The Hughes aircraft study is a case where whistleblowing is at the core of the case study which spanned over a long period of time from 1985 right through until 1995 where a civil suit between Hughes Aircraft and the whistleblowers was settled. We will delve into the circumstances and actions that lead to the eventual whistleblowing incident and unravel the ethical issues associated with this case. We will break down the ethical issues to better understand the ethical issues associated with this case. We will reference similar cases to explore potential outcomes in this case if certain actions did not happen, we compare the actions with a code of ethics that provide an insight to how the management structure at Hughes was operating. Throughout the study we will see that there are cultural issues that are driven from the head of the division right down to the middle management to supervisor level that drive the unethical actions carried out by the key participants in this case. The fallout for the whistleblowers as we will discover were very serious however unfortunately expected and in line with statistics pertaining to the outcome of whistleblowers.
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Hughes Aircraft is a large American Aerospace and defence company with multiple divisions. The company was acquired by General Motors (GM) in 1985 but was sold off in 1997 to a company called Raytheon [cite]. It is interesting that GM had well publicised ethical challenges of its own [cite] over the years. The division in this particular case is the Hughes Microelectronics division. The products at the core of the case were chips that were sold to the US Government. This was a lucrative market but there were stringent contractual agreements between Hughes and the government to ensure the safety of the chips. The mass production and testing requirements often lead to collisions between the Quality Assurance department and the production supervisors. The conflict being of keeping up with the demand for their customers versus ensuring a high level of quality and ensuring chips passed the contractual agreed tests.
A serious contributing factor to the Hughes case was the high-stress environment in which the chips were designed for. These chips were designed to be used in military battlefield systems. The chips would be used in military weaponry such as air to air missiles, F-14, F-15 fighter aircraft, M-1 tank, phoenix missiles. Environmental testers would complete the required associated tests for the chips which would test the chips performance in extreme circumstances such rapid changes in temperature, severe shock, changes in atmospheric pressure (1).
The Hughes case is about the people and the procedures in a corporate environment as opposed to the technical computing systems (2). There are software and hardware components involved in the production of the chips however these components are not the reasons that lead to whistleblowing incident. The procedures in place at Hughes were not stringent enough and were subject to fraud as chips associative documentation was easily conjured and passed even if the chips had failed or even skipped tests.
We analyse the various incidents and the actions taken by primary participants. There are numerous participants that are involved at various stages of the case. We need to ensure that we focus on the relevant details and participants to analyse the ethical issues surrounding the circumstances that lead to the whistleblowing incident in this case.
The two whistleblowers in the case are Margaret Goodearl and Ruth Ibarra. Margaret Goodearl was assistant supervisor with Donald La Rue and Ruth Ibarra was the head of the Quality assurance department, both Goodearl and Ibarra were concerned with the activities relating to the chips. Donald La Rue was the supervisor of the production line and was directly involved in the various incidents relating to the quality assurance of the chips shipped off to customers. It was his responsibility to ensure that the production line met the demands of the business. Hughes management had a key role in the outcome of the case there is clear evidence of a culture issue from the head of the division down to the various management and supervisory roles where ethical decisions were not dealt with in the manner that they should have been. Upper management were putting immense pressure on middle management to ensure that production met the demands of the business. The primary concern was meeting the demand which would have a knock on effect for the quality assurance requirements there was a lack of procedural enforcement to ensure adequate quality checks were enforced.
There are several incidents that lead to the actions of the whistleblowers Goodearl and Ibarra. The first incident that was brought to the attention of Quality Assurance was by Lisa Lightner an environmental tester. Donald La Rue had ordered Lightner to pass a leaker. Lightner had reported this issue to Goodearl who in turn escalated to Ruth Ibarra who was the head of the Quality Assurance department. Goodearl and Ibarra then decided that the issue should be escalated further and they went to the head of the division (Karl Reismueller) who simply redirected them to middle management. While this is not a direct issue to the outcome of the whistleblowing it is understandable why Reismueller redirected as there is a management structure in place that needs to be followed. It does however indicate that he was aware of the practices on the production floor. They later got a meeting with the head of the production line (Richard Himmel) who assured Lightner that her job was safe but she should try work with La Rue. However there was a subsequent meeting later with the production line and management who were told to obey La Rue but not to do anything against the rules (3).
Several weeks after the Lightner incident Ibarra who was now aware of the actions of La Rue noticed that Shirley Reddick another environmental tester was resealing chips when she enquired Reddick had told Ibarra she was resealing the chips under La Rue’s orders. Resealing chips was not against company or contractual policy but it needed to be authorised by quality assurance once again La Rue was not conforming to the policies that govern the contractual agreements. Ibarra had asked Goodearl if she knew anything about the reseals however she was not aware and questioned La Rue who told her to “mind her own business”. She stopped questioning La Rue at this point (4).
In the same month as the Reddick Incident La Rue again had ordered Rachael Janesch another environmental tester to sign off a leaker as passing the test. Goodearl got involved in the incident and the chips were retested.
We analyse the key statements by the various participants at the time the incidents were reported. These incidents eventually led to the escalations taken by Goodearl and Ibarra to eventually whistleblowing. After the Lightner case Goodearl got a phone call from her manager Frank Saia who was irate that the incident had been escalated. He was furious and known to have a bad temper and demanded to know who reported the incident.
“…who the damn squealer was out there. If I don’t hear from you by 4 o’clock on this, you’re fired”.
Further to this threat Goodearl received a second phone call from an assistant manager of Saia (Jim Temple) who reminded Goodearl of her immigration status
“…that meant that if she was fired, she would likely end up cleaning toilets for a living”.
The chips were giving back to La Rue after the Lightner incident and the chips were shipped out. In the meeting between management and the environment testers the testers were told that to obey La Rue.
After the Reddick incident Goodearl was told by Temple and Goodearl had another confrontation. Goodearls moral actions were not going down well with the company and she was running out of options on how to deal with the issue.
“…You are doing it again. You are not part of the team, running to Quality with every little problem”
“…Shape up and be part of the team if you want your job.”
Goodearl the attempts to escalate the issue to personal and enquires about a harassment charge. However straight after this meeting personnel reported the discussion straight to Goodearls manager Frank Saia. Again he was furious and threatened Goodearl again.
“…If you ever do anything like that again, I will fire your ass right out of here.”
This was a crucial incident that indicated to Goodearl that the issue surrounding the chips and the quality assurance was not going to be solved internally. There would appear to have be no procedure or structure in place that Goodearl could take advantage of to resolve the issue internally. She had tried escalating the issue to management only to be berated by direct management further to that personal did not deal with the harassment enquiry professionally. It is also obvious that Quality Assurance did not have the direct authority to prevent the chips from going out untested.
Two critical incidents involving two of Hughes customers were the AMRAAM and the PLRS incidents where La Rue had conjured the appropriate paperwork to accompany the shipment. After the AMRAAM incident Goodearl had very little option and at this point chose to whistleblow and report the fraudulent activities to external sources. Goodearl and Ibarra had initiated a call with the US Fraud hotline. They needed tangible evidence to take the case further. It was the paperwork on the AMRAAM that was used as evidence to the fraud squad. Goodearl had photocopied the original paperwork that clearly indicated incomplete tests. However the chips were still sent off with fraudulent paperwork.
It would be very easy to point the finger at La Rue as it would seem that he is directly breaking the rules and regulations to get the chips delivered on time and keep up with the demand. It would also be convenient to point the blame at Frank Saia and in particular to the legal implications associated with employee law. However we need to ask the question why certain actions and practices were occurring within the organisation.
The production line was under immense pressure to keep up with the demand and customers were applying pressure to have orders delivered on time. The main issue arises from the 10% failure rate on the production line (5). Upper management did not want to slow down the production line which would have resulted in better quality and reduce the failure rates so instead used a scheme were hot chips (urgent chips) which would jump the production in order to keep up with the demand. La Rue under instruction of his manager Frank Saia was to “babysit” the hot chips and to ensure they passed. He was under pressure from Saia to get the chips through the production line that he felt he no option but to intervene and ensure they were passed. Interestingly enough the failure rates for hot parts had lower failure rates. The hot chips scheme is potentially the area where the majority of chips were passed fraudulently. La Rue had the tempting ability to pass the chips and complete the paperwork irrespective of the test result and relieve the pressure. Even when QA identified chips that had failed tests La Rue himself would again fraudulently complete the paperwork and ship the parts out. It was common practice to even forge paperwork on the behalf of environmental testers. It would be reasonable to assume that La Rue actions were a result of the pressure from direct management.
Frank Saia had worked with the company for 35 years and worked diligently previously to improve the production efficiency and had managed to get the production up to speed with the demand. He was not only concerned with meeting the demand but was also concerned about the quality and was quoted saying “..It is the worst thing you can do to ship bad parts” to a subordinate (6).
However the backlog inevitably grew over time as a result of the failure rates and demand. Saia himself had tried to explain the difficulties with upper management and discussed the quality issues but was told to just deal with the problem Frank Saia would it would seem made unethical decision and showed a lack of moral responsibility when he turned a blind eye to La Rue skipping tests. He was confronted with 2 choices which were to either assist La Rue with assessing the least critical chips to minimise the risks but this would have meant that Saia was breaking a federal law (6) so he chose to let La Rue continue with the fraudulent activities. Again it would be reasonable to assume that Frank Saia actions were a result of the pressure applied from his direct management which were coming from the director level of the division.
There are legal considerations that need to be taken into account in this case. Unlawful actions are usually unethical in principle and we provide details of the legal breaches involved in the case. Whistleblower Protection Act The Whistleblowers in this case were not protected The false claims act enacted in 19663 allowed a whistleblower to be sure on the behalf of the government a person or company was submitting falsified to climes to the government. If the organisation was found guiltily they would be forced to pay a settlement to the government the whistleblower would received half of the settlement. The amendment was modified reducing the share of the settlement to the whistleblower. The whistleblowers act establishes safeguards for federal employees and former employees who claim negative personal actions have been taken against them as a result of whistleblowing (7).
False Claims Act: Hughes was supplying customers with chips that had falsified accompanying paperwork. There were strict guidelines for the testing of the chips in the contractual agreement between Hughes and the military.
Upper management were putting pressure on middle managers to meet the demand. This is turn lead to the supervisors having to handle the pressure from middle management and also from QA tension was building up between the La Rue and Ibarra as they had conflicting interests getting the chips out quickly to meet demand versus slowing the process down to ensure the quality is upheld. The pressures were mounting on La Rue as he was told to babysit part and ensure they passed. Upper management had told Sia middle management to just deal with the problem, which was of course the escalation by Goodearl, Ibarra to Reismueller regarding skipped tests. Sia at this stage new that La Rue was skipping tests in order to meet the demand but was getting little sympathy from upper management they wanted the customer demands to be met.
When QA identified chips that had failed tests laRue himself would often retest after hours and the relevant paperwork would be completed and the chips would be shipped out.
We need to understand the motives for whistleblowing to ensure that the moral obligation is valid. In this case Goodearl had exhausted many eventualities, escalating to the QA and upper management, threats regarding her job and immigration status, parts pertaining to incidents were giving back shipped and the blatant continued on going practices of the company left Goodearl with very little option but to the blow the whistle. The motives do not appear to be of self interest but the obvious risks associated with company practice.
Middle management displayed aggressive behaviour towards Goodearl and Ibarra. Goodearl initiated talks with personal and enquired about harassment charges however her efforts proved to be fruitless and received an angry reaction from her manager.
When defining the interested parties analysis needs to be completed to identify the primary, secondary and implied participants. This is quiet a large list and there complexities when identifying who the key participants are. We have narrowed the complete list and reduced this through rationalisation within the context of this case.
Margaret Goodearl and Ruth Ibarra are the two whistleblowers in this case both concerned with the activities relating to the chips that had failed or skipped tests. A natural confrontation was developing between quality assurance it was their responsibility to ensure the quality of the chips was upheld and the floor supervisors and production management they were responsible for getting the chips though production to meet demand.
The ideal solution for both of these participants should actually be a common goal with all participants which was to get the chips out on time and meet demand while ensuring the quality was met. Due to the high stressed environment this desire was not achievable and risks were taken.
Their preference would appear to be of moral obligation to put the quality assurance ahead of the demand which would have slowed the process down and failure to meet demand would have been inevitable. To resolve the various issues that came up in this case, an adhered to structure would need to be in place were conflict resolution and enforced escalation paths are available. Whistleblowing is viewed by some as a sign of organisation failure. If an organisation has the proper structure in place and communication process to allow concerns, issues to be raised and resolved (7) with the organisation then whistleblowing should be prevented if these structures are put in place and adhered to.
QA also should have the final outcome to what happens to chips that have failed or skip tests. However for some reason La Rue was to be bypass this procedure, clearly procedures need to redefined and reinforced from a quality assurance point of view.
Donald La Rue was the supervisor of the production line and at the heart of the incidents reported to and by Margaret Goodearl and Ruth Ibarra. Don La Rue was under immense pressure by direct managers to meet the customer demand who often contacted him directly enquiring about chips that were delayed. The cultural practices trickled down through the chain as upper management put immense pressure on middle management mainly Fran Sia who was La Rue direct manager. La Rue was asked to prioritise hot chips and get through testing process, as these were urgent the pressure to get them through the testing phase was high and failure to get them through would have meant confrontation with Sia who had a reputation of having a bad temper.
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When hot chips would fail La Rue would often takes these chips from the line and would pass them and have them shipped on. More pressure was put on La Rue as the pressure of demand increased he had an obligation to babysit the chips though the production line and ensure they passed the test. This would again mean that he was taken chips that had failed and would even skip tests to ensure they were shipped out on time.
From La Rue perspective his ideal would have been to ensure that customer demand was met. It is not clear from the investigation why demand target were affected so badly. Quality assurance checks need to be taken into account when estimating production lines limits and expectations. Questions need to be asked as to why the quality assurance checks were such an issue was there too many failed chips indicating a problem with production equipment were tests too stringent enforced by the contract between Hughes and the military? Was staffing an issue? was expansion of operations an option ? These are plausible questions and may he relieved the demand and allowing for adequate time for production, quality tests and even rework of failed chips.
For the purpose of the report we have grouped the various managers under “Hughes management”. While some managers had a more direct impact on the case than others it is the division’s culture and lack of ethical and moral responsibility that stemmed from the top of the divisions structure down to middle management to supervisors that lead to the actions on the production line and in particular Donald La Rue.
There were various levels of interaction between the participants and management. The unethical decision making by the various management positions in Hughes Microelectronics ultimately lead to the whistleblowing actions of Goodearl and Ibarra. A number of management figures in the division were aware of the practices that were putting the company at risk. Karl Reismueller who was the head of the division was made aware of an incident involving La Rue and Lisa Lightner was La Rue had ordered Lightner to pass a “leaker”. This incident was escalated by Goodearl and Ibarra however they were redirected to lower management levels. While this incident in itself is not directly the cause of the whistleblowing incident, it does show that Goodearl and Ibarra tried to escalate it does give an indication of the culture within the organisation. Olaf Neiendam head of the personal department and Richard Himmel manager of the circuit product line and direct manger to Frank Saia were aware of the issues also. Other incidents were La Rue was told by upper management to “handle it” when he was caught skipping tests by quality assurance [cite] and the company showed Frank Saia little patience for his explanations. Frank Saia made unethical decisions and showed a lack of moral responsibility when he turned a blind eye to La Rue skipping tests. He was confronted with 2 choices which were to either assist La Rue with assessing the least critical chips to minimise the risks but this would have meant that Saia was breaking a federal law (6).
When comparing the actions of the management in Hughes and indeed Goodearl and Ibarra with a code of ethics, we used the code of ethics from the Association of Ethics and Professional Conduct (8). We can see the motivations why Goodearl and Ibarra finally chose whistleblow and we can clearly see were the actions and practices that lead to the whistleblowing were conflicting with various aspects of this code.
We focused on the following are based on the ACM moral Imperatives there are other directives that do apply in the more specific professional responsibilities and the Organization leadership Imperatives.
Contribute to Society and human well-being
Avoid harm to others
Be honest and trustworthy
Be fair and take action not to discriminate.
We will look at 3 different possible solutions two extreme and a common ground solution. The two extremes solutions are 1) Declined from whistleblowing 2) Goodearl and Ibarra actually took the alternative extreme which was to whistleblow on the organisation 3) Procedural Requirements enforced by a change of Management Culture within the organisation
Goodearl and Ibarra could have chosen not to go public with the issues going on at Hughes. They had a sense of moral obligation to whistleblow on this case due to the risks associated with the actions of the company. However if they had chosen not whistleblow the outcome could diverse outcomes.
The frantic production line would have continued passing leakers. As long as there were no reported incidents caused by faulty chips the perception would have been that the chips and practices at Hughes were running in accordance with the contract signed between Hughes and the military. Goodearls career probably would have continued in the positive manner it was before she had started to escalate issues to management position. Goodearl may not have had to file for bankruptcy and the outcome of her marriage could have been different as the outcome from whistleblowing was a major contributing factor in the breakup of her marriage. Ibarra would most likely have stayed in her position in quality assurance.
However accidents do occur even with the most stringent practises in place. Knowing that something could have been done before a catastrophic incident only makes the matter worse after such an event occurs. One such tragic example is The Challenger incident where the engineers working on the Challenger were aware of an issue with the O-ring seals on the shuttle that exposed hot gases. Roger Boisjoly reported his concerns and even escalated to the vice president of engineering. The day before the launch Boisjoly and a team of engineers presented their concerns and recommended not to launch the shuttle there concerns were heightened due to the drop in temperature. There report was never communicated back to NASA officials with final authority to approve or delay the launch. Despite their efforts the shuttle launched and exploded in flight killing everyone on board (7). The chips manufactured by Hughes are also tested to ensure its functionality in extreme conditions. These tests are required as the chips at some stage are under the stress of severe weather and climate changes. These chips could have easily failed and resulted in loss of life for military personal and even civilians in proximity to the failed chips or the devices for which they were designed to function with such as missiles, tanks and other military equipment. It would appear that Goodearl and Ibarra’s motives were of a genuine moral obligation and I would believe that because of these motives if they had chose not to whistleblow they would have suffered a great deal more knowing that they could have been a contributing factor to preventing such a catastrophic event and possible found themselves on the other side of the court system.
The alternative extreme option that Goodearl and Ibarra chose was to actually whistleblow. After their attempts to get the incidents escalated and dealt the path they chose was a high risk option that was influenced by their natural ethical and sense of moral obligation. It was the lack of responsibility and actions from Hughes management that left Goodearl with no alternative but to escalate due to the seriousness and potential catastrophic outcomes. As the facts unfolded in this case the decision to whistleblow brought justice as Hughes were found guilty of fraudulent activity and they had settled the civil suit with Goodearl and Ibarra.
The operations at Hughes were subjected to investigations and procedures were under scrutiny in the legal battles. One would expect that procedural changes would be brought into effect that would ensure that failed and skipped tests could not be fraudulently allowed ship to customers.
Goodearl and Ibarra were brought through lengthy court trails (4 years) were their reputations were under constant scrutiny. Both were unemployed for lengthy periods and Goodearl and her husband filed for bankruptcy and eventually divorced and both experienced long term unemployment. Whistleblowers if they do not lose their job outright, they have probably lost all chances for future development within the organisation. Whistleblowers and their families typically suffer emotional and economic hardship (7).
The company endured 2 court cases a criminal case for fraud and a civil case against Goodearl and Ibarra.
It is evident that either extreme solution comes with extreme consequences for various parties. We now look at a middle ground solution and aim to provide a compromise to avoid the extreme eventualities. It is clear from the case study that the management style and culture of Hughes Microelectronics was a key factor in the decision making for Goodearl and Ibarra to eventually whistleblow. While the introduction of procedural and policies changes to ensure quality checks are adhered until management are able to buy into the procedures and have a structure in place to allow conflicts to be addressed and resolved the fraudulent activities could easily come into play. Upper management need to lead by example and support the lower management when difficulties arise and production is struggling. Procedural changes to ensure testing is complete and only signed off when successful could possibly be accomplished by use a computerised system where only the system can pass and print out official documentation. This could have made it more difficult for LaRue to modify accompanying paperwork distributed with orders. A computerised system could also provide historical audit trails for further review at any stage. This would have made the risk of detection to great to chance especially if the audit trails are open to the military for review.
The outcome with this solution should ensure only chips that have completed the contractual tests have official approved documentation associated with them. This would mean that all chips shipped would have approved documentation that validates the quality checks
Unfortunately it would appear that production lines may suffer and deadlines impacted. The production line appeared to be frantic and was struggling with the load even when bypassing procedure. Immense pressure was on the production line to meet deadlines and there is evidence that the production lines were running at optimal levels. It is conceivable that Hughes could have lost customers as a result of failure to meet demand and schedule.
The management structure at Hughes should all be interested in both the demand but also the importance of the quality checks after all it was a government contract and there strict agreements in place regarding the quality. They would have obviously preferred if Goodearl and Ibarra did not go public with the practices that were occurring at Hughes. It would have been in there interest for the production and quality checks to be in harmony with each other. The question needs to be asked again what was preventing this from happening. Was it purely profit driven that they could not hire additional staff, expand the operations or simply be honest with the customer and provide realistic expectations regarding timelines.
The solution that I would prefer would be the middle ground solution which suggest procedural and culture change within the organisation.
There are other non ethical variables that need to be taken into account such as why was the production line not able to meet the demand, these questions require business analyses and questions beyond the scope of the ethical issues here they do need to be answered such as staffing requirements, expansion of production lines, quality of work, stringency of tests as per the contract.
This solution from a moral obligation and ethical stand point in my view would be a solution that could be used by everyone in the company. The solution will ensure product fulfilment in conjunction with the agreed contract and in particular that quality checks are kept to a high standard and test are not skipped and reworked chips are authorised by QA or binned as required. The management divisions may not initially be happy with this solution but it does place the overall good of the customers, employees, public and the military personal operating with the chips on a daily basis.
The solution that we are suggesting is not material solution rather it is based on ideas that bring in the idea of the cultural change driven from the top of the organisation down to the middle management to supervisors to production and line testers. The cultural changes are required to ensure that procedural changes that are to be brought which are designed to handle internal conflict and provide a procedure that resolves internal issues to resolution. The solution does not treat people as a means to an end only rather it gives the people opportunity to resolve conflict within the organisation. The procedural changes are required to prevent fraudulent activity as chips that have failed or even skip tests should never acquire completed paperwork.
The current culture at Hughes resembles a philosophy that is considered to be at the 2 extremes of the naturalist philosophical view. The two extremes (excessive, deficient) in this
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