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How did the Takata’s actions prior to the corporate scandal comply with or contravene international (e.g. OECD, UN, ILO) guidelines for Multinational Enterprises

Discuss about the International Business for Economic Co-operation and Development.
 

From the beginning the report emphasizes on the fact there was a scandal regarding the Takata Airbag. Takata was considered to be the second largest airbag manufacturer in the world thereafter. However, it was observed that due to the defect in the airbags, 23 deaths and 230 injuries occurred worldwide. Thereafter, being the centre of the auto industry’s biggest product recall, the Government of Australia had declared a compulsory recall of all the airbags that were involved. The problem was that the airbags did not take any satisfactory measures or actions for preventing the vehicles that causes injury to the passengers and drivers. However, there have been factors like individual, organizational and national actions and the approach of the company to CSR in relation to the scandal. 

International investments have helped in the development of globalization and also helped the investment process to flourish more. The multinational enterprises are one of the best ways to channelize investment. The Multinational enterprises have found their maximum potential at the Organization for Economic Co-operation and Development economics. OECD is the forum where multinationals come together and their uses are addressed. Under the OECD are 30 functioning democracies which help in addressing the economic, societal and environmental issues. The Takata scandal is considered one of the biggest scandals in the history of automotive scandals. The negligence and the lack of measures taken by Chevrolet Corvair was held to be a death trap that claimed the lives of many and hence the automotive was forced to discontinue their business (Ruggie & Nelson, 2015). The automotive failed to take the essential care that was due and was owed to the users. The scandal was a defining point in the history of scandals because it defied the laid down norms of international conventions that rely on ethics. The reports have claimed that all the other counterparts were aware of the defective airbags that Takata was using but they kept quiet and that is against the basic principles of the international conventions. Another way Takata violated the OECD norms was by they kept the profit and the benefit equation in mind but they ruled out the safety that the automobile company owes to the owners. The government policies have shown a downward slope in penalizing the wrongdoers and that is one of the main reasons why these scandals occur (Reinert, Reinert & Debebe, 2016). The United Nations Commission on Human Rights made a theory that was binding on all the member states that required all the business enterprise to respect human rights and also make sure that their principles and norms are for the upkeep of the protection and preservation of human rights and there also had to be a relation between human rights and business. Under the UN regulations, a corporate is mandated to follow the treaty and ensure that their actions do not have any detrimental effect on the others. Therefore, these regulations are important because they have levied a very strict responsibility on the corporations to secure and approve the human rights element. In the particular case of the Takata airbag scandal, the automotive company did not take the necessary precautions that mandate that human life is worth more than profits and benefits. There was a clear violation of the human rights and also safety precautions that are owed to the users of the car. The International Labour Organization also looks after the rights of the labours and ensures that there shall be a promotion of the standards of the corporate world (Picciotto, 2017). The Multinational Enterprise and Social Policy Declaration is important for promotion of the rights of the employers and the users of any service under the ILO (Biondi, 2015). The airbag scandal has been a clear violation of the international norms that have established guidelines for multinational enterprise. 

Factors explaining these actions and the company’s approach to CSR prior to the scandal

According to the CSR activities, it can be stated that the factors of individual, organizational and international level has an effect on the approach of the company prior to the scandal of Takata waterbags. In this regard, mention can be made of the existing safety standards which needs to be followed on the part of the organization in order to make sure the well being of the employees and the consumers (Shire, Holtgrewe & Kerst, 2017). In spite of all this, much emphasis has to be laid on the installation of special equipments, which ensures the safety standards of the individuals to the highest possible extent. The Organization for Economic Co-operation and Development is an intergovernmental economic organization that helps in taking care of the individuals at the national or international level (Turban,  Strauss & Lai, 2016). The company will therefore be held liable for the loss and injury suffered by the individuals who had installed the airbags of Takata. In this regard, it is worthwhile to refer here that it is the obligation of every organization to act in accordance to the safety standards depicted in the code of safety measures. In this way, the organizations would be able to achieve the objective of common goal. However, the nature of this accident has already caused detrimental harm to the individuals concerned. Therefore, it is essential on the part of the authorities to undertake sufficient measures to address the underlined issues associated with it (McCrary, Nielsen & Goldstein, 2016). Ethics, environmental care and good corporate citizenship are few of the qualities that are engaged with the Customer Service Representative. It is evident that every organization has developed ethical codes of conduct of its own, which needs to be followed by the employees as well as the authorities of the organization. Failure to comply with the existing ethical codes of conduct shall result into penalty or in most serious cases can result in imprisonment as well (Top, 2018). It is noteworthy to mention here that despite all the efforts on the part of the management of the organization consumers should also comply with the existing codes of ethical and safety standards for the purpose of ensuring  their well-being. 

Takata is a popular air-bag manufacturer in Japan. Besides this product they provide safety materials such as child restraint system and other safety products. This organization is considered as the second air-bag manufacturer in the world. Takata has faced a major CSR scandal due to its defective air-bag. According to the statistical data, Takata air-bag caused 23 deaths and 230 injuries worldwide (News.com.au, 2018). However, this scandal affected the brand image of Takata. The CEO of this organization was resigned due to high financial pressure in that time. Therefore, this organization notes that the air-bag inflators are not working properly, which created injury and death of the individuals. After the huge investigation, the executives of Takata admit that they have manipulated the test data of inflators. However, this organization had tried to avoid the legal obstacle, however; they were not able and had to face the legal issues. The response of Takata towards this scandal was very disappointing. Takata has not made its response to National Highway Traffic Safety Administration or NHTSA (Productsafety.gov.au, 2018). At this time Takata’s chief executive did not mention that their air-bag was defective. Hence, it can be said that Takata’s management did not show any positive response to this scandal they had tried to avoid this critical situation. After this scandal Takata has promised to keep the driver safe in future however, NHTSA has started to review the Takata’s response.

Response of Takata during the corporate scandal and how did this scandal affect the firm’s strategy, relationship with external stakeholders and business sustainability

Defective air-bag of Takata affected its brand image and its strategies. However, due to the defective air-bag many drivers and people are injured and death occurred. This situation highlights a big danger for the car industry. The main strategies of Takata are to provide safety equipment and to and to design the equipment to protect the users from any danger. On the other, by providing the safety equipment Takata wanted to cover a large number of car brands. However, after the CSR scandal due to defective air-bag Takata is not able to continue its strategy as they are not able to provide safety to the customers, as a result, their profitability, as well as the brand reputation, was affected. On the other hand, the popular brands such as Toyota, Honda, Nissan, BMW, Ford and Mazda who were the regular customers of Takata rejected Takata’s product as it caused many deaths and injuries of passengers and drivers. As a result, the profitability strategy was hampered (Baena, 2018).

Poor reputation of an organization often hampers the relationship with the stakeholders (Sakunasingha, Jiraporn & Uyar, 2018). In the context of Takata, both internal and external stakeholders have lost their belief in the organization. The employees left their jobs due to the poor brand image of this organization. Next, the external stakeholders such as the customers rejected to purchase the products of Takata. The number of regular customers began decreasing and the popular car organization did not purchase air-bag from this organization. However, stakeholders did not trust this organization due to such big scandal. On the other hand, the sustainability of this organization also affected due to this air-bag scandal. Due to this scandal the profitability of this organization decreases, which highlights the poor economic sustainability of this organization. On the other hand, the brand image of this organization was affected, which also highlights a negative impact on its social sustainability. 

Takata did not take any proper CSR initiatives during their air-bag scandal. However, they need to take good CSR practices to deal with CSR challenges. CSR initiatives allow the organization to deal with the corporate challenges and reduce their impact on the society and the environment (Amoroso, 2018). However, defect in the air-bag is the main cause that leads the passengers and drivers to face accidents. Hence, weekly based auditing could be helpful for Takata to identify the defects in their product manufacturing. Regular auditing is an effective process to find out the loopholes and to take necessary action. The staffs manipulated the data regarding the defects of the air-bag. Hence, incorporation of a regular audit could be an effective process to reduce the inefficiency of the staffs in Takata.

It is important for Takata to raise the safety awareness among the staffs. This could reveal the importance of the safety during the manufacturer of the products. Safety assurance should be the first priority of the air-bag manufacturer (Fortis et al., 2018). In the context of Takata, they should respond by ensuring the safety during the scandal as it could protect their brand image. On the other providing compensation to the injured persons could be effective for this organization and it could be a good response from this organization to deal with this situation. Therefore, Takata management needs to take legal steps against those staffs who have manipulated the data regarding the ineffective inflators. This could help Takata to preserve their brand image. On the other hand, proper communication regarding the safety awareness is an effective CSR practice for an organization. However, this could be helpful for Takata to improve their CSR activities and to deal with the scandal. Hence, it can be said that Takata needs to concentrate on improving their CSR activities to deal with the challenges and to reduce their impact on the society.

Conclusion

This study deals with the major CSR scandal of Takata due to their defective air-bag. However, however, it has been received that Takata did not show any positive response to this scandal and they did not take any CSR activities to deal with this situation. Hence, this hampered the brand image, stakeholder relationship and the sustainability of the business. In order to deal with any business scandal, a positive response is crucial from the management. Therefore, incorporation of proper CSR responsibilities and practice need to be taken. Takata has lost many customers due to this scandal, which affects its social sustainability. Hence, it can be concluded that good CSR practice should be included in the management practice to achieve sustainability in the business. 

References

Amoroso, D. L. (2018). The Importance of Advocacy on Reputation and Loyalty: Comparison of Japanese, Chinese, and the Filipino Consumers. In Management Strategies and Technology Fluidity in the Asian Business Sector (pp. 114-125). IGI Global.

Baena, V. (2018). The importance of CSR practices carried out by sport teams and its influence on brand love: the Real Madrid Foundation. Social Responsibility Journal, (just-accepted), 00-00.

Biondi, A. (2015). New life for the ILO Tripartite Declaration on Multinational Enterprises and Social Policy. International Journal of Labour Research, 7(1/2), 105.

Fortis, Z., Maon, F., Frooman, J., & Reiner, G. (2018). Unknown knowns and known unknowns: Framing the role of organizational learning in corporate social responsibility development. International Journal of Management Reviews, 20(2), 277-300.

McCrary, H. C., Nielsen, T. J., & Goldstein, S. A. (2016). Penetrating neck trauma: an unusual case presentation and review of the literature. Annals of Otology, Rhinology & Laryngology, 125(8), 682-686.

News.com.au. (2018). The cars affected by biggest recall in history. Retrieved on June 4 2018, from: https://www.news.com.au/technology/innovation/motoring/motoring-news/the-cars-affected-by-biggest-recall-in-history/news-story/8860f9a3ef1cc581a464cd8a9cc8769d

Picciotto, S. (2017). Rights, responsibilities and regulation of international business. In Globalization and International Investment (pp. 177-198). Routledge.

Productsafety.gov.au (2018). About the compulsory Takata airbag recall. Retrieved on June 4 2018, from: https://www.productsafety.gov.au/recalls/compulsory-takata-airbag-recall/about-the-compulsory-takata-airbag-recall

Reinert, K. A., Reinert, O. T., & Debebe, G. (2016). The new OECD Guidelines for Multinational Enterprises: better but not enough. Development in Practice, 26(6), 816-823.

Ruggie, J. G., & Nelson, T. (2015). Human Rights and the OECD Guidelines for Multinational Enterprises: Normative Innovations and Implementations Challenges. Brown J. World Aff., 22, 99.

Sakunasingha, B., Jiraporn, P., & Uyar, A. (2018). Which CSR activities are more consequential? Evidence from the Great Recession. Finance Research Letters.

Shire, K., Holtgrewe, U., & Kerst, C. (2017). Re-organising customer service work: an introduction. Re-organising Service Work: Call Centres in Germany and Britain: Call Centres in Germany and Britain, 1.

TOP, J. (2018). THE EXPLOSIVE RECALL: PROPOSING SOLUTIONS TO HANDLE THE VOID LEFT BY THE TAKATA BANKRUPTCY. Wisconsin Law Review, 2018(3).

Turban, E., Strauss, J., & Lai, L. (2016). Social Customer Service and CRM. In Social Commerce (pp. 155-178). Springer, Cham.

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