The Sears auto scandal brought about a multitude of ethical issues, but the number one issue is that Sears over looked their integrity, values and just focused on increasing profits. Since the goal of the company was to maximize profits, employees in the company cut corners and just focused on the dollar amount that was to be made. Since the productivity incentive plan was introduced, mechanics and service advisors were advising and making customers pay for needless repair services. These two groups of employees were being unethical because they were inspired to increase their commission. The incentive plan in a way helped cut corners by betraying customers just so they could increase their profits.
Sears’s customers, their employees, and their reputation are all affected by this case. The customers were told that their cars needed repairs, which in-turn did not, but the customers still got charged for the services. Sears’ customers were defrauded and deceived to the auto center employees. Employees of Sears were affected because they could be terminated if they did not meet sales quotas the company was asking of them. In reason, the employees of Sears were degrading the principle of deontology. The employees’ duties were to serve their customers and to provide them with honest findings about the repairs their cars needed, but the productivity incentive plan, reassured them to act unethically. To reach their quotas and to receive their commission, it was necessary for the advisors and the mechanics to overcharge customers for unneeded repairs and squander to save time.
The aftermath for Sears was ample, many states had lawsuits against Sears and the license for the Sears auto center in California was in jeopardy. Because of the scandal, Sears lost a lot of dedicated customers and the company’s reputation was negatively impacted. As a short-term punishment, in 42 states, Sears had to pay a multimillion-dollar settlement and in California, they were placed on three-year probation. (Trevino & Nelson, 2007).
The responsibility of the Sears auto center was to serve its customers with honest service repairs. Apparently, Sears did not meet their loyalties to their customers and in reality they carried out an incentive plan that inspired employees to act unethical. Sears hurt their reputation nationwide by breading the trust of their customers. The disclosure rule was failed by the mechanics and service advisors. If their activities were brought forth to the public they would feel very uncomfortable
Ethical Approach Taken – Deontological
The approach that was taken in the Sears auto scandal was the deontological approach. The undermost difference is that the owners of cars are paying for services that were not needed on their cars while Sears benefited by earning larger profits. This is an aftermath of information change given that the repair advisors are more knowledgeable regarding the required services, and clients act upon their advice. Therefore that is an opportunity for the advisors to increase their own commission by recommending more than necessary repairs.
As the Consumer Protection Act states, it is unlawful for a trader to "do or say anything, or omit to do or say anything, if as a result a consumer might reasonably be deceived or misled." The incentive pay compensation scheme has resulted in service advisors "systematically misleading customers and charging them for unnecessary repairs", and this is a breach of the Act. Based on the theory of equal liberty principle, the basic rights of the consumers are accommodated and the disparity is unjust. Since the mechanics are shortening the procedures that are required for each repair done in order to increase their own compensation, they are risking the safety of the consumer.
My Analysis
Based on my analysis, I do not think Sears’ response to the allegations and the changes it made were adequate. The company did not even accept that their employees committed fraud by deceiving customers and making them pay for unnecessary repairs. Also, the letter from the Sears mechanic clearly shows that employees are still under pressure to meet quotas and nothing really changed in the company. The employee was threatened termination if he did not increase his production level, even though he had positive feedback about his production in the past. The company did not even take the real cause of the ethical dilemma; they did not eliminate their commission based compensation plan for mechanics. Mechanics are still motivated by meeting sales quotas and how many parts replaced.
In 1992, the big question asked was what was going to be the long term impact from this scandal. If I take today's current events in business scandals, I think I can sum it up as a huge impact. Sears decided in one campaign to increase production and revenue and capitalize on greed. Today, it is not uncommon for companies and organizations to have policies on ethics, behavior and business relations.
References
Treviño, L.K. & Nelson, K. A. (2007). Managing Business Ethics. Hoboken, NJ: John Wiley & Sons, Inc.
