Sears auto center scandal

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Sears auto center scandal

By | March 2008
Page 1 of 5
LGST001 – Ethics and Social Responsibility

Sears Auto Center Scandal
Managing Business Ethics Text (pp.207 - 210)

Ethical Decision-making Issue:
Should Sears remove its commission-based compensation scheme?

Group Stand:
The majority of the group believes that Ellen should be removed from the team.

Support for Motion:
Rawl's theory/Egalitarianism
The underlying inequality is that car owners are paying for repair services they do not require while Sears benefits by earning higher profits. This is a result of information asymmetry given that the repair advisors are in a more knowledgeable position regarding the available and required services, and clients act upon their advice. Thus, there is an opportunity for advisors attempting to increase their own commission to recommend more than necessary services. Based on the Consumer Protection (Fair Trading) Act in Singapore, 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. By Rawl's theory of equal liberty principle, the consumer's basic rights are compensated and the inequality is unjust. Further, consumer's rights to safety are also sacrificed as mechanics tend to shorten the procedures required for each repair in order to get more work done and increase their own compensation. Participation model

By the participation model of procedural justice, the group of people at the receiving end of the decision, the repair mechanics and service advisors, should have a say in the outcome of the decision. The letter by Sears mechanic Chuck Fabbri to the Senator is an indication of the opinions of the mechanics. He expressed discontent at the incentive pay system and narrated accounts of eliminated procedures and threats of...