The Case of the Sole Supplier

The Case of the Sole Supplier

Every day, organizations are faced with challenges that require them to strike a balance in meeting the needs of its various stakeholders. These organizations are expected to increase the shareholders’ wealth while at the same time serving the interest of the other stakeholders in the organization. Aside from the shareholders who are part owners of the organization, other stakeholders include financiers, customers, and the community in which the business is established. Therefore, whenever an organization sets out to make policy decisions, they must factor in the interest of all the stakeholders in the organization (Scarre, 2009). The essay that follows will apply utilitarian ethics to the problem faced by a transistor manufacturer.

Background of the Ethical problem

A story is told of a transistor manufacturer that acted as a sole supplier to a pacemaker manufacturer by the name of Stanton Medical Technologies. The transistor manufacturer was contemplating stoppage of supply to Stanton because of some ethical problems that had arisen. The main problem in this case arose when the transistor manufacture received information that their transistors were being used in the manufacture of sub-standard pacemakers. Some of these pacemakers malfunctioned causing mortality in the population that used them. Now, the board was thinking of withdrawing from the supply deal they had with Stanton because they feared that the cost of a lawsuit enjoining them with Stanton for the faulty pacemakers would impose a huge financial burden on the company. However, by so doing, Stanton will lack transistors for their pacemakers and as a matter of consequence, they will stop manufacturing pacemakers and patients with heart conditions will lose the fighting chance that Stanton Medical technologies could afford them (“The Case of The Sole Remaining Supplier, n.d”).

Obligations

The concerns raised by the members of the board are very legitimate. However, the board is wrong to assume that they only represent the interest of the shareholders. Shareholders are part of the stakeholders of the company. The boards approach should ensure that all stakeholders are considered before a final decision is reached. The company has both internal and external stakeholders. The internal stakeholders include shareholders, employees, and board of directors. External shareholders include Pacemaker Company, other companies that use the transistors, patients, and doctors. The company owes all these stakeholders a duty of care; for the sake of the internal stakeholders, the board has to shield the company from financial loss that might arise from a lawsuit, while for the external stakeholders, the board has to ensure that the supply of transistors is available as and when needed. Striking a balance between meeting the board’s obligation for these two groups presents an ethical dilemma (“The Case of The Sole Remaining Supplier, n.d”).

Practical reasoning

The ethical dilemma presented in this case can be solved by applying the theory of utilitarianism. According to this theory, right or correct actions tend to promote happiness while wrong actions promote unhappiness. An action with the greatest good is that which gives the greatest pleasure to a majority of people. Pacemakers rank the list of the most important medical devices. However, the numerous device malfunctions reported in recent years calls into question their reliability and safety. The theory of Consequentialism, which is a form of utilitarianism, demands that morality of any decision be based on the consequence or outcome of such a decision.

Jeremy Bentham’s Advice

Jeremy Bentham is the father of modern utilitarianism. According to Bentham, the best course of action should be one that imparts greatest good for the greatest number. Looking at the case at hand, Bentham would advice that the company continues to supply its transistor to the pacemaker manufacturer. This advice stems from the fact that the transistor manufacturer is the only remaining manufacturer of transistors to the pacemaker company. The fear of financial liability from lawsuits diminishes in importance when compared to the number of lives that would be lost if the pacemaker manufacturer stops producing more pacemakers (Julia, 2009). This case parallels the interest of internal stakeholders against that of external stakeholders.

Applying Bentham’s utilitarian theory, the interest of external stakeholders seems to overshadow that of internal stakeholders. The fear that the company might face financial losses from lawsuits can be remedied by the company imposing certain conditions on the companies buying their transistors. For instance, the company can request that the pacemaker manufacturer improve his engineering and testing facilities and procedures before resuming their supply. This move will ensure that both the internal and external stakeholders are protected, and the number of people covered by the greater good will increase (Julia, 2009).

The Tests

  1. Utility Test

This test starts by asking a question; is the common good being maximized and is harm being minimized? (“Ethics Ops – Common Good Test, n.d.)”. A normal functioning heart has a pacemaker of its own, which regulates the heartbeats. However, some people are born with defective hearts that lack this important mechanism. The heartbeat controls the pumping of blood to different parts of the body. Without the pacemaker, the heart will not be able to pump blood and as thus, the patient will die. The “good” of this medical device is that it affords patients suffering from conditions such as bradyarrthmias, and congestive heart failure a chance to live normal lives. The “bad” associated with this medical device is that it can malfunction (“The Case of The Sole Remaining Supplier, n.d”).

The good associated with the pacemaker device outweighs its bad by far. This assertion stands true because the device helps in saving lives. The bad is caused by an incompetent technical team, which does not spend enough time testing the device. This can be rectified by training the technicians, doctors on how to handle the device and minimize if not eradicate malfunctions, and by so doing address the concerns raised concerning safety and stability of the devices. The company can meet the needs of all stakeholders by ensuring that the technicians are trained properly. This move will reduce mortality rate due to malfunctions, while at the same time ensuring that more transistors are sold to increase the shareholders’ wealth.

  1. Common Good Test

This test asks the question, “Are we playing our part in ensuring that the common good prevails in this situation?” (“Ethics Ops – Common Good Test, n.d.)”. The question before the board regards whether the company should continue or halt the supply of transistors to the pacemaker manufacturer. The common good in this case is the heart pacemaker that is instrumental in saving countless lives. According to this test, the board must factor in the lack of technical knowhow by the doctors and technical staff at the pacemaker company, the responsibility they owe the patients that need the pacemakers, and the financial loss they might incur if sued for device malfunction. The members of the board must look at the common good from the benefit side.

Validity of the tests

It appears that both the utility and common good test point to the same conclusion. The conclusion is that the company should continue supplying the pacemaker manufacturer with the transistor. However, the company can revise their sale agreement and include a clause that limits their liability for the transistors up to the point the company sells to any buyer. This means that the transistor manufacturer will not be held liable for the incompetency of the pacemaker manufacturer. This action is in line with the utility approach, which will ensure that the majority of patients who need the medical device get them. .

Additionally, the fears presented by the board members about the malfunctions of the pacemakers should not concern board members so much because it is the pacemaker manufacturer that is responsible for the pace maker. The pacemaker has many components that are manufactured by different companies. If the transistor manufacturer was to be sued then it means that the manufactures of the other components should also be sued. Moreover, by comparing the number of devices that malfunctions against those that work perfectly, it is clear that the working devices overshadow the malfunctions (Julia, 2009).

In conclusion, utility test is ideal because it seeks to follow the test that gives the most benefit without seeking to know the harms of this choice. This approach will ensure that the firm, being a sole supplier of the transistor continues to make money due to monopoly. The transistor manufacturer will thus be able to maintain both its external and internal stakeholders happy. Following the results of the utility test, the board should come up with a resolution that keeps the business on.

 

References

Ethics Ops – Common Good Test. (n.d.). Ethics Ops – Common Good Test. Retrieved November 21, 2013, from http://ethicsops.com/CommonGood.php

Julia, D. D. (2009, March 27). The History of Utilitarianism. Stanford University. Retrieved November 21, 2013, from http://plato.stanford.edu/entries/utilitarianism-history/#JerBen

Scarre, G. (2002). Utilitarianism (Taylor & Francis e-Library ed.). London: Routledge.

The Case of The Sole Remaining Supplier. (n.d.). The Case of The Sole Remaining Supplier. Retrieved November 21, 2013, from http://www.scu.edu/ethics/dialogue/candc/cases/supplier.html

 

 

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