1. If you were deciding whether to engage in the recall or settle the cases in which injury occurred, which would you choose? Why?
2. What influence does the value of your stakeholders have upon your decision?
3. What sort of financial impact will your decision have upon the company?
4. How do you account for the intrinsic and instrumental value of human life?
The question at the end of the case study does not need to be answer, unless it is part of your response.
The Case Study should be thoroughly discussed in a minimum two-page paper (double spaced) based upon your readings. Any outside sources used to support your statements should be appropriately cited.
Measuring Our Worth
How do we measure the intrinsic value of a life, in addition to the instrumental value? Though perhaps an interesting mental exercise in which to engage, it is also a critical component of some business decisions and dilemmas. The following decision, though decades old, continues to teach us the hazards of considering only the instrumental value of a life. Though the instrumental calculation seems to make sense, and presumably it did at the time to those involved, you will see in hindsight that the "human element" seems to be missing. In 1968, Ford Motor Company made a historic decision regarding the Ford Pinto, which was engineered with a rear gas tank assembly that had a tendency to explode in accidents that involved some rear-end collisions. The company allowed the Pinto to remain on the market after it determined that it would be more costly to engage in a recall effort than to pay out the costs of liability for injuries and deaths incurred. In an infamous memo, Ford's senior management calculated what the company would likely have to pay per life lost. It is noteworthy that these estimates were not Ford's alone but were based instead on figures from the National Highway Traffic Safety Administration.
Expected Costs of Producing the Pinto with Fuel Tank Modifications:
- Expected unit sales: 11 million vehicles (includes utility vehicles built on same chassis)
- Modification costs per unit: $11
- Total Cost: $121 million [11 million vehicles $11 per unit]
Expected Costs of Producing the Pinto without Fuel Tank Modifications:
- Expected accident results (assuming 2,100 accidents):
180 burn deaths
180 serious burn injuries
2,100 burned out vehicles
- Unit costs of accident results (assuming out of court settlements):
$200,000 per burn death
$67,000 per serious injury
$700 per burned out vehicle
- Total Costs: $49.53 million [ = (180 deaths x $200k) + (180 injuries x $67k) + (2,100 vehicles x $700 per vehicle)]
Using the figures above, the costs for recalling and modifying the Pinto were $121 million, while the costs for settling cases in which injuries were expected to occur would reach only $50 million. If you were responsible for deciding whether to engage in the recall, how would you conduct the decision-making process? How would you account for the intrinsic as well as the instrumental value of a human life? Returning to the question that opened this Decision Point, consider how you would measure your own worth or the value of someone close to you. Who are your stakeholders and what is your value to each of them? How will you measure it financially? Would any of the following questions offer you a guidepost?
- How much would your stakeholders suffer if they lost you?
- How much do you currently contribute to society and what would society lose if you were not here?
- How much would society benefit if you continued to survive?
Businesses have reasons to consider these issues, though extraordinarily difficult; how would you prefer that they reach conclusions in these areas?
Please see attached file for the solution.
Here are my thoughts and research:
Christopher Leggett (1999) asks some important questions: Just because it is legal is it ethical? Can a price tag be put on a human life? Ford believed that legally within their economic theory that weighs monetary value against social value, a price can be put on a human life. However, Pirson and Deepak (2008) contend that even beyond honesty and integrity, stakeholders feel that organizations need to demonstrate that they care more about the well-being of an individual. The human element was missing in Ford's decision to weigh monetary value against social value. Was this ethical? Ford believed that it would be less costly to allow a certain number of people to suffer injuries and/or die based on their risk/benefit analysis, an analysis encouraged and condoned by the National Highway Traffic Safety Administration (NHTSA) (Leggett, 1999).
There are some factors that should influence companies like the Ford Motor company when making decisions to rely on risk/benefit analysis, especially when dealing with ...
The business ethics for measuring our worth is provided.