Tuesday, April 1, 2014

Business ethics

CEO Barra calls GM's actions on deadly defect 'unacceptable'
Lawmakers are investigating why GM and regulators missed or ignored numerous red flags that faulty ignition switches could unexpectedly turn off engines during operation and leave airbags, power steering and power brakes inoperable.
 So, I wonder how long this investigation will go on.  It's simple, really.  It's the same thing that Ford (F) did with the Pinto years ago.  They did a cost/benefit analysis.  And not surprisingly, the cost of the fix, even if small, was more than the value put on human life.  Of course, it isn't really the value of human life, but rather the expected cost of not fixing the issue that is considered.
Under intense grilling by lawmakers, Barra said she found employee statements "disturbing" that cost considerations may have discouraged the prompt replacement of faulty ignition switches now linked to at least 13 fatalities and the recall of 2.6 million vehicles.
Bingo.  But is it really "disturbing?"  I don't think so.  This type of decision-making has been going on for as long as business has been done.  I'm not surprised, nor am I disturbed.  I suppose that this is why I'm not the CEO of a multi-billion dollar corporation.  I have too much trouble feigning surprise.

But, on the other side of the argument is this:
House Energy and Commerce Committee Chairman Fred Upton, a Republican, told Barra: "With a two-ton piece of high-velocity machinery, there is zero margin for error; product safety is a life or death issue. But sadly, vehicle safety has fallen short."
But drivers' recognition of vehicle safety has fallen short as well.  Or perhaps a better way to put it is that drivers don't tend to recognize how unsafe the very act of driving is.  Most people don't really think of driving a "two-ton piece of high-velocity machinery" as being anything like that.  Drivers these days seem to assume safety.  And when it isn't so, they are shocked and appalled.  Driving is dangerous, and no amount of effort on the part of automakers is going to change that.  The "safer" cars become, the faster everyone drives and the more aggressive drivers become.

Still, for this type of problem, GM (GM) should certainly be held accountable for their action, or inaction as it were.  But I'm pretty sure this was already considered in the cost/benefit analysis, and in the end, the result will be more of the same in the future.  Because, consumers will do their own cost/benefit analysis, even if subconsciously, and decide that the perfectly safe vehicle is not worth the cost.  Just like they made the same decision with seat belts when seat belts were a new thing.

While I usually reserve this type of commentary for my other blog, I chose to comment here because it is directly relevant to the ethics of business and finance, of which, despite what professional associations would lead us to believe, there are none.  Well, except for my ethics, of course.