Measuring Our Worth Business Ethics

Business Ethics

The Pinto gas tank vulnerability situation in the 1960s and 1970s was an embarrassment for the Ford Motor Company but moreover, it was a defining moment in a corporate decision-making process that was highly unethical and hence, in hindsight, repugnant to the American public.

If I was deciding whether to have a recall of the Pinto or settle the cases, which one would I choose?

Certainly it seems easy in hindsight to choose the moral, ethical thing to do (recall all the vehicles to save lives and avoid injuries to passengers), but that is exactly what I would choose to do. As the Decision Point narrative points out: "…health and safety" have a value over and above the value of replacing a part on a car that is unsafe.

It brings to mind the well-known advertisement for Master Card -- "There are some things money can't buy." The advertisement lists several things that have a certain dollar value and then at the end of the pitch, there is always something that is "priceless." One could say that the value of a gallon of gas (in 1972) was $.40; a dozen eggs was $.52; a part for a fragile Pinto gas tank was $11 -- and the cost of a human life -- Priceless!

Looking back at the decision-making process at the Ford Motor Company, Lee Iacocca was the head of Ford and he was worried about losing market share to several small car manufacturers like the imported Volkswagen -- and AMC's Gremlin, the Dodge Colt from Chrysler Corporation, the Chevrolet Vega and the Plymouth Cricket. The literature on the production of the Pinto shows that Iacocca really was urgently trying to get the Ford version of a compact car on the road.

So the president of Ford made the decision to pay the injury and death-related costs (or out-of-court costs) based on an estimated 180 burn deaths, 180 serious burn injuries, 2,100 vehicles that were totally destroyed by fire. I would have recalled the Pinto and replaced the part that was causing fires, injuries, and deaths.

What influence does the value of my stakeholders have upon your decision? There are many stakeholders involved in this matter. First of all, consumers who buy the Pinto are stakeholders and there should be nothing more important to a manufacturer than to sell a car to an individual and know that it is a safe car and that the driver / buyer isn't in jeopardy of being injured or killed when driving the car. The Board of Directors of Ford Motor Company was also stakeholders at the time and they should have been of great concern; the reputation of the company in terms of future financial success should have been of vital concern. The shareholders who invested in Ford Motor Company should also have been taken into consideration. All these stakeholders would have been given great consideration if I were making the decision.

What would have been the financial impact of my decision? It would have cost the company an estimated $121 million to recall all the Pintos and replace the $11.00 part, but a company that sold over 3.5 million cars could easily have made up the difference. In any event, a high-visibility corporation that bases its success on a good public image should not worry about the temporary embarrassment of recalling cars. The public understands and if a part needed to be replace in order for passengers to be safe from harm, and then the cost should be of secondary concern.