Ethics in Business


From a business perspective, working under government 
contracts can be a very lucrative proposition. In general, a stream of 
orders keep coming in, revenue increases and the company grows in the 
aggregate. The obvious downfalls to working in this manner is both 
higher quality expected as well as the extensive research and 
documentation required for government contracts. If a part fails to 
perform correctly it can cause minor glitches as well as problems that 
can carry serious repercussions, such as in the National Semiconductor 
case. When both the culpable component and company are found, the 
question arises of how extensive these repercussions should be. Is the 
company as an entity liable or do you look into individual employees 
within that company? From an ethical perspective one would have to 
look at the mitigating factors of both the employees and their 
superiors along with the role of others in the failure of these
components. Next you would have to analyze the final ruling from a
corporate perspective and then we must examine the macro issue of
corporate responsibility in order to attempt to find a resolution for
cases like these.

 The first mitigating factor involved in the National 
Semiconductor case is the uncertainty, on the part of the employees, 
on the duties that they were assigned. It is plausible that during the 
testing procedure, an employee couldnt distinguish which parts they 
were to test under government standards and commercial standards. In 
some cases they might have even been misinformed on the final 
consumers of the products that they tested. In fact, ignorance on the 
part of the employees would fully excuse them from any moral 
responsibility for any damage that may result from their work. Whether 
it is decided that an employees is fully excused, or is given some 
moral responsibility, would have to be looked at on an individual 

 The second mitigating factor is the duress or threats that an
employee might suffer if they do not follow through with their 
assignment. After the bogus testing was completed in the National 
Semiconductor labs, the documentation department also had to falsify 
documents stating that the parts had surpassed the governmental 
testing standards. From a legal and ethical standpoint, both the 
testers and the writers of the reports were merely acting as agents on 
direct orders from a superior. This was also the case when the plant 
in Singapore refused to falsify the documents and were later falsified 
by the employees at the have California plant before being submitted 
to the approval committees (Velazquez, 53). The writers of the reports 
were well aware of the situation yet they acted in this manner on the 
instruction of a supervisor. Acting in an ethical manner becomes a 
secondary priority in this type of environment. As stated by Alan 
Reder, . . . if they [the employees] feel they will suffer
retribution, if they report a problem, they arent too likely to open 
their mouths. (113). The workers knew that if the reports were not 
falsified they would come under questioning and perhaps their 
employment would go into jeopardy. Although working under these 
conditions does not fully excuse an employees from moral fault, it 
does start the divulging process for determining the order of the 
chain of command of superiors and it helps to narrow down the person 
or department that issued the original request for the unethical acts.

 The third mitigating factor is one that perhaps encompasses 
the majority of the employees in the National Semiconductor case. We 
have to balance the direct involvement that each employee had with the 
defective parts. Thus, it has to be made clear that many of the 
employees did not have a direct duty with the testing departments or 
with the parts that eventually failed. Even employees, or 
sub-contractors, that were directly involved with the production were 
not aware of the incompetence on the part of the testing department. 
For example, the electrical engineer that designed the defective 
computer chip could act in good faith that it would be tested to 
ensure that it did indeed meet the required government endurance 
tests. Also, for the employees that handled the part after the testing 
process, they were dealing with what they believed to be a component 
that met every governmental standard. If it was not tested properly, 
and did eventually fail, isnt the testing department more morally 
responsible than the designer or the assembly line worker that was
in charge of installing the chip? Plus, in large corporations there 
may be several testing departments and is some cases one may be held 
more responsible than another depending on their involvement. A 
process like this can serve the dual purpose of finding irresponsible 
employees as well as those that are morally excused.

 The fourth mitigating factor in cases of this nature is the
gauging of the seriousness of the fault or error caused by this 
product. Since National Semiconductor was repeatedly being reinstated 
to the listed of approved government contractors, one can safely 
assume that the level of seriousness, in the opinion of For the 
contractor approval committees, is not of monumental importance. Yet 
one has to wonder how this case would have been different if the lack 
of testing did cause the loss of life in either a domestic or foreign 
military setting. Perhaps the repercussions would have come faster 
much more stringent. The fact that National Semiconductor did not 
cause a death does not make them a safe company. They are still to be 
held responsible for any errors that their products cause, no matter 
the magnitude. As for the opposition to the delegating of moral 
responsibility, mitigating factors and excusing factors, they would 
argue that the entity of the corporation as a whole should be held 
responsible. The executives within a corporation should not be forced 
to bring out all of the employees responsible into a public forum. A 
company should be reprimanded and be left alone to carry out its own 
internal investigation and repercussions. From a business law 
perspective this is the ideal case since a corporation is defined as 
being a separate legal entity. Furthermore, the opposition would argue 
that this resolution would benefit both the company and the government 
since it would not inconvenience either party. The original resolution 
in the National Semiconductor case was along these lines. The 
government permanently removed National from its approved contractors 
list and then National set out to untangle the web of culpability 
within its own confines. This allowed a relatively quick resolution as 
well as the ideal scenario for National Semiconductor.

 In response, one could argue that the entity of a corporation 
has no morals or even a concept of the word, it is only as moral and 
ethical as the employees that work in that entity. All of the 
employees, including top ranking executives are working towards 
advancing the entity known as their corporation (Capitman, 117). All 
employees, including the sub-contractors and assembly line workers, 
are in some part morally responsible because they should have been 
clear on their employment duties and they all should have been aware 
of which parts were intended for government use. Ambiguity is not an 
excusing factor of moral responsibility for the workers. Also, the 
fact that some employees failed to act in an ethical manner gives even 
more moral responsibility to that employee. While some are definitely 
more morally responsible than others, every employee has some burden 
of weight in this case. In fact, when the government reached a final 
resolution, they decided to further impose repercussions and certain 
employees of National Semiconductor were banned from future work in 
any government office (Velazquez, 54). Looking at the case from the 
standpoint of National Semiconductor, the outcome was favorable 
considering the alternate steps that the government could taken. As 
explained before, it is ideal for a company to be able to conduct its 
own investigation as well as its own punishments. After all, it would 
be best for a company to determine what specific departments are 
responsible rather than having a court of law impose a burden on every 
employee in its corporation. Yet, since there are ethical issues of 
dishonesty and secrecy involved, National Semiconductor should
have conducted a thorough analysis of their employees as well as their 
own practices. It is through efforts like these that a corporation can 
raise the ethical standard of everyone in their organization. 

 This case brings into light the whole issue of corporate
responsibility. The two sides that must ultimately be balanced are the
self interests of the company, with main goal of maximum profit, and 
the impacts that a corporation can cause on society (Sawyer, 78). To 
further strengthen this need, one could argue that there are very few 
business decisions that do not affect society in way or another. In 
fact, with the plethora of corporations, society is being affected on 
various fronts; everything from water contamination to air bag safety 
is a concern. The biggest problem that all of us must contend with is 
that every decision that a business makes is gauged by the financial 
responsibility to their corporation instead of their social 
responsibility to the local community, and in some cases, the 
international community. This was pointed out on various occasions as 
the main reason why National Semiconductor falsified their reports. 
The cost that the full tests would incur did not outweigh their profit 
margins. Their business sense lead them to do what all companies want 
. . . maximum profit. In the opinion of the executives, they were 
acting in a sensible manner. After all, no executive wants to think of 
themselves as morally irresponsible. (Capitman, 118). 

 The question that naturally arises, in debating corporate
responsibility, is what types of checks and balances can be employed
within a company to ensure that a corporation and all of its agents 
act in an ethical manner. Taking the example of the National 
Semiconductor case, one can notice many failures in moral 
responsibility. National Semiconductor would have to review its 
employees, particularly the supervisors, for basic ethical values such 
as honesty. example, ultimately it was the widespread falsification of 
the testing documentation that caused the downfall of National 
Semiconductor, not the integrity of their components. In the synopsis 
of the case it is never mentioned that the employees initiated this 
idea, it would seem that it was the supervisors that gave the order to 
falsify the documents. In order to accomplish this, the company 
executives would have to encourage their employees to voice
their concerns in regards to the advancement of the company. Through 
open communication, a company can resolve a variety of its ethical 
dilemmas. As for the financial aspects of the corporation, it has to 
decide whether the long term effects that a reprimand from the 
government can have outweighs their bottom line. In other words, 
corporations have to start moving away from the thought of instant 
profit and start realizing both the long term effects and benefits. 
These long term benefits can include a stronger sense of ethics in the 
work force as well as a better overall society. 

 To conclude, I must say that I agree with the use of 
mitigating factors in determining moral responsibility. A company, as 
defined by law, is only a name on a piece of paper. The company acts 
and conducts itself according to the employees that work in that 
entity. I use the word employee because in ethical thinking there 
should be no distinction of rank within a company. There are times 
when executives can be held directly responsible and at the same time, 
there are cases where employees are acting unethically without the 
executives knowing. Neither title of executive or employee equates to 
moral perfection. Therefore, when a company has acted irresponsibly, 
its employees must be held liable in a proportionate amount. As for 
the future of ethics in business I would speculate that if employees 
started to think more in long term benefits and profits, many of the 
ethical dilemmas that we face today would be greatly reduced. As 
mentioned before, businesses today uses the measuring stick of 
profitability. There needs to be a shift to the thinking of total
utility for the social community in order to weigh business decisions. 
Opponents would argue that this is a long term plan that require
too many radical changes in the face of business. Also, there is no 
way that an industry wide standard can be set since there are too many 
types of corporations. Plus, companies have different needs and every 
moral rule is subjective according to the type of business that 
everyone conducts. In response, I would argue that although there are 
no industry standards that are feasible, it is possible for every 
company to examine their practices as well as the attitude of their 
employees. There will be companies that find that they are doing fine 
with employees that are aware of their moral values. Yet other 
companies will find that they do have areas that need improvement. It 
is steps like these that start implementing changes. Once a few 
companies start to see the benefits of changes, it can help to 
encourage other companies to follow suit. After all, as seen in the 
case of National Semiconductor, mistakes in one department can cause 
the deterioration of an entire corporation. When the costs that are 
possible are taken into account, the changes required to rectify this 
are small in comparison.


Capitman, William. 1973. Panic In the Boardroom. New York: Anchor 
Press-DoubleDay Publishing

Harris, Kathryn, Chips Maker Feels Attack on Four Sides Los Angeles 
Times April 4, 1982. Pg. B1

Pava, Moses. 1995. Corporate Responsibility and Financial Performance.
London Quorum Books

Reder, Alan. 1944. In Pursuit of Principle and Profit. New York:
G.P. Putnams Sons Publishing

Sawyer, George. 1979. Business and Society: Managing Corporate Social
Impact. Boston Houghton Mifflin Publishing

Schuyten, Peter. To Clone A Computer. New York Times February 4, 1979. 
Pg. 1

Velazquez, Manuel. 1992. Business Ethics: Concepts and Cases. New 
Jersey Prentice Hall Publishing


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