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Essay/Term paper: Ethics in business

Essay, term paper, research paper:  Economics

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Ethics in Business

From a business perspective, working under government contracts can be a
very lucrative proposition. In general, a stream of orders keep coming in,
revenue increases and the company grows in the aggregate. The obvious downfalls
to working in this manner is both higher quality expected as well as the
extensive research and documentation required for government contracts. If a
part fails to perform correctly it can cause minor glitches as well as problems
that can carry serious repercussions, such as in the National Semiconductor case.
When both the culpable component and company are found, the question arises of
how extensive these repercussions should be. Is the company as an entity liable
or do you look into individual employees within that company? From an ethical
perspective one would have to look at the mitigating factors of both the
employees and their superiors along with the role of others in the failure of
these components. Next you would have to analyze the final ruling from a
corporate perspective and then we must examine the macro issue of corporate
responsibility in order to attempt to find a resolution for cases like these.
The first mitigating factor involved in the National Semiconductor case
is the uncertainty, on the part of the employees, on the duties that they were
assigned. It is plausible that during the testing procedure, an employee couldnt
distinguish which parts they were to test under government standards and
commercial standards. In some cases they might have even been misinformed on the
final consumers of the products 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 employees
is fully excused, or is given some moral responsibility, would have to be looked
at on an individual basis.
The second mitigating factor is the duress or threats that an employee
might suffer if they do not follow through with their assignment. After the
bogus testing was completed in the National Semiconductor labs, the
documentation department also had to falsify documents stating that the parts
had surpassed the governmental 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 a superior. This was also the case when the
plant in Singapore refused to falsify the documents and were later falsified by
the employees at the have California plant before being submitted to the
approval committees (Velazquez, 53). 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 arent 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 employment
would go into jeopardy. Although working under these conditions does not fully
excuse an employees from moral fault, it does start the divulging process for
determining the order of the chain of command of superiors and it helps to
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 National Semiconductor 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 a direct duty 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 incompetence on the part of the testing department. For example, the
electrical engineer that designed the defective computer chip could act in good
faith that it would be tested to ensure that it did indeed meet the required
government endurance tests. Also, for the employees that handled the part after
the testing process, they were dealing with what they believed to be a component
that met every governmental standard. If it was not tested properly, and did
eventually fail, isnt the testing department more morally responsible than the
designer or the assembly line worker that was in charge of installing the chip?
Plus, in large corporations there may be several testing departments and is some
cases one may be held more responsible than another depending on their
involvement. A process like this can serve the dual purpose of finding
irresponsible employees as well as those that are morally excused.
The fourth mitigating factor in cases of this nature is the gauging of
the seriousness of the fault or error caused by this product. Since National
Semiconductor was repeatedly being reinstated to the listed of approved
government contractors, one can safely assume that the level of seriousness, in
the opinion of For the contractor approval committees, is not of monumental
importance. Yet one has to wonder how this case would have been different if the
lack of testing did cause the loss of life in either a domestic or foreign
military setting. Perhaps the repercussions would have come faster much more
stringent. The fact that National Semiconductor did not cause a death does not
make them a safe company. They are still to be held responsible for any errors
that their products cause, no matter the magnitude.
As for the opposition to the delegating of moral responsibility,
mitigating factors and excusing factors, they would argue that the entity of 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
into a public forum. 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, the 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 National
Semiconductor case was along these lines. The government permanently removed
National from its approved contractors list and then National set out to
untangle the web of culpability within its own confines. This allowed a
relatively quick resolution as well as the ideal scenario for National
In response, one could argue that the entity of a corporation has no
morals or even a concept of the word, it is only as moral and ethical as the
employees that work in that entity. All of the employees, including top ranking
executives are working towards advancing the entity known as their corporation
(Capitman, 117). All employees, including the sub-contractors and assembly line
workers, are in some part morally responsible because they should have been
clear on their employment duties and they all should have been aware of which
parts were intended for government use. Ambiguity is not an excusing factor of
moral responsibility for 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 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 National Semiconductor were banned from future work in any
government office (Velazquez, 54).
Looking at the case from the standpoint of National Semiconductor, the
outcome was favorable considering the alternate steps that the government could
taken. As explained before, it is ideal for a company to be able to conduct its
own investigation as well as its own punishments. After all, it would be best
for a company to determine what specific departments are responsible rather than
having a court of law impose a burden on every employee in its corporation. Yet,
since there are ethical issues of dishonesty and secrecy involved, National
Semiconductor should have conducted a thorough analysis of their employees as
well as their own practices. It is through efforts like these that a corporation
can raise the ethical standard of everyone in their 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 affect society in
way or another. In fact, with the plethora of corporations, society is being
affected on various fronts; everything from water contamination to air bag
safety is a concern. The biggest problem that all of us must contend with is
that every decision that a business makes is gauged by the financial
responsibility to their corporation instead of their social responsibility to
the local community, and in some cases, the international community. This was
pointed out on various occasions as the main reason why National Semiconductor
falsified their reports. The cost that the full tests would incur did not
outweigh their profit margins. Their business sense lead them to do what all
companies want . . . maximum profit. In the opinion of the executives, they were
acting in a sensible manner. After all, no executive wants to think of
themselves as morally irresponsible. (Capitman, 118).
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 National Semiconductor case, one can notice many failures in
moral responsibility. National Semiconductor would have to review its employees,
particularly the supervisors, for basic ethical values such as honesty. example,
ultimately it was the widespread falsification of the testing documentation that
caused the downfall of National Semiconductor, not the integrity of their
components. In the synopsis 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. In order to accomplish this, the company
executives would have to encourage their employees to voice their concerns in
regards to the advancement of the company. 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
from the government 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 society.
To conclude, I must say that 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 in that entity. 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 equates to moral perfection.
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. There needs to be a shift to the thinking of total utility for
the social community in order to weigh business decisions.
Opponents would argue that this is a long term plan that require too
many radical changes in the face of business. Also, there is no way that an
industry wide standard can be set since there are too many types of corporations.
Plus, companies have different needs and every moral rule is subjective
according to the type of business that everyone conducts.
In response, I would argue that although there are no industry standards
that are feasible, it is possible for every company to examine their practices
as well as the attitude of their employees. There will be companies that find
that they are doing fine with employees that 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 start implementing changes. Once a few companies start
to see the benefits of changes, it can help to encourage other companies to
follow suit. After all, as seen in the case of National Semiconductor, mistakes
in one department can cause the deterioration of an entire corporation. When the
costs that are possible are taken into account, the changes required to rectify
this are small in comparison.


Capitman, William. 1973. Panic In the Boardroom. New York:
Anchor Press-DoubleDay Publishing

Harris, Kathryn, Chips Maker Feels Attack on Four Sides Los Angeles Times
April 4, 1982. Pg. B1

Pava, Moses. 1995. Corporate Responsibility and Financial Performance. London
Quorum Books

Reder, Alan. 1944. In Pursuit of Principle and Profit. New York:
G.P. Putnams Sons Publishing

Sawyer, George. 1979. Business and Society: Managing Corporate Social Impact.
Houghton Mifflin Publishing

Schuyten, Peter. To Clone A Computer. New York Times
February 4, 1979. Pg. 1

Velazquez, Manuel. 1992. Business Ethics: Concepts and Cases. New Jersey
Prentice Hall Publishing

Please send feedback on this paper to: dsalguer@gwis2.circ.gwu.edu


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