Solved: Ethical Culture, GM Case Study – General Motors Case study
Ethical Culture, GM Case Study
About 800, 000 of general motor’s cars had engine shut down due to failure of the ignition switches. It often occurred when the vehicles were in motion hence most accidents were caused resulting into several deaths. For years, general motors never discovered that the problem was with their ignition switches. A lot of funds were compensated for the deaths caused. Despite GM discovering the cause for the accidents caused were due to faulty ignition switches, the information was disclosed for about fifteen years. Research reveals that the cause for the information disclosure was dur to ethical lapse in the corporate company. It took more than a decade for the government to discover that more than 2.6 million cars got damaged and caused accident due to faulty ignition switches. There was liaise with the federal prosecutors to announce a fine of 900 million US dollars to end the criminal investigations. Besides, they were to adhere to some terms and conditions for the coming three years. There are main events that occurred during the recall
Key instances of the recall
In February 2002, Engineer Ray DeGiorgio who specialized in ignition switches designed an ignition switch. According to the quality assurance team the standards of the gadget did not meet GM’s specifications. However, the switch was later used in Saturn Ion and later in Chevrolet Cobalt despite it being identified that it was below the standards. The switch was then used in Saturn Sky, Chevrolet HHR, PontiacG5 and Solstice. In 20005 a Chevrolet Cobalt owner, Amber Rose, got involved in an accident and died. Investigations showed that the frontal crash resulted from faulty switches which changed positions from the run to accessory hence resulting into cut off power to the airbags, steering and brakes. It led to a fatal accident. To resolve the situation, Engineer Ray signed a redesign of the ignition switch but in his redesign the part number is not changed. It led to uncertainties as to whether the changes were made or not. The alleged redesigned switch was used in cars from 2007. In 2013 the National Highway Traffic Safety Administration (NHTSA) declined to open investigations as to why Cobalt and Ion did not have proper air bags regarding several accidents that occurred during that period. NHTSA claimed that GM concealed important information hence preventing them from going further with the investigations.
A new CEO, Mary Barra, discovered in 2013 that there was an issue with the ignition switches in GM. Around February 2013, GM recalled 1.6 million cars to repair spoiled ignition switches, the number later grew to 2.6 million cars. General Motors received a fine of $35 million by US government for failing to reveal the cause of the problem early enough. GM paid then fine and admitted to give a report on the government’s demands and its safety operations in good time. In June 2014, Barra released a report which were investigations conducted by prosecutor Anton. Barra stated that regarding the investigations, 15 employees were retrenched and five have undergone penalties due to their actions. The CEO agreed to compensate fund to victims who reported companies as from the first day of August. It was discovered that defective switches resulted into 275 injuries and 124 deaths and each victim’s family will be compensated at least 1 million dollars. The company had 625 million dollars for the compensation process.
General Motor’s actions towards the issue
General Motor’s issue on defective ignition switches not only costed the company a lot of money but also tarnished its name to the public. Since the issues were related to ethics and culture, the company decided to review and publish its ethical codes. All employees were required to read, sign and follow the ethical codes of conduct failure to which punishments will be applied. By GM resorting to admit they had faulty switches, they chose on the engineering code of ethics other than profitability. Regarding GM’s failure in culture and leadership, the code of ethics had to cover the entire stakeholders involed in the company’s operations from the junior most to senior most positions. Their code of ethics addressed issues on integrity and the company’s terms and values.
Among the code’s listed was the significance of speaking up in case there are corruption or misconduct issues. The company majors on safety, identification and resolving the problems encountered. Among the issues listed are accountability, conflict resolution, management of resources and reporting of misbehavior such as theft, violence and fraud. The speak up policy was meant to encourage the employees to report any misconduct they observe without fear of being harmed or retrenched. The company also resorted to improving vehicle safety. The employees had to understand the codes of ethics including the repercussions of committing crimes. They resorted that their first priority as a company will be safety.
Recommendations of possible solutions to GM’s problem
Studies show that ethics is controlled by culture. A large number of employees at GM decided to remain silent about the ignition switches which resulted to several deaths, this clearly shows that a company can have well laid out codes of ethics but no satisfiable integrity. It is not only enough to pass good laws regarding some policies in the company, but also important for employees to use their common sense and have a sense of humanity in them. Employees need to have good morals and the desire to do the right thing and be accountable. The leaders should be ready for any crisis and also be able to lead under the company under turbulence for the sake of positive transformation of the employees.
Corruption is secretive, culture change is gradual. Problem acceptance is an important way of solving ethical issues in an organization. Deploying other stakeholders to investigate the company’s problems also helps identify the issues. Valukas’ report regarding the switch issues in GM shows a problem of silence and concealment. After it was discovered that the switches designed by engineer ray has a lower torque spec. the engineer was under pressure to deliver a less costly ignition switch and culture encouraged this behavior. In conducting investigations, witnesses from top most executive positions also need to be spotted.
General Motors learned a lot of lessons from the ordeal, they realized that a lot of effort and resources should be geared towards ensuring that the environment is ethically heathy and that employees have the right morals. Leaders living on assumptions that their employees will always do the right thing can result into discovery of misconducts later after a damage is made. Organizational leaders need to know their organizational culture, this can only be identified through proper communication. When communication is functional from the junior employees and up through the senior, discovering a problem would be easier. There could be information that a lot of employees are aware of but the CEO has no idea about them. Such matters can only be addressed through constant communication through meetings and emails.
Employees also need to communicate any misconduct happening in the organization. A culture of integrity and honesty need to be nurtured in organizations. The only way this can be done is when the leaders do thorough inspection in the company and interact with employees at personal level. By creating a conducive environment and being approachable, knowing what is happening in the business will be made easier. After a mistake is identified, leaders should learn and adapt to the current situations of the organization. They ought to quickly notice possibilities and solutions to the crisis. They need to only expect trustworthiness if it is more inclined to viewing the positive side of the crisis.
It took about fifteen years for managers to release bad news about the faulty ignition switches in general motors. For the news to be out, the managers had to go back to history and understand how it all began. Emphasis of employees doing the right thing and being honest helps eliminate the chances of nurturing bad culture into the business environment. Organizations should concentrate more on their consumers safety other than profitability. They need not to wait until several cases are reported on the consequences of their actions for them to release their reports. Managers should be well prepared for tragedy and crisis and be able to survive through such atmosphere.
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