1. The document discusses ethics in business using the case study of Toyota recalls between 2009-2010. It outlines the four stages of ethical decision making: moral awareness, moral judgment, moral intent, and moral behavior. 2. In the Toyota case, the CEO failed to recognize the ethical problem of faulty brakes in stage one. In stage two, Toyota overlooked moral judgment by hiding accident reports. In stage three, the CEO prioritized profits over correcting faults to save lives. Finally, the CEO lacked moral character to accept responsibility in stage four. 3. Upholding ethics provides benefits like competitive advantages and reputation, while unethical actions can harm profits through legal issues and attrition. Managers must

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Ethics in Business: Being Ethical or just Making Money: A Case Study of Toyota Recalls
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Introduction
Ethics refer to a philosophical school of thought that depicts what is right or wrong.
Morality refers to a set of standards and principles determined by a code of conduct in a certain
philosophical or business context. Values on the other hand refer to absolute or relative
assumptions attached to an ethical action. In the business context, the term refers to the school of
thought that guides decision-making and policies, and depicts what is right or wrong in a
business context. Business ethics touch on all business entities like employees, stakeholders, and
employers; it is dedicated customer satisfaction, product quality, and social responsibility.
Managers who make decisions for purposes of building power, wealth, or reputation are devoid
of ethics and their fundamental philosophy hinders any ethical objectivity (Ferrel, 2010). In this
paper, I present the ethical dilemma at Toyota Motor Company whereby business ethics were
compromised, losses incurred, and reputation lost from what was merely a mechanical mistake.
Benefits of Ethics in Business
There are several benefits that ascribe to being ethical and practicing social
responsibility. One of the benefits of being an ethical business is the fact that ethical businesses
are able to attract and retain investors, customers, and employees. Investors find peace of mind
when they realize that they have invested in a company that operates in an ethical and
responsible manner; investors need to have their money being spent in a manner that concurs
with their own moral standing. Employees feel comfortable and motivated at the realization that
their actions do not permit the proliferation of unethical practices. Failing to be a good employer
may push away good staff, and reduces the likelihood of attracting good starters; this undermines
performance, increases costs, and reduces efficiency. Customers on the other hand find delight
in the knowledge that they are buying products from a company that sources labor and materials

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in an ethical manner. Being unethical means that an organization loses its competitive
advantages; market share is lost, popularity shrinks, and revenues are reduced. Ethics in an
organization also boost morale and organizational culture; staff at a high-integrity and socially
responsible organization are less prone to dissatisfaction, stress, and attrition, and thus are happy
and more productive. Ethical organizations also benefit since they are less likely to face legal
tussles. All companies are expected to abide to their industrial code of ethics; unethical
organizations find themselves in legal problems that cost enormously. Finally, ethical companies
are able to earn reputation. Even in the wake of scandals and controversies, an ethical company
knows how to deal with them openly, honestly, and quickly. A reputable organization is able to
achieve its goals but once reputation is lost, it is extremely hard to rebuild (Ferrell, 2010).
Ethical Decision Making Process
For companies to balance between ethics and profits and maximize profits, it needs a
robust ethical strategy. The ethical decision making process is a crucial tool that can help
managers and other stakeholders get the best out of ethical issues (Martocchio & Liao, 2009,
223).

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The ethical decision making process is based on four components of ethical
behavior; Moral awareness, moral judgment, moral motivation, and the moral character. It is a
systematic approach to solving ethical problems. In order to explain this process, we need to
reflect on the case of Toyota Recalls in 2009-2010.
Toyota Recall Case Study
Headquartered in Japan, Toyota is the world’s leader in motor vehicle, having overtaken
General Motors in 2008. Between 2009 and 2010, the motor corporation manufactured vehicles
with faulty braking systems and faulty accelerator pedals, the poor braking and accelerating
mechanisms caused persistent crashes; to the extent of attracting a global concern. The
mechanical problem led to the recall of over 5.3 million vehicles in 2010. Although the
manufacturing fault was the initial cause of the 2010 financial crisis, the ethical dilemma was the
main issue that placed the company in a full-blown disaster. The main ethical issue emanated
from laxity of the CEO Akio Toyoda in admitting the company’s responsibility in the fatal
accidents that followed the manufacturing fault (Tabuchi & Maynard, 2009; Evans &
MacKenzie, 2010).
Process Description
Stage 1: Moral Awareness. Moral awareness or sensitivity is all about recognition of an
ethical problem. It is the first step in the ethical decision making process since a problem cannot
be solved unless its existence is recognized (Kohlberg, 2004). It calls for both individual and
organizational characteristics to recognize an ethical issue. Problem recognition requires that
managers consider how both personal and organizational behavior affects others, devise a
possible course of action, and establish causes and consequences of every strategy. The most
essential aspects at this stage of moral action include empathy and perspective skills. In the

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context of Toyota recalls, the CEO should have recognized the ethical problem behind the faulty
braking system. This would have been the initial stage towards finding a solution to the faulty
braking system.
Stage 2: Moral Judgment. Once an ethical problem has been identified, decision makers
may select the best course of action from several options developed in the first stage. Here,
managers decide the course of action that is right or wrong for a given situation. This stage is a
systematic process whereby the management develops a deeper sense of reasoning, from the
limited egocentric perspective to the broad perspective that incorporates societal needs
(Werhane, 2009, 54). First, Toyota overlooked moral judgment by first hiding the cause of the
many accidents that ensued from the brake system failure. The CEO should have rapidly decided
the necessary action following internal assessment reports even before the public noticed the
failure.
Stage 3: Intent. The third stage in the ethical decision making process entails the moral
focus or the motivation. This stage comes after deciding the course of action. It is whereby the
decision makers determine the focus of their choices. It is common for moral values to conflict
with other significant values. Unfortunately psychologists have established that hypocrisy and
self-interests prevail over moral values (Batson et al., 2002, 334). At the organizational level,
motivation takes center-stage because if the reward for a moral action is great, individuals are
likely to exercise ethical conduct and report unethical practices. At Toyota, it would be argued
that Akio Toyoda chose to remain silent about the fatal accidents and conceal accident reports so
as to avoid financial responsibility. The CEO did not find enough motivation in the ethical deed
of correcting the brake fault and save lives, rather, Toyoda though he could save money by
ignoring the problem. The Managers should institute policies that facilitate reporting of unethical

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conduct and reward ethical practices. Toyota Motor Corporation has always been operating on a
business principle of producing automobiles for the prosperity of the society; execution of this
slogan would have enabled reporting of unethical practices to the industrial leaders, or ensured
due diligence in the production process. Moreover, installing safe braking systems would have
cost the company less than the cost of recalling 5.3 million cars, let alone the loss of reputation.
Stage 4: Moral Behavior. Executing the moral action calls for ethical character. Moral
agents should be able to resist opposition, handle fatigue, overcome distractions, and develop
strategies for achieving their goals without contravening moral standards. Leaders should have
courage so as to implement plans despite the involved risks and costs. Integrity is important in
enabling leaders to uphold choices, humility obliges managers to tackle limitations, and
optimism enables leaders to thrive in difficulties. Additionally, compassion and justice enables
leaders to focus on others as opposed to egocentrism, while virtues enhance moral action. These
are elements that seemed to lack among the leaders at Toyota Motor Corporation as seen when
the CEO could not accept the company obligation of executing ethical responsibility (Trevino &
Weaver, 2003, 160). Toyoda was not a moral person despite the company having a strict moral
philosophy, and this led to the ethical problems that faced the company.
Conclusion
Ethics, morality, and virtues are a crucial aspect to be considered if any company has to
thrive in today’s business environment. Organizations that observe ethical guidelines tend to gain
competitive advantages and emerge profitable as opposed to those organizations that undermine
ethical conduct. Although unethical companies may try to justify actions on the basis of the
utilitarian perspective, ethical companies have several benefits over unethical companies.
Organizations that uphold ethics enjoy competitive advantages, customer loyalty, stakeholder

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satisfaction, customer satisfaction, and above all reputation. Unethical companies on the other
hand are faced with problems such as attrition, stress among staff, and dissatisfaction. In
addition, unethical companies find themselves in legal tussles that greatly alter operations and
lower the overall profit margins. Managers need to strike the right balance between ethics and
profits. If organizations are guided solely by economic ideals, they end up suffering losses that
could have been avoided by proper ethical conduct. For companies to balance between ethics and
profits and maximize profits, it needs a robust ethical strategy. The ethical decision making
process is a crucial tool that can help managers and other stakeholders get the best out of ethical
issues. The process is based on four components of ethical behavior; Moral awareness, moral
judgment, moral motivation, and the moral character. It is a systematic approach to solving
ethical problems.
Toyota recall Case has been used to elucidate the relevance of the various stages of the
process in organizations. It is evident that it was failure to observe business ethics and morals
that led to the ensuing financial stalemate rather than the manufacturing error. Moral awareness,
which entails recognition of the moral problem has been featured as a crucial step in any ethical
decision making process. Failure of the management to approach a problem from an ethical
standpoint means that the problem will develop. At Toyota, the company management failed to
recognize the moral problem, thus problems ensued. Problem identification alone is not enough,
once the ethical problem has been identified, the management must discern the best course of
action, which leads to the second stage: moral judgment. The stage calls for decision makers to
exercise a broad sense of morality that incorporates societal needs rather than organizational or
individual needs. From the case study, it has been observed that failure to incorporate societal
needs in decisions leads to unethical conduct, just as Toyoda considered saving costs as opposed

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to the societal need of saving lives. However, a manager or an organization may recognize the
best course of action, but fail to make ethical decisions due to other significant matters such as
loss of profit, or job security. This brings us to the third stage: Intent. The intent calls for both
organizational and individual character. Moral character must involve a sense of sympathy, guilt,
and disgust for unethical conduct. At the organization level, policies should be put in place such
that ethical actions are rewarded while reporting of unethical conduct is not punished. The fourth
stage in the ethical decision making place involves moral behavior. And moral behavior that
entails the ability to resist opposition, handle fatigue, overcome distractions, and develop
strategies for achieving their goals without contravening moral standards. Values such as
integrity, humility, compassion, and justice are crucial at this stage. Failure to adopt the ethical
decision-making process led to car recalls that culminated in Toyota’s financial crisis in 2010.
The company actions also attracted ethical speculations that led to legal suits which cost the
company much more than it saved. The company was obliged to recall over 5.3 million cars and
compensate for deaths and injuries that resulted from car accidents. The application of the ethical
decision making process would have been crucial in evading the ethical challenge associated
with the Toyota Motor Corporation.

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References
Batson, C. D., Thompson, E. R., & Chen, H, 2002). Moral hypocrisy: Addressing some
alternatives. Journal of Personality and Social Psychology, 83, 330–339.
Evans, S., MacKenzie, A., 2010. The Toyota Recall Crisis: A Chronology of How the World's
Largest and Most Profitable Automaker Drove into a PR Disaster. [Online]. Available at:
<http://www.motortrend.com/features/auto_news/2010/112_1001_toyota_recall_crisis/>
[Accessed August 26, 2014].
Ferrell, O. C., Fraedrich, J., & Ferrell, L., 2010. Business ethics: Ethical decision making and
cases: 2009 update. Mason, OH: South-Western Cengage Learning.
Kohlberg, L. A., 2004. The psychology of moral development: The nature and validity of moral
stages (Vol. 3). New York: Cengage Publishers.
Martocchio, J. J., & Liao, H., 2009, Research in personnel and human resources management.
Volume 28. Bingley, UK, Emerald Jai.
Tabuchi, H. & Maynard, M. (October 2009), President of Toyota apologizes. The New York
Times.
Werhane, P., 2009. Moral Imagination and Management Decision-making. New York: Oxford
University Press.

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References
Batson, C. D., Thompson, E. R., & Chen, H, 2002). Moral hypocrisy: Addressing some
alternatives. Journal of Personality and Social Psychology, 83, 330–339.
Evans, S., MacKenzie, A., 2010. The Toyota Recall Crisis: A Chronology of How the World's
Largest and Most Profitable Automaker Drove into a PR Disaster. [Online]. Available at:
<http://www.motortrend.com/features/auto_news/2010/112_1001_toyota_recall_crisis/>
[Accessed August 26, 2014].
Ferrell, O. C., Fraedrich, J., & Ferrell, L., 2010. Business ethics: Ethical decision making and
cases: 2009 update. Mason, OH: South-Western Cengage Learning.
Kohlberg, L. A., 2004. The psychology of moral development: The nature and validity of moral
stages (Vol. 3). New York: Cengage Publishers.
Martocchio, J. J., & Liao, H., 2009, Research in personnel and human resources management.
Volume 28. Bingley, UK, Emerald Jai.
Tabuchi, H. & Maynard, M. (October 2009), President of Toyota apologizes. The New York
Times.
Werhane, P., 2009. Moral Imagination and Management Decision-making. New York: Oxford
University Press.