Business Ethics Case Study: The Kobe Steel Data Fabrication Scandal

This case study examines the ethical issues surrounding Kobe Steel's data fabrication scandal, where the company admitted to providing false quality data for its metal products. The analysis focuses on several ethical principles, including common good, fairness, honesty, dignity of human life, loyalt...Read More

ETHICAL ISSUES AFFECTING BUSINESSES
CASE STUDY OF KOBE STEEL, JAPAN
May 20, 2018

Introduction
Business ethics is the way people differentiate wrong and right in the line of their duties and
conduct in business. This paper highlights the business ethical issues brought out in the article
‘Kobe Steel chief is resigning over fake data scandal,’ published on 6th March 2018 by Daniel
Shane. Kobe Steel is a metal manufacturing and supplying company based in Japan. It is known
for producing high-quality steel, aluminum, and copper metals for sale to companies making
cars, planes, and other metallic products.
However, the company admitted to providing false data on the quality of metals, including
mislabeling, in October 2017. This is after complaints came up from consumers, leading to
temporary halts in production processes. The company’s Chief Executive Officer announced that
he is set to down to pave the way for a replacement. This essay points out some of the ethical
issues evident in the article. This essay outlines some arguments concerning business ethics. The
main issue in the picture is product quality.
1. Common Good
As a business, all guidelines and regulations put in place to control the product quality must be
considered in all production steps. Failure to this gives a great risk to consumers. In this case,
using low-quality metal in manufacturing cars and planes puts people’s lives at a great risk.
Violation of product quality standards can lead to the closure of the company and should,
therefore, be taken seriously (Claudia & Painter-Morland, 2014). The moral principle of
common good ought to be followed in Kobe Steel Company.
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2. Fairness
Employee treatment issues pop up in the article. The management expects all employees to abide
by all the rules set by the company. Insider trading and other common cases of dishonesty are
unethical. On the other hand, the employees of the Kobe Steel Company have a tendency of
charging customers expensively for low-quality products is unethical as speculated by price-
regulatory bodies. The implications of unfairness may lead to firing, paying huge penalties and
facing court charges (Byung, Francis, Andrew & Tony, 2014).
Moreover, leadership ethics is another issue evident in this article. The Chief Executive Officer,
Hiroya Kawasaki, failed to demonstrate leadership ethics by deciding to resign. As much as he
wanted to protect his personal reputation, he should have tried to rectify the company’s image
first. Having worked for it for so many years, he should have based on the previous trust that the
company had earned from its consumers. The future of the company did not seem to bother him,
hence displaying his disloyalty.
3. Honesty
The main ethical issue pictured in the article is about Product and Brand. It is ethical for a
company to produce products that comply with the safety regulations in terms of design and
other considerations. Any business’ ethics should always put the consumer at the primary level
(Michael, 2016). Contrarily, the Kobe Steel Company failed to satisfy the regulatory
requirements set up by the regulatory bodies, producing low-quality metals that posed a great
danger to consumers, forcing them to stop the production process. In addition, professional
ethics is another issue brought about in the article. The involvement of the employees in
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mislabeling products intentionally and failure to produce quality metal according to the set
standards makes them unethical.
According to the set standards regarding business ethics, Hiroya Kawasaki, the company’s Chief
Executive Officer, did not make the right decision to step down. From the report he gave
concerning the scandal, he was determined to implement steps to raise the procedure on quality
control and management of the company (Shane, 2018). As a leader, Kawasaki should have
conducted an internal investigation regarding the employees responsible for the act and take the
necessary measures to ensure it does not happen again.
4. The dignity of Human Life
A lawsuit was filed by the consumers against Kobe Steel Company for failing to uphold integrity
and disobeying the laws of consumer protection (Obayashi, 2018). This was reasonable since it
was discovered, from the report published by the Chief Executive Officer, that there were several
people in management who were aware of the multi-practices but took no action. This was so
unethical of them. Basing on labor and management ethical practices, it is wrong to cover an evil
act which can pose a risk to any person involved. As the consumers sue the company, the Chief
Executive Officer should have fired and sued the individual managers and other employees
involved in ruining the reputation of the company.
5. Loyalty
Ethical decision-making is not too different from the normal decisions made in daily life (Dawn,
2011). The company’s Chief Executive Officer should have followed a systematic and ethical
process before making the decision to resign. The first step was to gather facts. From his report,
he had all the facts regarding the people involved in mislabeling low-quality metal. It was clear
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that some people in the management knew what kind of misconduct was happening but did not
bother to act. This shows that they were part and parcel of the whole scandal.
Secondly, he was to identify the ethical issues that developed from the facts. Some of the ethical
issues displayed were employee loyalty and product quality. The most important step is the first,
which would have involved identifying the stakeholders in the scandal. After a month’s
investigation, Kawasaki produced a report outlining what had transpired. He also mentioned
about the people involved and that they were scheduled for firing alongside his resignation.
The consequences of the scandal, as they had clearly popped up, were ruining the company’s
reputation. Nevertheless, the Chief Executive Officer should have thought about the
consequences that would befall the company because of his decision. In this case, he should have
considered the implications of his resignation, is one of the few upright people in the
management. Secondly, he should have thought about the impacts the company would undergo if
the misbehavers were fired.
6. Humaneness
The chief was to list all the principles, laws and regulations used by the company to ensure
ethical behavior. Basing on the report, Kawasaki was morally upright since he was not involved
in the scandal. However, as a leader, he felt guilty of failing to strictly monitor the whole
production process. This statement makes him guilty of unethical leadership and governance.
Having done all these, he should have thought creatively about the decisions to make concerning
the scandal participants and the future of the company. Finally, he should have made the decision
of firing and suing all the employees involved.
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In his decision-making process, the Chief Executive Officer should have considered his devotion
to the Kobe Steel Company. Having built a good reputation and won customers’ trust for 112
years, he should have tried fighting for it instead of just resigning. His loyalty is not reflected in
his decision. An ethical leader identifies his/her mistakes and rectifies them. Given that the
company had been manufacturing quality metals in the previous years, the CEO should have
investigated into the matter to notice the people responsible for changing the quality and taking
the most appropriate steps as the Chief Executive Officer of the company.
7. Autonomy
The rule of autonomy has come to involve a superior position in a vote based social orders due to
their sense of duty regarding systematic self-assurance. This standard in Kobe Steel Company
might be detailed in an accompanying way: an employee ought to be allowed to play out
whatever activity he/she wishes, paying little respect to dangers or silliness as seen by others if it
doesn't encroach on the autonomy of others. This rule gives extreme control (self-administration)
for an ethical activity to the operator who is settling on the choice to play out the activity
(Laszlo, 2011).
Essentially, autonomy in the steel manufacturer is a guideline of good strengthening and places
the obligation regarding the outcomes of an activity on moral operators themselves. Somebody
following up on the standard of autonomy can't honestly accuse another of unfavorable results.
Assuming liability for one's activities is a focal component of individual pride.
Steve (2014) argues that it ought to be noticed that the view of others is not adequate to warrant
to stop an autonomous activity. On the off chance that the specialist is skillful or has the
decisional limit, at that point the likelihood of hazard to the operator which may inspire an
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onlooker does not give the spectator the privilege to supersede the choice of the specialist.
Regardless of whether the onlooker views the activity as silly and hazardous, the specialist still
has the ultimate control over the activity. Obviously, an eyewitness isn't obliged to help the
operator in playing out the activity unless there is a particular authoritative or expert relationship
requiring the spectator to do as such.
Concluding Remarks
In conclusion, business ethics should always be the guide for every business in terms of
operations and objectives. The core objectives should be consumer satisfaction instead of profit
making. Issues mentioned in the article are a total opposite of what a business is expected to do,
in terms of business ethics and labor practices. Leaders should always be on the frontline to show
the employees how to implement good morals in their endeavors. Big damages can result if the
subject of business ethics is not taken seriously.
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