Ethics in Business

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Ethics in Business

>From a business perspective, working under government contracts can be a

very lucrative proposition. In general, a stream of orders keep coming in,

revenue increases and the company grows in the aggregate. The obvious

downfalls to working in this manner is both higher quality expected as

well as the extensive research and documentation required for government

contracts. If a part fails to perform correctly it can cause minor

glitches as well as problems that can carry serious repercussions, such as

in the National Semiconductor case. When both the culpable component and

company are found, the question arises of how extensive these

repercussions should be. Is the company as an entity liable or do you look

into individual employees within that company? From an ethical perspective

one would have to look at the mitigating factors of both the employees and

their superiors along with the role of others in the failure of these

components. Next you would have to analyze the final ruling from a

corporate perspective and then we must examine the macro issue of

corporate responsibility in order to attempt to find a resolution for

cases like these.

The first mitigating factor involved in the National Semiconductor

case is the uncertainty, on the part of the employees, on the duties that

they were assigned. It is plausible that during the testing procedure, an

employee couldnt distinguish which parts they were to test under

government standards and commercial standards. In some cases they might

have even been misinformed on the final consumers of the products that

they tested. In fact, ignorance on the part of the employees would fully

excuse them from any moral responsibility for any damage that may result

from their work. Whether it is decided that an employees is fully excused,

or is given some moral responsibility, would have to be looked at on an

individual basis.

The second mitigating factor is the duress or threats that an

employee might suffer if they do not follow through with their assignment.

After the bogus testing was completed in the National Semiconductor labs,

the documentation department also had to falsify documents stating that

the parts had surpassed the governmental testing standards. From a legal

and ethical standpoint, both the testers and the writers of the reports

were merely acting as agents on direct orders from a superior. This was

also the case when the plant in Singapore refused to falsify the documents

and were later falsified by the employees at the have California plant

before being submitted to the approval committees (Velazquez, 53). The

writers of the reports were well aware of the situation yet they acted in

this manner on the instruction of a supervisor. Acting in an ethical

manner becomes a secondary priority in this type of environment. As stated

by Alan Reder, . . . if they [the employees] feel they will suffer

retribution, if they report a problem, they arent too likely to open their

mouths. (113). The workers knew that if the reports were not falsified

they would come under questioning and perhaps their employment would go

into jeopardy. Although working under these conditions does not fully

excuse an employees from moral fault, it does start the divulging process

for determining the order of the chain of command of superiors and it

helps to narrow down the person or department that issued the original

request for the unethical acts.

The third mitigating factor is one that perhaps encompasses the

majority of the employees in the National Semiconductor case. We have to

balance the direct involvement that each employee had with the defective

parts. Thus, it has to be made clear that many of the employees did not

have a direct duty with the testing departments or with the parts that

eventually failed. Even employees, or sub-contractors, that were directly

involved with the production were not aware of the incompetence on the

part of the testing department. For example, the electrical engineer that

designed the defective computer chip could act in good faith that it would

be tested to ensure that it did indeed meet the required government

endurance tests. Also, for the employees that handled the part after the

testing process, they were dealing with what they believed to be a

component that met every governmental standard. If it was not tested

properly, and did eventually fail, isnt the testing department more

morally responsible than the designer or the assembly line worker that was

in charge of installing the chip? Plus, in large corporations there may be

several testing departments and is some cases one may be held more

responsible than another depending on their involvement. A process like

this can serve the dual purpose of finding irresponsible employees as well

as those that are morally excused.

The fourth mitigating factor in cases of this nature is the

gauging of the seriousness of the fault or error caused by this product.

Since National Semiconductor was repeatedly being reinstated to the listed

of approved government contractors, one can safely assume that the level

of seriousness, in the opinion of For the contractor approval committees,

is not of monumental importance. Yet one has to wonder how this case

would have been different if the lack of testing did cause the loss of

life in either a domestic or foreign military setting. Perhaps the

repercussions would have come faster much more stringent. The fact that

National Semiconductor did not cause a death does not make them a safe

company. They are still to be held responsible for any errors that their

products cause, no matter the magnitude.

As for the opposition to the delegating of moral responsibility,

mitigating factors and excusing factors, they would argue that the entity

of the corporation as a whole should be held responsible. The executives

within a corporation should not be forced to bring out all of the

employees responsible into a public forum. A company should be reprimanded

and be left alone to carry out its own internal investigation and

repercussions. From a business law perspective this is the ideal case

since a corporation is defined as being a separate legal entity.

Furthermore, the opposition would argue that this resolution would benefit

both the company and the government since it would not inconvenience

either party. The original resolution in the National Semiconductor case

was along these lines. The government permanently removed National from

its approved contractors list and then National set out to untangle the

web of culpability within its own confines. This allowed a relatively

quick resolution as well as the ideal scenario for National Semiconductor.

In response, one could argue that the entity of a corporation has

no morals or even a concept of the word, it is only as moral and ethical

as the employees that work in that entity. All of the employees, including

top ranking executives are working towards advancing the entity known as

their corporation (Capitman, 117). All employees, including the

sub-contractors and assembly line workers, are in some part morally

responsible because they should have been clear on their employment duties

and they all should have been aware of which parts were intended for

government use. Ambiguity is not an excusing factor of moral

responsibility for the workers. Also, the fact that some employees failed

to act in an ethical manner gives even more moral responsibility to that

employee. While some are definitely more morally responsible than others,

every employee has some burden of weight in this case. In fact, when the

government reached a final resolution, they decided to further impose

repercussions and certain employees of National Semiconductor were banned

from future work in any government office (Velazquez, 54).

Looking at the case from the standpoint of National Semiconductor,

the outcome was favorable considering the alternate steps that the

government could taken. As explained before, it is ideal for a company to

be able to conduct its own investigation as well as its own punishments.

After all, it would be best for a company to determine what specific

departments are responsible rather than having a court of law impose a

burden on every employee in its corporation. Yet, since there are ethical

issues of dishonesty and secrecy involved, National Semiconductor should

have conducted a thorough analysis of their employees as well as their own

practices. It is through efforts like these that a corporation can raise

the ethical standard of everyone in their organization.

This case brings into light the whole issue of corporate

responsibility. The two sides that must ultimately be balanced are the

self interests of the company, with main goal of maximum profit, and the

impacts that a corporation can cause on society (Sawyer, 78). To further

strengthen this need, one could argue that there are very few business

decisions that do not affect society in way or another. In fact, with the

plethora of corporations, society is being affected on various fronts;

everything from water contamination to air bag safety is a concern. The

biggest problem that all of us must contend with is that every decision

that a business makes is gauged by the financial responsibility to their

corporation instead of their social responsibility to the local community,

and in some cases, the international community. This was pointed out on

various occasions as the main reason why National Semiconductor falsified

their reports. The cost that the full tests would incur did not outweigh

their profit margins. Their business sense lead them to do what all

companies want . . . maximum profit. In the opinion of the executives,

they were acting in a sensible manner. After all, no executive wants to

think of themselves as morally irresponsible. (Capitman, 118).

The question that naturally arises, in debating corporate

responsibility, is what types of checks and balances can be employed

within a company to ensure that a corporation and all of its agents act in

an ethical manner. Taking the example of the National Semiconductor case,

one can notice many failures in moral responsibility. National

Semiconductor would have to review its employees, particularly the

supervisors, for basic ethical values such as honesty. example, ultimately

it was the widespread falsification of the testing documentation that

caused the downfall of National Semiconductor, not the integrity of their

components. In the synopsis of the case it is never mentioned that the

employees initiated this idea, it would seem that it was the supervisors

that gave the order to falsify the documents. In order to accomplish this,

the company executives would have to encourage their employees to voice

their concerns in regards to the advancement of the company. Through open

communication, a company can resolve a variety of its ethical dilemmas.

As for the financial aspects of the corporation, it has to decide whether

the long term effects that a reprimand from the government can have

outweighs their bottom line. In other words, corporations have to start

moving away from the thought of instant profit and start realizing both

the long term effects and benefits. These long term benefits can include a

stronger sense of ethics in the work force as well as a better overall


To conclude, I must say that I agree with the use of mitigating

factors in determining moral responsibility. A company, as defined by law,

is only a name on a piece of paper. The company acts and conducts itself

according to the employees that work in that entity. I use the word

employee because in ethical thinking there should be no distinction of

rank within a company. There are times when executives can be held

directly responsible and at the same time, there are cases where employees

are acting unethically without the executives knowing. Neither title of

executive or employee equates to moral perfection. Therefore, when a

company has acted irresponsibly, its employees must be held liable in a

proportionate amount. As for the future of ethics in business I would

speculate that if employees started to think more in long term benefits

and profits, many of the ethical dilemmas that we face today would be

greatly reduced. As mentioned before, businesses today uses the measuring

stick of profitability. There needs to be a shift to the thinking of total

utility for the social community in order to weigh business decisions.

Opponents would argue that this is a long term plan that require

too many radical changes in the face of business. Also, there is no way

that an industry wide standard can be set since there are too many types

of corporations. Plus, companies have different needs and every moral rule

is subjective according to the type of business that everyone conducts.

In response, I would argue that although there are no industry

standards that are feasible, it is possible for every company to examine

their practices as well as the attitude of their employees. There will be

companies that find that they are doing fine with employees that are aware

of their moral values. Yet other companies will find that they do have

areas that need improvement. It is steps like these that start

implementing changes. Once a few companies start to see the benefits of

changes, it can help to encourage other companies to follow suit. After

all, as seen in the case of National Semiconductor, mistakes in one

department can cause the deterioration of an entire corporation. When the

costs that are possible are taken into account, the changes required to

rectify this are small in comparison.


Capitman, William. 1973. Panic In the Boardroom. New York:

Anchor Press-DoubleDay Publishing

Harris, Kathryn, Chips Maker Feels Attack on Four Sides Los Angeles Times

April 4, 1982. Pg. B1

Pava, Moses. 1995. Corporate Responsibility and Financial Performance.


Quorum Books

Reder, Alan. 1944. In Pursuit of Principle and Profit. New York:

G.P. Putnams Sons Publishing

Sawyer, George. 1979. Business and Society: Managing Corporate Social

Impact. Boston

Houghton Mifflin Publishing

Schuyten, Peter. To Clone A Computer. New York Times

February 4, 1979. Pg. 1

Velazquez, Manuel. 1992. Business Ethics: Concepts and Cases. New Jersey

Prentice Hall Publishing