Business Ethics: An Ethical Issue



1. The ethical issue presented in the case above is utilitarianism (Consequentialism) where the morality of the ethical concern is judged based on the action that impacts the greatest good for the great number. The moral choice is dictated by facts and effects instead of absolute rules. The main focus in this case is cost-benefit analysis. Paid pledges are just a third of the accrued benefits.
2. a). Kotchian decision to pay the stated amount was weighed with the benefits of the gain and that workers will have jobs to benefit their dependents and corporate stakeholders. The company itself could benefit from the expected sum of $430 million that could have been received from ANA for selling the 21 TriStars. This would increase sales and attract more customers. Lockheed employees will benefit from the decision as they will get jobs and in such case help their dependents as well as their communities (Carroll & Buchholtz, 2014).
b). There was a meeting with Japanese president with Nixon to balance trade agreements between America and the country. In any case that Kotchian had failed to honor the pledge to the prime minister, then no trading could have gone on between America and Japan. The suppliers from Japan benefited as business ties will be established. All Nippon received $400,000 and could still buy more planes from Lockheed. So Japan and All Nippon are other stakeholders who benefited from the decision.
c). Over the previous years, Lockheed had failed to get contracts with Boeing among other airlines in America and Europe. Lockheed could not compete with Boeing due to the considerable cost overruns brought up by producing the C5A Galaxie transport plane. Kotchian’s decision made more profit for Lockheed and hence put the company in a position to rival Boeing. The Boeing shareholders would also be affected since it could have less sales from the lost market share as what they used to receive has been diverted to the revived Lockheed Company. All Nippon Airways in Japan could also pose a threat to Boeing that could see the latter pay low wages to minimize expenditure and maximize profits (Carroll & Buchholtz, 2014).
d). European airlines who could not contract with Lockheed lost much to the Japanese All Nippon Airways which meant that Japan could trade more with America compared to Europe. The Japanese government was also harmed as the money paid by Kotchian was not taxable due to the fact that it was given out as bribes to the prime minister’s office, the Airline’s office and to politicians (Carroll & Buchholtz, 2014).
3. Utilitarian would just say that the act of bribing to have the deal done and the keeping of promises is not intrinsically right or wrong but rather is based on the resulting non-moral good. The bribing act is a clear immorality but has been justified as moral. It was done to produce maximization of results and the parties involved honored their pledges. The greatest number (Lockheed and its employees) benefited from the decision regardless of how immoral it was (Carroll & Buchholtz, 2014). From the deontological perspective, they will argue that duty should be done for duty’s sake and the consequences should not gauge the righteousness of an act. The revival of the Lockheed Company laid on the shoulders of Kotchian. The consequences of the deal are relevant in assessing the decision impacts. Kotchian had a duty not to break promises/pledges. Despite the decision benefiting a larger number (positive consequences), the act of bribing still remains immoral. Consequences are not what make something our duty.
4. Okubo, a representative of the Marubeni Corporation was hired by Kotchian to help Lockheed gain access to the decision makers at All Nippon. Contractors under the agency law act in the interests of the principal but not in the interests of the agent. Kotchian had no legal duty to make the offer that was demanded for him. Indeed it was a contract law rather than a bribe. Kotchian decision to give what was requested was a unilateral contract. The contract was executory until Kotchian payed the Prime minister the agreed sum of money now when the contract became executed. Express contract was made orally between the parties. Under statute of frauds, contracts are not considered when public policy is broken. In this case no rule or policy was broken. The goods being sold were specially manufactured and all parties perform their pledges. Duties were discharged when every party did their part as promised. Utilitarian calculations needed to be done to save Lockheed from Bankruptcy. All possible short and long term consequences ought to be considered (Carroll & Buchholtz, 2014). Paying whatever was proposed was the best course of action I believe could have been the best ethical response to the issue. Kotchian did not discuss any monetary issues with the beneficiaries of his contributions and he just followed the functioning system to get the chance of winning his product on their own merits.
5. The primary stakeholders in this case are the government, Lockheed, employees and shareholders. Customers, competitors and suppliers are the secondary stakeholders. When Lockheed was granted guarantee a $250 million loan by the government, it generated a moral hazard where other large companies will risk hoping that the government will bail them out. However, when people are employed, it saves the government the cost of paying unemployment benefits. Kotchian’s decision strengthened the business and it could avoid bankruptcy. Fewer employees will be laid off, same case to suppliers and their employees too. More production, more business and more job stability. Competitors will lose a market share to Lockheed and employees from the competitors’ site may receive lower wages (Carroll & Buchholtz, 2014).

Carroll, A. B., & Buchholtz, A. K. (2014). Business and society: Ethics, sustainability, and stakeholder management. Nelson Education.

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