of the financial year to repairthe recalled cars and pay fines to the regulatory authorities for itsfailure to maintain the safety of its consumers (Ruel, 2014). Thismeans that GM failed to adopt an effective strategy to manage itslong-term relationship with the stakeholders at the expense ofshort-term financial gains. In the long-run, the company profits willdecrease, which will in turn reduce the shareholder value.
Irresponsibleuse of power
Largecompanies, especially those that operate in the automotive industryhave the capacity to influence the taste of their consumers and thesociety at large. According to Frank (2014) Corporate influence thenatural environment of a given society, its cultural expectations,and norms. This is based on the notion that corporations provideconsumers with services and goods that they require and set pricesfor those goods. Consumer’s loyalty to products of a given firm isbased on the fact that those products are up to the expected safetyand quality. The General Motors seems to have abused the perceivedpowers held by the multinational corporations over the marketsegments in which they operate. In this case, the General Motorsassumed that the consumers would continue buying and using theproducts as presented in the market. This was a wrong judgment thatwill cost the company and its shareholders, both financial gains andits reputation in the long-run following the recall of more than 28million vehicles (Frank, 2014). Consequently, the company is likelyto lose its power and impact on the automotive industry.
Themanagement of the General Motors failed to assume its corporatesocial responsibility by ignoring a warning by engineers about thedefective ignition system in some cars. The effect of this decisionwas financial gain in the short-run, but it risked the reputation ofthe company and subjected to significant financial losses in thelong-run. More importantly, the company did a trade-off between thesafety of its consumers and financial gains. This is unethical, andit demonstrates the narrow view of the relationship existing betweenthe company and its stakeholders, including consumers. The fact thatthe technical members of staff (including engineers) had informed themanagement about the defect suggests that the recall was caused bythe management failure to appreciate the contributions of the juniorand technical members of staff.
Cox,K. (2014, July 31). Why every driver should care about the GMignition recall. Consumerist.Retrieved November 12, 2014, fromhttp://consumerist.com/2014/04/21/why-every-driver-should-care-about-the-gm-ignition-recall/
Frank,R. (2014). General motors and the breakdown of corporate socialresponsibility. HighbrowMagazine.Retrieved November 12, 2014, from http://www.highbrowmagazine.com/4185-general-motors-and-breakdown-corporate-social-responsibility
Morran,C. (2014). GM Knew of faulty ignition switches in 2001 NHTSA saysdata was inconclusive. Consumerist.Retrieved November 12, 2014, fromhttp://consumerist.com/2014/03/13/gm-knew-of-faulty-ignition-switches-in-2001-nhtsa-says-data-was-inconclusive/
Ruel,S. (2014). Business ethics case analyses. HeatherSalazar.Retrieved November 12, 2014, fromhttp://businessethicscases.blogspot.com/2014/04/post-bailout-power-failure-for-gm-2014.html
Servaes,H. & Tamayo, A. (2013). The impact of corporate socialresponsibility on firm value: The role of customer awareness.ManagementScience,59 (5), 1045-1061.