Case Study
IN
Business
Ethics
Submitted By: Nipay,Maclawren T.
Submitted To: Sir.Jp Receno
Controversy
There has been a 25 year fuel economy scandal uncovered in this past April. Mitsubishi was
caught lying on multiple occasions regarding how many miles to the gallon that their vehicles
can maintain. In 1991 Japan placed new regulations, which further restricted how the country
monitored the mpg of their country's vehicles. At the time of the proposals, they were only under
investigation with two main models; the eK and the Dayz. Under new research, it is now
confirmed that there are eight models under investigation, and they have since been raided by
what would be the Japanese Transport Administration. Some of the major models that are being
questioned are the Pajero, the RVR SUV, and the well known Outlander. Mitsubishi Motors is
now being forced under federal law to cease all production of all eight models until proper
numbers relating to fuel-economy can be released. The JTA quotes that "we want to thoroughly
investigate the circumstances that led to this situation," and they found that all efficiency
numbers were understated by 4.2%-8.8%. They also uncovered that Mitsubishi was only
making estimates of their numbers based on old tests, and not physically running updated tests
for recently produced vehicles.
The controversy arose when Nissan, a partner company, found out about the false numbers.
Centering around the fact that Nissan works on multiple projects with the fraudulent company,
and actually has them manufacture the Dayz model for them, they did not want to be linked to
the charges. They cut off all ties with the company until they saw a business opportunity. As a
result of the scandal, Mitsubishi Motors' market share tumbled along with their revenues. This
meant that in order to stay in business, they needed an influx of investments. Nissan hopped on
this chance, and purchased a controlling stake in the company for $2.2 Billion. This will
hopefully create a large change for Mitsu, being under a new board. Nissan wasn't the only
partner company effected by the false data though. Toyota also has ties to the company, and
refuses to do business in the future. It will take years to come to bounce back from the scandal,
and Mitsubishi's now resigned president stated he "was truly embarrassed."
Stakeholders
Unfortunately with any scandal, more than just one entity is effected. Their vehicles were sold
worldwide, and many people took hits. Mitsubishi had to lay off several employees due to their
cuts in revenue streams, so upper and lower level employees were stakeholders. Any partner
companies like Toyota and Nissan who conducted business would also be effected from the halt
in production. Joined by consumers in any country that sells any of the eight models with
fraudulent data. If you purchased one of those vehicles, there was a very good chance the
appealing fuel economy was one of the reasons you turned to it. Members of the Japanese
Transport Authority are also included because they have to take time to investigate a large
company as soon as possible. Lastly, the Japanese government becomes a stakeholder,
because they now have to again create new legislation to prevent future events from occurring.
Dayz model by Nissan
produced by Mitsubishi
Individualism
Individualism focuses on the concept of making profits within the law. As Friedman explains, the
only obligation that the business person has is to maximize profit for the owner or stockholders.
The decision in 1991 to falsify data would, for the next twenty five years, make the company
seem individualistic. The problem is that they directly went outside the law to make profits
possible. Machan's individualistic approach follows the same concept, but explains that indirect
goals must be met as well, those of which do not directly link to profits. Mitsubishi had indirect
goals of meeting the standards of Nissan and Toyota, and doing so within Japan's Law. They
were individualistic in the sense that the company put profits before all, but cannot be classified
as this because of their unlawful decisions. If the company chose to place an irrational profit
margin on their vehicles, this would still be unfair to their customers, but not illegal. A decision
like this would fall in the lines of Individualism. Unfortunately, directly ignoring regulations was
the choice former president Tetsuro Aikawa made for Mitsubishi. They felt that their numbers
were not up to par to compete with the competitive market and they saw an opportunity to make
more profits. Exactly what the stockholders want as investors, but the wrong means of doing so.
Although they were happy, many stakeholders were affected as a result, and in the end
Mitsubishi paid up for it by almost having to close their doors entirely. With a cost of $1.4 Billion
in fines to counteract regulation violations, it will be tough to recover fiscally. Trust is needed for
any company to succeed, and all trust is lost from consumers when lying about figures,
especially fuel economy. Safety and efficiency are two areas where you must be honest, and
Mitsubishi's desire for positive profits made them almost individualistic, but not quite.
Utilitarianism
John Stuart Mill's idea of utilitarianism takes a stakeholder approach, and is focused on the
consequences of the business action. This action's main goal should be to maximize happiness
in the long-run for all conscious beings affected. He also touches on the idea that happiness is a
valuable thing, and that there is no difference morally, between one beings happiness to
another. There are two viewpoints to how Mitsubishi could be looked at from a utilitarian
perspective. Many stakeholders, especially the consumers who bought vehicles like the eK and
Dayz, were affected in a negative way but only after a twenty five year period. The line is drawn
depending how you look at the term long-run. If you describe this within the confines of a twenty
five year period, then you could almost consider their actions to be utilitarian. Happiness
becomes the only thing matters, and for this extensive amount of time, every stakeholder in the
picture was, in fact, happy. Even though the figures were falsified and outside the law, strong
profits were being reported along with satisfied customers. The consumer believed they were
purchasing a good reliable vehicle, and they essentially never had issues with their cars other
than having to refill the gas tank slightly sooner. This changes if you determine that the "long-
run" should be a hundred years, or even hundreds or years. This would make their unethical
choices result in very unhappy consumers in a short period of time. Happiness is pleasure and
freedom from pain and the consumers, along with many employees of the company, were not
pleased when the news was reported. Once the Japanese Transport Administration raided the
company, the idea of a utilitarian organization was kicked down along with the front door. The
intrinsic value is completely centered on happiness, and because of this it makes is difficult to
make a finite verdict on if the company acted in a utilitarian way. They did aim to keep everyone
happy, and did for quite some time. If you asked around 1995, most people would agree that
they were completely utilitarian, but fast forward to 2016, and there's an entirely different
picture.
