General Motors' Failure to Consider Stakeholders

General Motors (GM) has struggled with its brands and its image. Over the years, it has jettisoned some of its once-popular brands, including Oldsmobile and Pontiac, sold many others, and climbed back from a 2009 bankruptcy and reorganization. The automaker was hiding an even bigger problem, however: The ignition switch in many of its cars was prone to malfunction, causing injury and even death. The faulty switches caused 124 deaths and 273 injuries, and GM was finally brought to federal court. In 2014, the company reached a settlement for $900 million and recalled 2.6 million cars.

The case exemplifies the tension between the concept that "the only goal of business is to profit, so the only obligation that the business person has is to maximize profit for the owner or the stockholders" on one hand, and the ethical obligations a company owes to its other stakeholders on the other.4 GM's failure to consider its stakeholders and consumers when choosing not to report the potential for malfunction of the ignition switches led to an ethical breakdown in its operations and cost the company and its customers dearly. In addition, by treating customers as only a means toward an end, the company turned its back on a generation of loyal buyers.

Critical Thinking

What virtues and values shared by its long-time customers did General Motors betray by failing to disclose an inherent danger built into its cars?

How do you think that betrayal affected the company's brand and the way car buyers felt about the firm? How might it have affected its shareholders' views of GM?