Business Ethics Case Study — Kokomo Corporation

There are of unethical conduct, both in general and in business management issues. For example, conduct whose only purpose is malicious, such as that which is intended to destroy the business of another purely for malice or revenge but without any possible benefit to the individual responsible for the conduct might be the highest level of unethical conduct. The next (worst) level of unethical conduct might be deceitful and for the purpose of benefiting the individual or entity taking the action that involve knowingly and purposely misrepresenting information with the specific intent of defrauding others (i.e. investors, business partners, or customers) for financial profit. The infamous cases of Bernie Madoff would fall into this category because he knew that he was destroying the lives of his investors by misrepresenting what he was doing with their life savings.

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The type of unethical conduct involved in the Kokomo Case is less serious (although still unethical) simply because Michael sincerely believes that his deception is necessary to save the company and the jobs of many employees. More importantly (in terms of the level of unethical behavior), Michael also sincerely believes that by lying to get the loan he will be causing no harm to the lender or to the company, because the loan will enable Kokomo to become competitive again. Michael is not considering lying because he purposely wants to cause harm to anybody, or because he hopes to profit personally from the deception, such as by cashing out all his company stock and retiring right after the loan is secured. Nevertheless, his misrepresenting the information is still unethical for other reasons.

Undoubtedly, Michael believes that his deception will not actually cause harm to anybody. On that level, his approach to securing the loan is only unethical “technically” because the lenders are entitled to use whatever criteria they want to decide how to . Michael has no moral “right” to undermine their loan evaluation process even if he genuinely believes that the lender will not be harmed by the deception. After all, beliefs are always subjective and people in Michael’s position can be very sure about what they genuinely believe but still be wrong.

One need look no further than the U.S. housing market in 2007 to see what can happen when peoples’ beliefs about the value of property and about the ability of borrowers to pay back loans are wrong. Therefore, Michael is acting unethically to misrepresent information to the lender that the lender intends to use to determine whether or not the loan to Kokomo is safe enough to issue. Michael probably believes (honestly) that the lender simply does not understand enough about Kokomo’s business processes and competitive situation to make the “right” decision. He probably feels morally justified in lying for that reason.

The more ethical approach to the same situation and the one that I would prefer would be to devote the necessary effort to teach the lender about Kokomo’s position and to present all of the facts that might not be apparent from the traditional information requested on the loan application. Michael should create a presentation to educate the lender so that the lender can understand that the poor past profits recorded for Kokomo are simply not a reliable indicator of the security of the loan. Michael should illustrate why the loan will enable Kokomo to become profitable and repay the loan instead of relying on unethical deception to get the loan.