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Based on the Toyota Company, this report was about analysis and investigation of business ethics. According to Crane & Matten (2007), business ethics is the study of business situations, activities, and decisions where issues of morally right and wrong are addressed which means that business ethics had taught us how to differentiate the right or wrong and distinguish between the ethical or unethical actions or situations. It is hard to let Toyota to practice business ethics in order to meet stakeholders requirements and satisfaction which caused by consideration of company profit and reputation.
In this report, the author had conducted a research on Toyota's business ethics using the stakeholder analysis. The ethical dilemmas are poor products quality, poor conditions of work or employment and sexual harassment and these had negatively impacted on its stakeholders such as the victims, government, company, media, competitors, customers, civil society and the employees. In other word, a stakeholder of a corporation is an individual or a group which either is harmed by, or benefits from, and whose rights are violated, or respected by the corporation actions (Evan and Freeman, 1993). Following the research, this report also evaluated the importance of these ethical dilemmas and how Toyota had dealt with these dilemmas. The actions taken are to recall the products, investigations, paying compensations to the victims, improved conditions of work and apologizes to the victims. One appropriate theory was discussed in this section. The last part of the report discusses about Toyota's best practices and values such as corporate social responsibility and corporate governance.
Background of Toyota
Toyota Motor Corporation was headquarters at Aichi in Japan. It employed about 300,734 people worldwide. It was the largest car company in Japan and eleventh largest car company around the world. Sakichi Toyoda was the productive inventor of first engine of Toyota; name Toyoda (ãƒˆãƒ¨ãƒ€) in the 19th century. Toyoda means "fertile rice paddies". With the help of Kiichiro Toyoda, Sakichi's son, had established and change the name to Toyota Motor Corporation as the newly formed word of Toyoda. And finally, Toyota Motor Corporation had developed and produced new brands of vehicles that can refer in appendix 1.
Although Toyota Motor Corporation was successful, earned a lot of profits in the industries and the largest automaker; they faced some unethical issues which had negatively influenced their stakeholder, reputation and profit. Although Toyota knew that it had to conduct its business with principles, values, and standard but they had failed to do so because their aim was focus on the maximization of profit. This resulted in ethical dilemmas such as poor of quality, poor conditions of work/employment, and sexual harassment.
Poor Product Quality
In 2012, Toyota had reach its sales target till 9.76 million vehicles and made the high profit compared to 2011, including North America, Europe Japan and the rest of Asia. It was reported that Toyota has received many complaints about its poor quality products such as floor mat, gas pedal, brake and steering. There were 34 cases of complaints. According to The U.S National highway Traffic Safety Administration (NHTSA), 56 people died due to the problem on acceleration of Toyota vehicles.
On 28 August 2009, an off duty California Highway Patrol Officer, Mark Saylor together with his wife, daughter, and brother in law who were travelling on a Toyota Lexus ES350 were killed in San Diego. It was reported that Saylor was driving his car at 120 mph when it hit another car, launched off an embankment, rolled several times and the car burst into flames. Before the accident, Saylor's brother in law, Chris Lastrella had called the police station and told the police that the car's accelerator was not under control and the brake was not functioning. After the investigation, the police discovered that the floor mat had interfered with the gas pedal that triggered the accidental acceleration of the vehicle. This horrible accident has spread like wildfire where ABC News, CNN News, Los Angeles Times questioned the reliability of Toyota's vehicles. Toyota denied responsibility and blamed its dealership for not installing the proper floor mat to the car. Besides, it also blamed the driver for not using the other systems of the car to prevent such accident.
In 2006, Koua Fong Lee killed 3 people while driving his Toyota Camry and was jailed for 8 years. He testified that he had pressed the brakes but it did not stop. However, two mechanical engineers who examined the case claimed that the vehicle was fine. After several years of explaining to the victim's family, he was released and they had sued Toyota.
According to the 2010 JD Power Initial Quality Study, Toyota had dropped its ranking from 6th to 21st because of its poor product quality. From the 100 vehicles surveyed, the problem has increased from 101 to 117. Based on the annual report 2009 Toyota Motor Corporation's sales had dropped from 1.35 million units, or 15.1%, to 7.57 million units, net revenues decreased 23.2% to Â¥18.6 trillion and operating income fell Â¥2.6 trillion to a loss of Â¥394.8 billion. This has greatly affected the employees where there was a sharp decline of job.
On the other hand, customers of Toyota were confused and lost their trustworthiness on Toyota's products. Some customers had stopped driving their Toyota's cars fearing for their safety. Besides, the dealerships were having a hard time where they had to attend to endless of customers' complaint about Toyota's products. Therefore, competitors such as General Motors, Ford were profiting and had taken advantages of this situation by offering US$1000 incentives and low financing rates to owners of Toyota to help to pay off their lease.
Poor Conditions Of Work /Employment
The second ethical dilemma of Toyota is poor conditions of work and employment where it had received many complaints and lawsuits. This shows that it did not practice any human rights of employment. It was reported that an estimated of 200 to 300 workers had serious illness, depression and death due to overwork in Japan. There was a case of Kenichi Uchino who was a 30 years old engineer, died due to overwork at Toyota Prius Plant in Nagoya City. He had worked for Toyota about 13 years and his main job was checking vehicles bodies for any defects. He was said to work for 14-hour shifts per day and had to perform overtime work of between 107 and 155 hours. To make matter worst, he was unpaid for at least 61Â½ of overtime work. Because of this incident, Mrs. Uchino had filed a complaint to the Labor Standards Inspection Office of the Ministry of Health, Labor and Welfare and demanded from Toyota to pay the compensation for her children's life. Her children were 7 and 9 years old. Nevertheless, she was turned down. Toyota claimed that 61 hours were "voluntary" and did not even apologize for their poor treatment towards Kenichi Uchino.
After the case of Uchino, people started using the "Karoshi", which means overworked till died. A white collar technician of 46 years old, who worked more than 15-17 hours per day, had died of overwork in November 2006. Another employee, 32 years old who had to meet hard and fast deadlines of setting and unifying a new computer security system of Toyota has committed suicide on 17 January 2005 due to stress and pressure at work. Following these 2 cases, Toyota denied responsibility and refused to help. However, after investigation, The Labor Inspection Standard Office confirmed that the white collar technician's and computer technician's death was caused by overwork.
Furthermore, there was racial discrimination in Toyota. One of the well-known case was the general manager of Fremont Toyota had verbally harassed the four Afghan Americans salesmen as "terrorists" on October 2007. They were later forced to resign. Another Afghan American manager who spoke up for these Afghan Americans was fired.
In addition, there was an incident of age discrimination at Texas Toyota Dealership in San Antonio. The younger salespeople were allowed to sell both Scion and new Toyota models whilst the four employees of 40 years old were prohibited from selling the brand Scions and had to sell the new Toyota models. One of the employees retaliated and later resigned.
Last but not least, even the sexual harassment case also happened in Toyota. As a CEO of Toyota Motor North America, Hideaki Otaka, 65 years old, did not practice the value of respecting women workers. It was reported that Otaka demanded sexual harrassment from his former executive assistant, Sayaka Kobayashi of 42 years old in 2006 during a business trip in a hotel of Washington D.C. Kobayashi felt helpless and sent a letter to Dennis C. Cuneo, who was the senior vice-president Toyota and BusinessWeek to request for help. The letter's contents were about evidence of romantic and sexual harassment that Otaka gave to Kobayashi. However, it was useless. Then, she proceeded to complaint to Toyota officials, but they ignored her complaint. Finally, Kobayashi sued Otaka for sexual harassment.
Ways in which Toyota has dealt with these dilemmas
In order to settle the ethical dilemmas, Toyota had took the actions on recalled the products, investigations, paid compensations to the victims, improved conditions of work and apologized to the victims.
Poor of Quality
Initially Toyota had denied responsibility of the sudden acceleration and floor mats cases. But with the intense pressure from the public and after the cases became critical, Toyota had chosen to recall its products. The recalled was the largest ever in Toyota. On September 2007, Toyota had recalled 55,000 floor mats of Lexus E350 and Camry after the case of San Jose. On 28 August 2009, after NHTSA has met with Toyota, Toyota instructed 1400 Toyota and Lexus dealers to ensure that Toyota's owners received proper floor mats. Toyota had also urged the owners to remove their floor mat before had the exact result. In October 2009, Toyota had recalled 3.8 million vehicles after the case of Mark Saylor because of the floor mat and sudden acceleration. After the case of Mark Saylor, Toyota also had settled compensation. Toyota had paid 10 million. Finally, Toyota had settled with Mark Saylor's Family on the floor mat case. In January of 2010, Toyota had recalled 2.3 million vehicles on the same problem. While recalled, Toyota had temporarily stopped selling the models that had been recalled. Besides that, Toyota had halted production of those recalled models during the investigations. The recalled had continued till 2010, and Toyota had already recalled nearly 8 millions vehicles.
NHTSA, which had received a lot of complaints and death cases, had decided to do the investigations with National Aeronautics and Space Administration (NASA) engineersÂ on Toyota's sudden acceleration problem. Although Safety Research & Strategies, Inc had already made the investigations and showed the problems were from floor mat which interfered with the gas pedal, but, there still was confusion and customers believed that it was caused by electronic problem. In the investigations, NHTSA had released results that no electronic problems in Toyota. Therefore, there was no solution and clear result on the cause of the accidents. After this investigation, NHTSA made civil penalties to Toyota as the result of investigations of about $48.8 million.
Besides, Toyota had proposed new rule to install a brake override switch and create installation of event data recorders in the vehicles in order to prevent the problems. Toyota also had installed proper floor mat, which was using the retaining clips to make it tighter with floor mat.
Moreover, Toyota had paid the dealers about $75,000 for the cost of recalls. It was because dealers had spent their hours to talk to the customers, and open repaired stations and offered car wash for calming the customers. Besides, the president of Toyota had apologized to the customers and employees. He even wrote an apologize letter to the media about Toyota's plan to repair its public image. The letter showed that Toyota took responsibility on their mistakes and learnt from it, and would try their best to settle the problem.
Apart of action taken of paying compensation, recalled the products and apologized to public, Toyota had applied the descriptive stakeholder theory. According to Thomas and Lee (1995), descriptive stakeholder theory was attempts to ascertain whether and how corporations actually do take into account stakeholder interests. It meant that Toyota had no another option when the case became more critical, in order to take action to make the news calmed down.
Poor Conditions of Work/Employment
In the ethical dilemma of poor of conditions of work, Toyota also found the solutions to solve the problem. With the dilemma of poor of quality and working conditions, Toyota was far from being perfect. National Labor Committee had released the report of "Toyota you don't know", which had the research of the Toyota cases about poor of conditions of work. This report had alleged that the workers had been cheated and forced to work. In Japan, their unions are weak and lack independence. Â However, Toyota had provided safety warning when worker had worked in the factory.
In the Kenichi Uchino's case, it took 6 years to settle the case. The Nagoya District Court ruled that Uchino had worked overtime time and till the end he collapsed and died. Mr. Uchino had won the compensation for her husband's death.
While the case of age discrimination on the San Antonio, Texas Toyota dealership, Toyota had finally decided to pay $140,000 compensation to the salesman. And Equal Employment Opportunity CommissionÂ (EEOC) had ruled that the dealership must develop anti-age discrimination policies and train the management team under 2 year consent decree. Toyota made the promised to the public that would build against reputation for products and performance.
Due to the Bowie's case, Toyota would pay $202,000 compensation for the two black men from Landover and Silver Spring to settle the case. While with the Afghan case in Fremont Toyota, Toyota had paid $400,000 for the compensation. In these cases, Toyota also requested to provide training on management and reported to the EEOC after 3 years.
For this incident, Toyota took action by forcing Otaka to leave his position as a CEO secretly. They recruited Jim Press to be the first American president of the Japanese car makers U.S. operating unit. Apart from this, Toyota had paid $190 million lawsuit to Kobayashi. After this case, Toyota had promised to the public would take more concern on workers, and increased more training and practices to the staff to prevent the unethical behavior.
Organization's Best Practices and Values
Although Toyota had faced unethical cases, fortunately, Toyota still had practiced some best practices and values in society. With best practices and values, Toyota's profit and reputation might increased and grow. Toyota had practiced corporate social responsibilities and corporate governance in the company.
Corporate Social Responsibilities
For United Motor Works Toyota SDN BHD (UMW), also a part of Toyota which in Malaysia had practiced the corporate social responsibilities. Toyota had always being responsible and focused in marketplace, workplace, environment, and community.
During the major festivals such as Ramadhan, Hari Raya Aidifitri, Chinese New Year, Deepavali, and Christmas, Toyota had always celebrated with the community and company gatherings. In 2011, UMW, Toyota had created an annual event with the theme of "The Day of Love" to develop love, compassion and kindness, whereby Toyota had conducted horse-riding, archery, fun and games for the children of Yayasan Sunbeams Home, Cheras, Kuala Lumpur at Denai Alam Recreation and Riding Club, Selangor.
Besides that, UMW, Toyota had provided RM1.8 million to MERCY Malaysia for various community health projects, which included by mobile clinics, alcohol misuse, Intervention group, and longhouse fire-risk reduction activities in 2011. This project was most benefiting for the 9,000 people of Sabah and Sarawak.
Furthermore, in 2011, Toyota also involved in PINTAR Programme which had promoted intelligence, nurturing talent, and responsibilities, had contributed RM300,000 for improving seven adopted PINTAR schools, namely SK Sitiawan, Perak, SK Kampung Busut Baru (Asli), Banting, SJK(C)Perkampungan Berapit, Penang, SK Bukit Cheding (Asli), Kuala Langat, SJK(T) Ladang Sungai Choh, Rawang, SK Selisik, Behrang, and SK Pasir Panjang, Port Dickson. It would help the students to improve their motivations and made them get a proper knowledge.
Moreover, Toyota also had involved in global warming, event of Earth Day, for cleaning Sungai Gombak, which was located at Selangor and also World Environment Day, Toyota had planted 1,500 mangrove tree saplings in Sepang, also located at Selangor. Toyota also had involved in post-flood relief and donated RM40, 000 of cleaning equipment and others to SK Pagoh. Those activities could save the earth, and made the earth healthy and reduced the water and air pollution. With those events, it showed that Toyota had concerned the earth and environment, and developed love for the earth.
When the Japan experienced serious Tsunami in 2011, Toyota also had donated RM500, 000 to the Malaysian Red Crescent Society International Relief Fund. Toyota also had showed their loving and caring to each other.
Apart of corporate social responsibility of Toyota, it had applied the theory of feminist ethic. According to Crane and Mattern (2007), feminist ethic was an approach that prioritizes empathy, harmonious and healthy social relationships, care for one another, and avoidance of harm above abstract principles. From those programs and activities, there could see that Toyota had developed loving and caring to the children, which was appropriated suitable for the feminist ethics theory.
Besides in practicing corporate social responsibility, Toyota also had practiced corporate governance, which is Code of Conduct that had conducted to the management and workers of Toyota. Toyota had showed their duties, transparency and integrity on code of conduct. In Toyota's laws and rules, management and workers would not be able to do any illegal or unethical actions. If there had workers and management did not follow the rules, it would took actions against the illegal acts.
To make the Toyota more effort and commitment, there had a Whistle Blowing Policy came out, which was comprised senior management to look through the faulty and wrongdoings by the workers and management. In this policy, the committee was responsible to review, investigate and analyze complaints that had received against the management. Apart on Whistle Blowing Policy, Toyota could prevent unethical news from occurring to public.
Besides, Toyota also had adopted Code of Ethics on 21 August 2009, which concerned transparency, integrity, and accountability in the company. There were the duties and responsibilities as board members to look through the laws and regulations in the company which had conducted the principles and practices of good corporate governance to respect on behalf of the company. As a board in company, there was a responsibility to established and reviewed the strategic of company, evaluated the conduct of business, and identified risks and ensured the risks are properly managed.
Moreover, the director of Toyota had responsibility to provide clear, balanced and comprehensible assessment of financial reports to Bursa Securities and shareholders. It was the duties and responsibilities of a director to run their business successfully.
Apart on Toyota's corporate governance, it had applied instrumental stakeholder theory. According to Thomas and Lee (1995), instrumental stakeholder theory was attempts to answer question whether it is beneficial for the corporation to take into account stakeholder interests. Based on code of conduct, code of ethics and whistle blowing policy, Toyota had made the benefit for themselves, which conducted the laws; to prevent the ethical dilemma occurred. By the time, workers and management also had benefit when conducted the policy, but the most benefit was the Toyota which provided and conducted the policy.
Business ethics is an oxymoron which is hard to decide the way. It is hard to let all of the company to practice values and beliefs of the society and ensure that company always practices ethical in business. And finally when unethical news or dilemmas has occurred, it will force company such as Toyota to take actions to balance the interests of company and stakeholders. Although Toyota always denies responsibility, but at least Toyota will take responsibility after the case becomes critical. However, Toyota shall prevent the ethical dilemma, not to wait until the cases have becomes serious. Fortunately, Toyota has practiced corporate social responsibility and corporate governance that prove to community best values and practices of Toyota. There still a long way to let Toyota practices from the case quality of product and poor conditions of work. It will be in risk again if Toyota have continues to let ethical dilemmas occurs. It is nothing wrong in making profit but see weather how company can practice business ethics on their way.
This report analyzes and investigates the business ethics of Toyota Company. Toyota was the world's largest automaker. Even though Toyota Motor Corporation was successful and earned a lot of profits in the industries, it still met some unethical behavior and issues which had greatly influence their stakeholder, reputation and profit. It is hard to let Toyota to practice business ethics in order to serve and demands the community. It is because of consideration company profit, reputation and another purpose. There is some major ethical dilemma on Toyota, which is poor of quality, poor of conditions/employment, and sexual harassment. After the author had discussed the ethical dilemmas, there had described how Toyota deal and settle the problems. Besides, the author had described Toyota's best practice principles and values in Toyota's corporate social responsibility and corporate governance. In this report Toyota had applied appropriated theory in their action taken after the ethical dilemma and best practices and values.