UNIVERSITY OF LA VERNE
FEBURARY 12, 1997
BY DOUG RONING
From a business perspective, working under government contracts can be
very lucrative. In general, a steady stream of orders keep coming in, revenue
increases and the company continues to grow. There are a few obvious downfalls
to working with government contracts; a higher quality is to be expected as well
as extensive research accompanied by accurate and complete documentation are
usually required. If one part of the process fails to perform correctly it can
cause minor flaws as well a problems that can carry some serious repercussions;
For example the case of the failed computer chip at Company X. When both the
employee and company are found at fault, the question arises of how extensive
should the repercussions be? Is the company as a whole liable or do you look
into individual employees within that company? From an ethical perspective one
would have to look at the available information of both the employees and their
superiors along with the role of others in the situation. Next you would have
to analyze the final outcome from a corporate perspective and then examine the
corporate responsibility as a whole in order to find a resolution for cases such
The first mitigating factor involved in the Company X case is the
uncertainty, on the part of the employees, on their duties that they were
assigned. It is possible that during the testing procedure, an employee
couldn’t distinguish between the parts they were to test under government
standards and commercial standards. In some cases they might have even been
misinformed on the final product that they tested. In fact, ignorance on the
part of the employees would fully excuse them from any moral responsibility for
any damage that may result from their work. Whether it is decided that an
employee is fully excused, or is given some moral responsibility, would have to
be looked at on an individual basis.
The second mitigating factor is one of threats that an employee might
suffer if they do not follow through with their assignment. After the bogus
testing was completed in the Company X labs, the documentation department also
had to falsify documents stating that the parts had more than met the
governments testing standards. From a legal and ethical standpoint, both the
testers and the writers of the reports were merely acting as agents on direct
orders from upper management. The writers of the reports were well aware of the
situation yet they acted in this manner on the instruction of a supervisor.
Acting in an ethical manner becomes a secondary priority in this type of
environment. As stated by Alan Reder, if they the employees feel they will
suffer retribution, if they report a problem, they aren’t too likely to open
their mouths. (113). The workers knew that if the reports were not falsified
they would come under questioning and perhaps their job would be in jeopardy.
Although working under these conditions does not fully excuse an employee from
moral fault, it does give a starting point to help narrow down the person or
department that issued the original request for the unethical acts.
The third mitigating factor is one that perhaps encompasses the majority
of the employees in the Company X case. We have to balance the direct
involvement that each employee had with the defective parts. Thus, it has to be
made clear that many of the employees did not have direct involvement with the
testing departments or with the parts that eventually failed. Even employees,
or sub-contractors that were directly involved with the production were not
aware of the ignorance on the part of the testing department. For example, the
electrical engineer that designed the defective computer chip could have stated
that it was tested and it did indeed meet the required government tests. Also,
for the employees that handled the part after the testing process, they were
dealing with what they believed to be a piece of equipment that met government
standards. If the part was not tested properly, and did eventually fail, isn’t
the testing department more morally responsible than the designer or the
assembly line worker that was in charge of installing the chip? In large
corporations there may be several testing departments and in some cases one may
be held more responsible than another depending on their involvement. A process
like this can serve as a dual purpose for finding irresponsible employees as
well as those that are morally excused.
The fourth mitigating factor in cases of this nature is the measure of
the seriousness of the fault or error caused by the product. Since Company X
was repeatedly being added to the list of approved government contractors, one
can safely assume that the level of seriousness, in the opinion of the
contractor approval committees, is not of monumental importance. Yet a person
has to wonder how this case would have been different if it caused the loss of
life in a military setting. Perhaps the repercussions would have taken effect
much faster and been more stringent. The fact that Company X did not cause a
death does not make them a safe company. They are still to be held responsible
for any errors for which their products cause, no matter the extent.
As for the opposition to the delegating of moral responsibility,
mitigating factors and excusing factors, most would argue that the corporation
as a whole should be held responsible. The executives within a corporation
should not be forced to bring out all of the employees responsible. A company
should be reprimanded and be left alone to carry out its own internal
investigation and repercussions. From a business law perspective this is the
ideal case since a corporation is defined as being a separate legal entity.
Furthermore, opposition would argue that this resolution would benefit both the
company and the government since it would not inconvenience either party. The
original resolution in the Company X case was along these lines. The government
permanently removed Company X from its approved contractors list and then
Company X set out to untangle the web of wrongdoing from within. This allowed
for a relatively quick resolution as well as an ideal scenario for Company X.
In response, one could argue that the whole corporation has no morals or
even a concept of the word. A corporation is only as moral and ethical as the
employees that work for it. All employees, including top ranking executives are
working towards the advancement of the company as a whole. All employees,
including the sub-contractors and assembly line workers, are in some part
morally responsible. Every employee should have been clear on their employment
duties and aware of which parts were intended for government use. Uncertainty
is not an excuse for moral responsibility in the case of the workers. Also, the
fact that some employees failed to act in an ethical manner gives even more
moral responsibility to that employee. While some are definitely more morally
responsible than others, every employee has to carry some burden of weight in
this case. In fact, when the government reached a final resolution, they
decided to further impose repercussions and certain employees of Company X were
banned from future work in any government office (Velazquez, 54).
Looking at the case from the standpoint of Company X, the outcome was
favorable considering alternate steps in which the government could have taken.
As explained before, it is ideal for a company to be able to conduct its own
investigation as well as it’s own punishment. After all, it would be best for a
company to determine what specific departments are responsible rather than
having a court of law trying to decide which employee is to be blamed. Yet,
since there were ethical issues of dishonesty and secrecy involved, Company X
should have conducted a thorough analysis of their employees as well as their
own practices. It is through such efforts that a corporation can raise the
ethical standard of everyone in the organization.
This case brings into light the whole issue of corporate responsibility.
The two sides that must ultimately be balanced are the self interests of the
company, with main goal of maximum profit, and the impacts that a corporation
can cause on society (Sawyer, 78). To further strengthen this need, one could
argue that there are very few business decisions that do not have an affect on
society in one way or another. In fact, with the vast number of growing
corporations, society is being affected on various fronts; everything from water
contamination to air bag safety is becoming a major concern. Every decision
that a business makes is gauged by the financial responsibility to their
corporation instead of their social responsibility to the local community. This
was pointed out on various occasions as the main reason why Company X falsified
their reports. The cost of reingineering of the defective part did not outweigh
the loss of business. In the opinion of the executives, they were acting in a
sensible manner. After all, no executive wants to think of themselves as
The question that naturally arises, in debating corporate responsibility,
is what types of checks and balances can be employed within a company to ensure
that a corporation and all of its agents act in an ethical manner. Taking the
example of the Company X case, one can notice many failures in moral
responsibility. Company X would have to review its employees, particularly the
supervisors, for basic ethical values such as honesty. For example, ultimately
it was the widespread falsification of the testing documentation that caused the
downfall of Company X, not the integrity of it’s imployees. In the outline of
the case it is never mentioned that the employees initiated this idea, it would
seem that it was the supervisors that gave the order to falsify the documents.
Through open communication, a company can resolve a variety of its ethical
dilemmas. As for the financial aspects of the corporation, it has to decide
whether the long term effects that a reprimand can have outweighs their bottom
line. In other words, corporations have to start moving away from the thought
of instant profit and start realizing both the long term effects and benefits.
These long term benefits can include a stronger sense of ethics in the work
force as well as a better overall example to society.
In conclusion, I agree with the use of mitigating factors in determining
moral responsibility. A company, as defined by law, is only a name on a piece
of paper. The company acts and conducts itself according to the employees that
work for it. I use the word employee because in ethical thinking there should
be no distinction of rank within a company. There are times when executives can
be held directly responsible and at the same time, there are cases where
employees are acting unethically without the executives knowing. Neither title
of executive or employee are always morally perfect. Therefore, when a company
has acted irresponsibly, its employees must be held liable in a proportionate
amount. As for the future of ethics in business I would speculate that if
employees started to think more in long term benefits and profits, many of the
ethical dilemmas that we face today would be greatly reduced. As mentioned
before, businesses today uses the measuring stick of profitability. We need to
stress the importance of placing ethical weight on all major business decisions.
Opponents would argue that this is a long term plan that require too
many radical changes. Also, there is no way that an industry wide standard can
be set due to the vast differences in corporations.
In response, I would argue that although there are no industry standards
that are feasible, but it is possible for every company to examine their
practices as well as the attitudes of their employees. There will be a number
of companies that will defend that are doing all they can to make sure their
employees are aware of their moral values. Yet other companies will find that
they do have areas that need improvement. It is steps like these that spark
change in an organization. Once a few companies start to see the benefits, it
can help to encourage other companies to follow suit. After all, as seen in the
case of Company X, mistakes in one department can cause the deterioration of an
entire corporation. When a corporation realizes the costs involved with
decisions such as this, the changes required to rectify are small in comparison.
Pava, Moses. Corporate Responsibility and Financial Performance.
Quorum Books, March 1995.
Reder, Alan. In Pursuit of Principle and Profit.
G.P. Putnams Sons Publishing, 1995.
Sawyer, George. Business and Society: Managing Corporate Social Impact.
Houghton Mifflin Publishing, Feburary 1993.
Velazquez, Manuel. Business Ethics: Concepts and Cases.