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Business Ethics and Consequentialism

Case: The Case of the Sole Remaining Supplier

The heart pacemaker is a modern wonder. The device has a timer that resets itself every time the patient's heart beats. If the heart does not beat on schedule (say, within 1.2 seconds), the pacemaker gives a stimulus that causes a heartbeat.

But the technology was not always so sophisticated, and its early limitations form the background of this true story, told to Markkula Center for Applied Ethics Director Thomas Shanks, S.J., by one of the participants. Although the events happened 20 years ago, the ethical issues they raise are still relevant.

It's 1975, and you are on the board of directors of a company that makes transistors. Among the many companies with whom you have a contract is one that makes heart pacemakers.

Pacemaker technology is in its infancy. When doctors implant a pacemaker, the patient's normal heartbeat is disabled, and he or she relies entirely on the device. If it fails, the patient's heart stops. Doctors are not very adept at installing the pacemakers, which are extremely delicate; there is even a story of a person yawning deeply, pulling the pacemaker wire in his chest, and dying.

After that and many similar incidents, the board begins to reconsider whether your company should sell to the pacemaker company. Members of the board feel this situation is a major lawsuit just waiting to happen and your company, as well as the company you supply, will be liable. In addition, you feel the specs the pacemaker company uses to test the transistors are not very strong.

You and the board decide to get out of the business before it's too late. You tell the pacemaker company representatives about your conclusion, and they respond, "You can't stop selling us the transistors. You are the sole remaining supplier for us. Everyone else has backed out for the same reasons you're giving. If you don't sell us the product, we'll go out of business. Pretty soon, no one will be making heart pacemakers, and many people need them. Without the pacemaker, people don't even have a chance."

You take that information back to the board. People around the table have different opinions. One person says, "This is a bad deal, and it isn't our problem. We don't make enough on this sale to make the risk worthwhile." Another person says, "We don't know how other companies use the transistors we sell them; why should we be concerned about this one? What about that baby who died when the transistor in the incubator failed? We didn't know how that company was using the transistor." Another person says, "I think we're missing the real issue here. Don't we have an ethical obligation to sell the product to the pacemaker company? What will happen if we don't sell to them?" Another person says, "Give me a break. Our only obligation is to our shareholders. And how did we get so stupid that we're the last source? I'm telling you, we don't need this." Finally, the chair of the board says, "OK. Let's make a decision."

What do you do?

This case was written by Thomas Shanks, S.J., Executive Director of the Markkula Center for Applied Ethics.
What Really Happened? Author Thomas Shanks comments.
Fall 1996

Commentary on the Case of the Sole Remaining Supplier
by Thomas Shanks

As the story of the Sole Remaining Supplier was told to me, the Board conversation went pretty much the way the case describes it. Legal was saying, "This is a time bomb waiting to happen. Why are we even talking about this?" Engineering was bemoaning the lack of standards for testing the electronics of pacemakers, and the majority of the Board understood that they had a problem with no easy solution.

One of the people on the Board told me later that the founders of Silicon Valley were the sons (and a few daughters) of blue-collar parents. Their fathers were plumbers, electricians, and carpenters, who had passed on a core set of values to their children. This was the Valley before greed and early retirement (at the age of 30) had swept through it. So they took seriously their responsibility and duty to protect the rights of people who needed pacemakers at the same time as they balanced their fiduciary responsibility to the current company. They understood that "doing the right thing" did not have to be stupid, and that they could both do the right thing and do well for the company ("DO RIGHT" AND "DO WELL," rather than having to choose one or the other.)

So, they continued to sell to the pacemaker company. But they also instructed their engineers to develop more rigorous testing and technical standards they could hold the other company to. They reserved the right to stop selling if the other company did not improve its technical standards. They took steps to be sure they did not have a legal liability down the line and then turned it over to the other company to improve the quality of its products.

In these ways they felt they were reducing harms and maximizing utility. They felt it fair to single out the industry because it was new and standards were developing, an equal way of treating start-up industries. They felt they were showing compassion without sacrificing business, and were living out their parents' other virtues. In this way they felt that they were serving the common good, protecting people's rights to a promising new medical technology, the pacemaker.

Task: I need to explain the utilitarian ethics that apply to the following business problem (there is one attachment which describes the history of utilitarianism). In doing so, I will have to apply the Utility Test and five additional tests in a critical analysis of the organizational problem. Finally, I need to compare and contrast which of the tests I have chosen (if any) that are most responsive to the business problem.

I am not too sure how to approach this. Any help would be appreciated.

Questions:
1) Specifically, what are the utilitarian ethics issues in this Case?

2) What would Jeremy Bentham, the father of utilitarianism, have said about this Case? How might Bentham's suggestion that "We seek pleasure and the avoidance of pain..." apply here? Was Bentham right?

3) Apply Steps A through D of the Utility Test to the above case. Be sure that you carefully document each step in the process.

4) Choose one of the following five tests: Rights Test, Exceptions Test, Choices Test, Justice Test, or the Common Good Test. Click here: http://ethicsops.com/EthicsTestsLinks.aspx. Now, apply the test you've chosen to the above case.

5) Compare and contrast the results you have obtained from the Utility Test (#1 above) and your choice of the five tests (#2 above). Which of the two tests do you believe is most informative, and why?

Solution Preview

Dear Student,
In this particular assignment, you are being asked to determine answers to 5 questions in relation to a particular business problem. This is essentially an application of the theories of utilitarianism to an organizational issue. It is my advice that in terms of applying utilitarian position - it is important to stick to the principles of the position and to be as concise as possible. I suggest this simple outline:

1. The utilitarian issue in the case - what it is, why it is a utilitarian issue - 300 words
2. Reflection on the ideas of Bentham as it applies to the case - 300 words
3. Application of Utility test - 300 words
4. Documentation of other tests - 300 words
5. Comparison and Contrast of test results, including defense of most informative - 300 words

This outline should cover what you need. This solution has been written to help you out with this particular problem. All the best!

Sincerely,
AE 105878/Xenia Jones
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The Utilitarian Issue:
Utilitarianism is an ethical view that is consequentialist in nature which means that the consequences of the action bear the most importance of all. It is thus teleological as the final result or end result becomes the normative judge about the rightness or wrongness of an action or position. The simplest notion is that utilitarianism believes that the right course of action is that course of action that maximizes or provides the best overall form of happiness. The moral worth of an act thereby is determined by the result. If the result is not the 'max happiness' that can be achieved by an action, then it is not the right course. Consider for example the case of 'the sole remaining supplier'. The product is the first generation of pacemakers. The setting was 20 years ago. The story behind it is that the pacemaker, first generation is not as efficient or reliable as the current crop of products. Back then, installation of the pacemaker requires or means the disabling of the heart of the patient. Essentially, the heart 'stops'. Since back then doctors are not well-trained and are so adept in implanting the device, and with the devices not yet as efficient as they are today, this often resulted to device malfunction which of course resulted to death. The company in question is the sole supplier of transistors to the pacemaker company as no other company could manufacture to the specs required by the pacemaker company.

The Board questions selling to the pacemaker company because of the likelihood that the products created will fail and the Board is sure that when the pacemaker company gets sued, the transistor company that supplied the transistor component will more than likely be held liable too. Thus, the Board wants to avoid selling to the pacemaker company even if doing so would make profit. The utilitarian question is this - is the right path to 'self preserve' by not taking the risk of supplying to the pacemaker company or is it supplying to the pacemaker company as that would mean potentially helping people with heart issues achieve healthier lives and allow for the continuation of life in others whose own hearts are unable to beat without aid? Maximum ...

Solution Summary

The solution provides information, assistance and advise in tacking the task (see above) on the topic of 'the Sole Remaining Supplier', a case involving the application of Business ethics principles. The solution suggests and outline, lists arguments and justified utilitarianism as the applicable theory, including an elaboration of the ideas of Bentham. This solution is 1750 words and five resources are listed for the purpose of further exploration of the topic.

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