Final Case Analysis

Business Ethics and Corporate Social Responsibility

ADMS 3660
York University

A. Identification of Key Ethical Issues

After reviewing and assessing each situation in the Dentex case study, I have identified
significant ethical issues that need to be addressed. Firstly, Dentex chose to pursue profitability
over the concerns of the Rento’s safety specs and the harm these failures cause. From
Friedman’s stockholder and a utilitarian perspective, the company’s approach to profit over the
safety of a small group does not characterize as unethical, which will be further discussed in the
report. Issues of pursuing profit despite the safety of others being in jeopardy, also inherently
leads to other ethical concerns such as the production/product safety and whether or not
Dentex did their due diligence. We did not take responsible actions in ensuring the vehicle met
safety regulations and have consumer interest in mind, which will also be discussed further.
Due to the slightly damaged image and declining sales of the Rento, the marketing department
targeted a younger, student demographic, for the reason that they believe they are carefree
and more likely to overlook the concerns of safety and reliability. Dentex continued to pursue
the older audience also, however the marketing strategy for this demographic is to make them
“believe that the car is safe by getting the message from someone they trust” (1). This raises
another ethical issue regarding Dentex’s marketing strategy as it could be seen as a form of
denying consumer full information, concealing facts, exploiting instincts and clever
manipulation. This case sheds light on the ethical issues of international business and how
Dentex management in Mexico conducted themselves morally wrong through the use of ethical
and cultural relativism. The idea of cultural relativism also spurs the idea of how women and
their status’ differ in certain cultures, which brings about the ethical issues of unequal
treatment and even sexual harassment in the workforce. On its company website, Dentex
states that the company “promises to pursue the highest standards in all areas of business, be
transparent, and focus on creating better products, for a better tomorrow” (1). It is quite clear
that all the issues mentioned above disregard our core values and we are in danger of
sacrificing our long term reputation of the company in exchange of short term profitability
goals.

I will be evaluating these ethical issues I have made by comparing them mainly through
a Stockholder and Stakeholder theory views. As well as maintaining that the core ethical issue
of continuing with the production of the car was made through utilitarian terms. I will also
discuss certain measures the Dentex and the management team to ensure that these types of
matters are minimized and corrected.

B.
Profitability and Production Issue and Effect on Stockholders vs. Stakeholders
Stockholders Stakeholders
  Friedman maintains that a business’
sole obligation is to pursue profits
within the law
 At the time the subcompact car was in
very high demand
 Therefore, producing the Rento, a
small, cheap car was in Dentex and the
markets best interest as it met demand.
 Falls in line with creating greater profits
for stockholders
 To do this Dentex needs to production
and design costs
 The Rento failed to meet safety
guidelines that Dentex knew would be
in place in the FUTURE
 There was a PROPOSED federal
regulation requiring all automobiles
manufactured in 1972 to be able to
withstand a 20/mph fixed barrier
impact
 Deemed to costly to make design
changes and would delay release of the
vehicle
 This delay would allow Dentex to
further lose market share and in turn
effect profits of stockholders
 Went ahead with the production
despite fuel tank concerns
 Legally Dentex was on solid ground
 Going back to the beginning,
Friedman’s stockholder model states
that the business pursue profit within
‘rules of the game’
 Dentex did not violate any laws at the
time as the Rento met all CURRENT
safety regulations
 Utilitarian defense of stockholder
model is that in pursuit of profits more
people benefit than not
It is clear that the stockholder model is the dominant view in this case. This is because
Dentex, with the aid of the cost-benefit analysis, determined that more people would benefit
from the Rento coming out of production as-is than those that would not. It can be seen
morally wrong, considering the core values of the company, that Dentex would potentially put
 Evans and Freeman argue that
stockholder model fails to represent
business management
 Should be replaced with stakeholder
model
 Business should function with all
those with a stake in the company
best interests in mind
 Stakeholders in this particular case:
 Dentex stockholders, employees and
their families, engineers, suppliers,
consumers and their families,
communities surrounding the
production facilities
 Who benefits and gets harmed by the
delay?
 Stockholders might see a loss in short
term profits
 Employees, engineers and their
families might benefit from delay
 Gives them more work and better job
security
 Eases the moral dilemma they may
feel knowing the car is susceptible to
explode and cause death
 Consumers would have benefitted
from the safer Rento, leading to fewer
deaths and injuries
 Negative impact is that fewer Rento’s
would have been sold, effecting
stockholders, employees etc.
 Price increase make for a less
affordable car making those who
could have purchased the car at the
prior price point now without a car
 Surrounding communities depend on
facilities to bring jobs and income
 Shut down of facility has great effect
in danger a small group of people for in favour of profits to another(stockholders). The counter
argument is that it is morally wrong for the company to deny the best interests of the larger
audience in order to avoid potential danger for a smaller group.

Key Facts of Marketing and Promotion Issues and the Impact

Key Facts
1.Dentex’s head of marketing, John
Richardson, came to the realize that the
company’s image has been damaged and
sales have slipped due to recent issues with
the Rento. Through research, this led to him
redirecting his target audience towards the
younger, student demographic between the
ages of 16 and 24. This was done with the
intention of exposing their carefree attitudes
and ‘innate’ desires to disregard safety
concerns. Catered to this by advertising the
Rento as the ‘carefree car’, showing young
people driving at high speeds veering off
onto the prairie. Is the company justified in
trying to promote what is naturally wanted?
Impact on Ethical Issues
>In terms of a deontological scope, a
promotion is ethical as long as it respects a
person’s autonomy upon influencing a sale
>The issue with the promotion of a ‘carefree
car’ and actually catering to the idea of
disregarding safety is that it can be seen as
manipulation
>This is due to the psychological appeals it
has. Influencing the inhibitions of the youth
to remain ‘rebellious’
>The use of the word ‘carefree’ implies Rento
is slight form of puffery with intention of
trying to mimic youth behaviour
>Infringes on autonomy, consumers have
right to know their life could be in danger

2.Dentex did not give up on the older
audience, rather deciding that it needed to
repair its image as a safe and trusting car.
Through conducted research and studies,
they discovered that with increasing age,
people rely on authority figures they grow to
trust for influence in decision making in their
daily lives. Dentex began advertisements that
would show actors dressed as engineers and
mechanics putting their families in the car
and essentially endorsing the quality of the
car. Again, this is an exposure of certain
instincts and psychological appeals much like
that of the younger demographic.
>Much like above, there is a blatant intention
of catering to the psychological traits of
humans and looking to expose this
>Issue of concealed facts and that Dentex did
not necessarily make the information of the
Rento and potential dangers of it readily
accessible
>By having actors depicted as putting their
families in the car and endorsing it as ‘safe’ is
deceptive and unethical when it is fully
known that the car does in fact have safety
concerns
>Influencing the product as something it is
not is deceptive and essentially unethical

It is quite clear that through clever psychological appeal and a lack of full information
disclosure Dentex looks to market the Rento as both a car that garners to the ‘wild side’ of the
youth by disregarding the safety concerns. As well as promoting the idea that the car is safe
enough for family use and that the pseudo-mechanics and engineers endorse the product
themselves. Deontological views remain that a marketing strategy is ethical so as long as it does
not influence a sale through disregard of a human’s freedom(autonomy). The Dentex marketing
team did utilize these methods and such, is morally and ethically in the wrong for doing so.
International Business Issues and Micro-Level Concerns
The idea of gift giving is a classic form of showing appreciation, gratefulness and is
relatively innocent as it is based on the philosophy of reciprocity. This is especially true in
regards to foreign affairs and deals with organizations. However, when gift giving is overly
generous it tends to be done with the intention of putting some pressure on the beneficiary to
giving back more than just goodwill. This is where it borders on bribery and begins to face
ethical as well as legal issues.
With Dentex looking to expand its global market share, it has opened a new branch in
Mexico. Diane Ross, after being appointed a management position realized that certain
members of Dentex management were accepting gifts and cash in exchange for franchising and
car allocations. She took issue with this, and brought it up to James Carr the head manager,
however he took took part in accepting gifts and retorted that it was a common practice and
accepted way of doing business in Mexico. It is at this point where Ross takes great issue with
this and refuses to participate in accepting gifts in return for awarding franchises. This brings
about the ethical issue of gift giving and bribery. To start, Ross’ issue is supported by the
Foreign Corrupt Practice Act of 1977 and its subsequent revision in the Omnibus Trade Act. This
government regulation was trying to influence domestic and international organizations to
refrain from giving gifts as business practice (2). This is further supported by the fact that the
International Revenue Service requires gifts from foreign partnerships or corporations to be
reported in their income (3). While it is unclear whether or not the same regulations are in
place in Mexico, the legal issue is still due to the fact that an American corporation is involved.
The ethical reasoning of this being a problem is that businesses tend to see the profit potential
in adopting local ethical practices and converging from cultural relativism to ethical relativism.
The harsh reality is that the reason for these practices is simply due to corruption and poverty
in host nation, not their values. According to some, the idea of moving from cultural relativism
to ethical relativism has no real basis either. Just because one culture has different values than
another does not necessarily mean there should not be objective standards when choosing
between conflicting values. This is especially true with regards to Dentex and their foreign
practice of accepting gifts for car allocations. This is a form of bribery and negatively effects
their brand and organization as a whole. The issue is greater magnified when Dentex
management skewed their ethics and values and based it off of the different cultural values of
another. The harm in this is that it is not fair and does not allow equal opportunity for both
businesses in Mexico looking to franchise and sell the Rento as well as employees of Dentex. If
the practice of gift giving for franchising was the standard everywhere, it would simply mean
that whichever car dealer with the deepest pockets and willingness to spend is likely to win the
rights and car allocations. This impacts other dealers that cannot afford to offer such gifts to
Dentex, which may lead to further repercussions. Some of these including having to shut down
dealerships due to declining sales and this consequently effects the employees, their families
and the general community surrounding it depending on the business. The other aspect is that
certain management members may receive gifts over others due to the way they go about
handling accounts and to what extent they will allow themselves to be bribed. A perfect
example of this is when Diane Ross refused to participate in these activities and in return had a
difficult time with clients wanting to deal with her as well as receiving an average review. This
sort of pressure forces certain people to conform and may be disregard their morals not
because of desire but necessity. If someone’s work, and therefore pay, is being effected
because their morals were conflicting with certain practices, a consequence of this could be
their family struggling to make ends meet. Looking at this decision through utilitarian you have
to ask who it benefits, how, and does it benefit the majority. The select few management
members ands the dealers who receive the franchises are the clear beneficiaries as they both
profit off the exchange. However, it is safe to assume that there are a larger number of people
who do not a) receive gifts and bribes therefore leading their work to suffer, this could be both
dealers and Dentex, as well as b) cannot afford to ‘out bribe’ another business owner and in
turn leads to a negative effect on the overall business and surrounding community. These
practices are not justifiable as they do not benefit the mass and such, is not made through
utilitarian terms and by those standards should be abandoned.
Impact of Unequal Treatment and Sexual Harassment Issues
It is evident that cultural and ethical relativism involves and goes beyond things such as
‘common practices’. A common issue still at large is women’s status, or lack thereof, and the
roles they are perceived to have. In society’s outside of North America there is still an
unbalanced spectrum of a women’s role in the workforce. One main concern is that it is not
very common for a woman to be in a managerial position and such, is seen as out of place
which is unfortunate. Some research and studies have revealed that businesses with more
gender parity in upper management are in fact better off financially (4). However, it also reveals
that only 3% of Fortune 500 CEOs are women and the number of corporate executives at top
companies worldwide is less than 15% (4). The treatment of women in managerial positions
raise even more concerns, especially pertaining to cultural norms as stated above.

Key Facts Ethical Issue and Impact

1.Diane Ross, began noticing a shift in work
relations. Mexican clients, partners and
employees began to disregard and not
recognize her authority. This would
eventually lead to them bypassing her
altogether when dealing with important
matters. Also had the issue of clients asking
for others to deal with their accounts.
Matters were worsened when the head,
James Carr called Ross his “cute little
assistant” and would refer to her as “lady
manager”. This never occurred in front
Americans and Carr maintained that it was
just a “game” he was playing with Ross.
2.Ross noticed that office policy dictated that
women working reception wear colourful
and sexy uniforms. This is unnecessary as
they were demeaning to the women and
inconsistent professionalism in the
workplace. When issue was brought up to
Carr and management, Ross was essentially
blown off and was told that it was the
realities of working in international business.
C. Options and Alternatives
Option
>Clear to see the impact it may have on not
only current and future female employees
but also male employees. Touching on
cultural relativism, Carr used it as an excuse
for his behavior and her authority in was
barely recognized due to such
>Employment Equity Act states that no
person shall be denied employment
opportunities or benefits for reasons
unrelated to ability
>Due to lack of recognition by clients and
peers specifically Diane’s work suffered, was
impeded with and did not receive equal
treatment because of this issue
>No policy can maintain ‘sexy’ uniforms as a
bona fide occupational requirement
>Ethically wrong as it demeans women and
essentially objectifies them. Again, the idea
of cultural relativism morphs into ethical
relativism and there is a poor judgment by
management. Issue in this is the self-esteem
problems women face if they do not meet
certain standards and deters potential future
applicants
Why it may solve ethical issues
 Profitability and Production
>Clear that the decision to forth with the
decision to build the car as initially proposed,
was done with utilitarian thinking
>Through cost-benefit analysis they
determined that they would spend more
than they ‘saved’ and thus negatively
effected profits of the stockholders
>However, the obvious solution if the
company would like to stay true to its roots
and core values and make right their wrongs
is to make the necessary modifications to
ensure the car is safe and the fuel tank issue
is no longer
Marketing and Promotion
>Once car has modifications, fully disclose
and make accessible all information
>Promote car as one that can appeal to all
audiences, young and old
International Business and Conduct
>Initiate company policy that absolutely NO
bribery will be tolerated and equal work
opportunity, and professionalism is
maintained just as it would here at ‘home’
>Ensure that guidelines are followed and only
those qualified legally to franchise are
allowed to do so through monthly reports to
upper management
Employment and Sexual Harassment in the
Workplace
>Make it company wide known that sexual
harassment is not at all tolerated in the
workplace and those who are found doing so
will be reprimanded.
>Monthly Human Resources meetings and
reports to maintain this policy as well as
readily available focus groups
>Ensure that there is employment and
treatment equality by evenly allocating
company accounts to managers
References
 By modifying the vehicle, the
company may take a short term profit
loss but in the long term it maintains
the reputation of the company and
the quality of product
 Dentex does their due diligence
 Values the life and liberty of people
over the profits of corporation
 Referring back to stakeholder model,
there is a valid argument it is in the
best interest of those with a stake in
the company than not
 Meets company values of being
transparent and striving for a better
tomorrow
 Car meets market demands and still
gives company flexibility to market as
they please
 Solves issues of using cultural
relativism as excuse for potentially
criminal behavior
 Solves issues of both merit and equal
treatment arguments as company will
look to ensure that the most qualified
candidates earn rights to franchise
and sell due to meeting requirements.
 Same would hold true with future
company applicants, preferential
treatment would like to be avoided.
 Further avoids ethical and cultural
relativism to negatively effect the
workplace
 Instills better values in Mexican
clients, employees etc. in that just
because women are not held in the
same regard as men, does not mean
that it should continue this way.
 Slight form of affirmative action but
necessary to ensure quick results
1. The Dentex Corporation case. (n.d.). Retrieved from
https://moodle.yorku.ca/moodle/pluginfile.php/1726082/mod_resource/content/1/Fin
al%20Case.pdf
2. Foreign Corrupt Practices Act. (2015, September 23). Retrieved April 04, 2016, from
https://www.justice.gov/criminal-fraud/foreign-corrupt-practices-act

3. Gifts from Foreign Person. (2015, November 27). Retrieved April 04, 2016, from
https://www.irs.gov/Businesses/Gifts-from-Foreign-Person

4. Rafter, M. V. (2015, January 27). Women in Management: Ceiling is Believing. Retrieved

April 04, 2016, from http://www.workforce.com/articles/21056-women-in-
management-ceiling-is-believing