The goal of this activity is to understand the role of business ethics in everyday company operations.

Business ethics is the application of general ethical ideas to business behavior. Business ethics is not a special set of ethical ideas different from ethics in general and applicable only to business. If dishonesty is considered unethical and immoral, then anyone in business who is dishonest with stakeholders—employees, customers, suppliers, stockholders, or competitors—is acting unethically and immorally. As described in the following case, however, sometimes ethical behavior may take on a different perspective when confronted with life and death situations during a global pandemic.

Read the case and answer the questions that follow.

Case

In early April 2020, the Trump administration issued a presidential order directing the Federal Emergency Management Agency (FEMA) to use its authority under the Defense Production Act to acquire from 3M and its subsidiaries as many N95 respirators as it determined appropriate. It also asked that 3M suspend exports of N95s made in the United States to Canada and Latin America and to divert masks made in China from customers in Asia to customers in the United States. President Trump tweeted (referring to N95s as "masks" and the Defense Protection Act as the "P Act"):

Donald J. Trump @realDonald Trump Apr 2

We hit 3M hard today after seeing what they were doing with their Masks. "P Act"

all the way. Big surprise to many in government as to what they were doing - will

have a big price to pay!

Source: Donald J. Trump, Twitter.

The backdrop of the president's demand was the sudden emergence in late 2019 of the global COVID-19 pandemic. COVID-19 was a highly contagious and sometimes deadly disease, with a higher risk of death or severe illness in the elderly or in people with underlying conditions such as heart or lung disease, asthma, or diabetes.

The N95 was a particulate-filtering facepiece designed to block at least 95 percent of airborne particles. The CDC recommended that medical workers, first responders, and others treating COVID-19 patients wear N95s to protect themselves from the airborne coronavirus. In late March 2020, U.S. hospitals told the government they did not have enough N95s, putting medical workers at grave risk during the pandemic. They said they faced delays of three to six months in ordering more. To combat price gauging, 3M published the list prices in the United States for several of its N95 respirator models so that customers could compare them with those of other manufacturers.

At the time, 3M was one of the leading manufacturers of various medical and personal protective equipment (PPE), including N95 respirators, for the global market. 3M respirators were manufactured in various countries, including at two factories it owned in the United States and by several supplier firms in China. According to its website, 3M followed six major principles that formed the basis of their code of conduct, including honesty, integrity, and personal accountability.

Like many other manufacturers of personal protective equipment, 3M was faced with a sudden spike in demand when the pandemic emerged. In early 2020, in response to COVID-19, 3M's management had invested over $80 million and doubled the global production of N95s to 100 million per month. Management stated they were on target to produce more than 100 billion respirators in the coming 12 months.

On that same day as his tweet, President Trump wrote a presidential memorandum calling for 3M to make available "any and all" N95 respirators the United States needed, under the authority of the Defense Production Act, which allowed presidential authorities to expedite supplies deemed necessary during a national emergency, such as COVID-19.

CEO Mike Roman responded to the White House memorandum with a statement on the company's website. Roman said that 3M looked forward to working with FEMA. However, he warned that halting the export of 3M respirators to non-U.S. customers in Canada and Latin American countries might provoke other countries, such as China, to retaliate. He added that he and the team at 3M were doing all that they could to get as many masks to those who needed them as quickly as possible. He also pledged to work closely with the U.S. Attorney General to stop illegal and unethical price gouging and promised not to raise the price for respirators during the pandemic.

Sources: 3M, "3M Response to Defense Production Act Order," press release, April 3, 2020, www.news.3m.com; 3M, "Ethical Business Conduct Principles," www.multimedia.3m.com; "How 3M Plans to Make More Than a Billion by End of Year," Bloomberg.com, March 25, 2020; "U.S. Pays High Prices for Masks from Unproven Vendors in Coronavirus Fight," The Wall Street Journal, April 18, 2020, www.wsj.com; and "Trump Seeks to Block 3M Mask Exports and Grab Masks from its Overseas Customers," The New York Times, April 3, 2020, nyti.ms/2UEKUDB.

(Note: The complete Discussion Case appears in Chapter 5 of the textbook.)

 

 

Which type of ethical issue did 3M face regarding price-gouging accusations, according to the case?

Multiple Choice

• Competitive pressures on profits
• Personal gain and selfishness
• Cross-cultural contradictions
• Conflicts of interest

At what stage of moral development would you classify a decision that focuses only on how U.S. customers are affected?

Multiple Choice

• Stages 5-6, principle-centered
• Stage 3, group-centered
• Stage 4, society-centered
• Stages 1-2, ego-centered

Which factor of moral intensity likely played the biggest role in 3M's response to FEMA's request, according to the case?

Multiple Choice

• Probability of effect
• Proximity
• Magnitude of consequences
• Social consensus