In August, 1978, three young women died in a horrific car crash in Elkhart, Indiana. They were riding in a Ford Pinto, a popular subcompact car at the time. The trouble is the car had a defective fuel system design. The defect was known to Ford but it did a risk/benefit analysis to determine if it should pursue changes in the car’s design. Ford decided it was cheaper to pay death claims as a result of the product than to fix the problem.
Do some research on the subject and answer the following questions:
(1) Should a risk/benefit analysis be used in situations where a defect in design or manufacturing could lead to death or serious bodily harm, such as in the Ford Pinto situation?
(2) If you owned your own company, and you were faced with this dilemma, what would you have done? Why?
(3) What do you think car companies learned from this issue?
Please advise which theories and analysis I should use discussed in Chapters 1 and 2 of text book Ethical Obligations Decision Making in Accounting,