Ethical considerations sometimes get pushed aside when an organization’s managers makes decisions based purely on a cost-benefit analysis. In such instances, the bottom line may ultimately suffer, anyway. Why? If legal lines get blurred as the ethics fade away, lawsuits could spring up, costing much, much more in the long run. If you are concerned about ethical failures with regard to the policies that govern standard operating procedures at a local corporation, an experienced business attorney may be able to help.

Lapse of Ethics – Enron and Ford

Companies large and small are not immune to these hiatuses from sound judgment. Unfortunately, consumers often have to pay a high price before these businesses are reined in.

Enron

When the Securities and Exchange Commission investigated Enron for questionable bookkeeping practices, it was discovered that high-level executives were doctoring the books to hide losses and liabilities from stockholders. The company was eventually bankrupted, and key leaders of the corporation were tried on multiple counts of money laundering, bank fraud, conspiracy, and insider trading. Convictions ranging from 25-45 years were handed down to Kenneth Lay, Jeffrey Skilling, Andrew Fastow, and other key administrators.

Ford

Another example involves Ford’s efforts to break into the small car market in the 1970s. When the company’s crash data on the Pinto car revealed dangers associated with rupturing fuel tanks during rear-end collisions, Ford managers had to decide whether to address the problem or to go forward with production. The decision was made to proceed. The business thinking was methodical and completely void of ethical considerations; the costs associated with redesigning the vehicle exceeded projected costs associated with potential lawsuits down the road. That decision resulted in 900 injuries and dozens of deaths when fiery crashes occurred on roadways across the country.

The fallout for Ford was massive. 1.5 million Pintos were recalled, and Ford paid a legion of lawyers to defend them in court. After fighting criminal charges and numerous civil cases, Ford far outspent the $137 million it would have cost them to fix the car before releasing it to the public. In fact, just one California jury awarded a $128 million verdict. Many other cases were settled for undisclosed amounts, but it can be surmised that the decision to put the Pinto on the road cost Ford a pretty penny. Beyond that, Ford’s reputation was crushed.

What Constitutes an Ethical Issue?

When a lack of ethics leads to decisions that cause serious harm to the public, legal proceedings may ensue. In public service, the primary violation relates to bribery, and is punishable by two to four years in prison. [Read more…]