Memorandum to the Chief Executive of Gumthrop Northern Company

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Table of Contents

Introduction
Ethical Issues
Recommendations/Conclusion
References

Introduction

Statement: Gumthrop disregarded the international laws in order to make profits from the landmine business. Another unethical issue of concern is faulty and defective products manufactured by Gumthrop. Moreover, the company openly disregarded business regulations, environmental, and labor laws.

Business ethics is an acceptable way of conducting business without infringing into other people’s rights or freedom. An acceptable set of business ethics takes care of the customers, the labor force, rules, and regulations. Professional bodies, across the world, are of the opinion that businesses must be conscious of the social consequences of their activities. All businesses should have an obligation to social responsibility; that is, businesses should ensure the society gets maximum benefit and minimum harm out the business. A successful business does not compromise on ethical principles. Ethical practices consolidate the customer’s trust, which stimulates decent working business relationships. Any person or group conducting business with high ethical integrity will earn the utmost confidence from its clients. Consequently, it is prudent for businesses to learn how to identify ethical issues affecting them. Analysis of the ethics of a situation should be done from the client’s consideration. An unethical activity hurts the customer and dents the reputation of a business. This paper focuses on analyzing the unethical activities in Gumthrop Northern.

Ethical Issues

Gumthrop Northern is a reputable company that manufactures ammunitions and armored vehicles. It is majorly contracted to supply various ammunition by the military. Although it makes remarkable annual revenues, it is embroiled in unethical activities that are threatening its longstanding reputation (Ferrell, & Fraedrich, 2012, p. 130). Gumthrop does some activities that breach international law and treaties. It is involved in the manufacture of landmines that are sold to Iran and Afghanistan. Gumthrop breached the international laws in order to make profits from the landmine business. Another unethical issue of concern is faulty and defective products manufactured by Gumthrop. Gumthrop employed the use of substandard materials to manufacture armors and the military vehicles despite being paid well for quality products. The illegally manufactured landmines were discovered to be defective. This implies that Gumthrop had no regard to quality in its businesses. The third unethical issue is open disregard to business regulations, environmental, and labor laws. The company did not consider any social implications posed by its business activities.

Quality gurus, like Juran, argue that compromising quality is extremely expensive for any company. Costs related to quality issues are far higher than the costs of implementing quality. A company, which compromises the quality of its products, suffers extreme consequences. It losses its reputation and settles higher costs of litigation. A loss in reputation translates to loss of customers since they lose confidence in the company’s products. It is unethical for a business to act contrary to the expectations of the customer. Gumthrop employs dubious methods in the manufacture of its products. The contract, that it made with the US military, entailed manufacture and supply of quality armored vehicles and armored bodies. The USA military paid duly for these goods as per the contract agreement. Gumthrop decided to use substandard materials in assembling the vehicles to maximize on its profits, an act that amounts to dishonesty, and it is unethical in business. This unethical decision compromised the safety of the military personnel. The armored bodies were easily damaged by ammunition from the enemy’s ammunition. Gumthrop manufactured armored vehicles that were susceptible to explosions from explosive devices. Further to this unethical practice, the landmines that were exported to Iran and Afghanistan were exceedingly defective. The landmines had faulty switches that could detonate easily. This put to risk the lives of many people who did not realize its defects. The causalities out of this neglect are too costly for any company.

The legal issues that are attached to production of substandard products are quite expensive and dangerous to any company. When the USA military discovered the defects of the things they had procured from Gumthrop, they decided to seek legal action for the company (Childs, 1995, p.87). The victims of the faulty armory from Gumthrop and the causalities from the landmines also sought legal action against the company. If the company were to be found guilty, of manufacturing substandard products, the legal consequences would be too much for the company. A company that breaches the contract agreement pays for compensation and the contract is terminated. This translates, to loss of business and subsequent decline in revenue. This would imply failure in the managers’ fiduciary responsibilities to the stakeholders of the company. The managers’ fiduciary is to reduce litigation cost for the company by engaging within the law (Beauchamp, Bowie, & Arnold, 2008, p.123). It is the manager’s responsibility to ensure that need to make profits does not compromise the need for quality. The stakeholder’s interests are affected whenever the company’s reputation is questionable. Their investments are always vulnerable when company’s employ unethical business activities. A formidable solution to this problem is to entrench quality control measures in the production process. This would leave no room for manufacture of defective products. Good quality products reduces litigation and improves the reputation of the company hence increased sales. Managers’ can exercise their fiduciary duties of maximizing on profit by implementing quality in the company.

International treaties and laws set guidelines and regulations on how corporations and countries should handle each other’s interests. Any operations that breach these treaties often stimulate conflicts of interest. Gumthrop’s manufacture of landmines and subsequent exports to Iran and Afghanistan against the law amounted to a serious crime. International law outlaws operations that compromise the interests of various countries and peaceful coexistence. Manufacture of landmines was outlawed in the USA for its adverse effects to social life. It was also illegal for any country that is a signatory to the international treaty to trade in landmines. The legal consequences include sanctioning the company from conducting its business within countries subjected to the treaty. Therefore, it is the managers’ responsibility to safeguard the interests of business within the law. This aspect is a vital fiduciary responsibility because any violation of the law stimulates adverse effects t the business. In as much as the managers’ are supposed to make profits for the company, application of the rule of law is mandatory. The corporate stakeholders have a duty to supervise the operations of the managers’ (Cory, 2004, p.56). Any company that is embroiled in a breach of the law has extreme negative impact on the stakeholders. The company should review its business interests and abide by the law. Business ethics demands that all business operations should be within the law and respect the component of social responsibility.

Gumthrop conducts its operations without due regard to its social responsibilities. Gumthrop management argues that regulations that govern businesses amount to obstacles, hence should be disregarded. This aspect is the highest form of insensitivity that breeds unethical activities. Disregard of the labor laws and environmental regulations cause adverse social implications. When Gumthrop was embroiled with legal issues, they decided to dismiss five workers without any legal reasons. This act is a violation of the labor laws, which safeguard the laborers rights. This infringement into labor rights without due regard to the law is a criminal offense. Gumthrop was allowed to operate in Argentina and Colombia without due regard to the environmental damage. Chemical radiations that were leaked from the manufacturing plant were disposed into underground water. This causes serious implications to the social well-being of the society. This outright disregard to the labors rights could be costly to the company in the form of litigation. Damage to the environment stimulates health complications and conflicts of interest from various groups. The managements’ fiduciary is to ensure that the company’s obligation to social responsibility is upheld. The relationship of a company with the society is dependent on a company’s social responsibility (Gibson, 2007, p.36). The stakeholders should influence management to employ a resolution that regulates the operations of the company to reduce its harmful effects. A feasible solution to this problem is to comply with the set out laws on labor and the environment.

Recommendations/Conclusion

Gumthrop Northern Company has been in existence for a long time. Therefore, it should not be embroiled in tussles arising from poor quality products. Quality management is vital for any manufacturing company. Production of defective products affects the company negatively. It increases the cost of litigations from frustrated clients. Production of substandard products is a consequence of disregarding quality procedures. Quality entails taking into consideration all the regulations and specifications in manufacturing. Therefore, an appropriate quality control system should be implemented. The company should formulate policies and rules aimed at entrenching an ethical culture in all its operations.

References

Beauchamp, T. L., Bowie, N.E., & Arnold, D.G. (2008). Ethical Theory and Business. New York: Pearson/Prentice Hall.

Childs, J.M. (1995). Ethics in Business: Faith at Work. USA: Fortress Press.

Cory, J. (2004). Business Ethics: The Ethical Revolution of Minority Shareholders. New York: Springer.

Ferrell, O.C., & Fraedrich, J. (2012). Business Ethics: Ethical Decision Making & Cases. Boston: Cengage Learning.

Gibson, K. (2007). Ethics and Business: An Introduction. USA: Cambridge University Press.

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Memorandum to the Chief Executive of Gumthrop Northern Company

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