Ford Pinto & Social Capital essays

Ford Pinto & Social Capital essays The Ford Pinto fiasco in the 1970s led to an unprecedented court case in which the prosecution brought charges of reckless homicide against the Ford Motor Company, the first time a corporation had been charged with criminal conduct in the United States (Gioia, p. 115). Buckling under pressure from pending lawsuits, increasingly strident governmental regulations, and a persistent media, the Ford Motor Corporation finally recalled all Pintos sold between 1970 and 1976. What really inspired Ford to recall the explosive vehicles was, however, the clear fact that the negative attention they were receiving in the media impinged on their profit margins. Mismanagement of the Pinto problem led to a decline in Fords reputation and thus eroded their perceived social capital. What Lee Iacocca did not foresee when he refused to improve the design of the vehicle was the inherent value of social capital: the implied trust between consumers and corporations. Iacocca had assumed that price would be the sole motivator for purchasing the Pinto and that, in spite of the frequent explosions, consumers would pay the price. Placing a dollar-value on human life, estimated at around $200,000 at the time, Ford worked out a cost-benefit analysis that implied that cutting safety costs outweighed possible losses due to injury or death. The cost-benefit analysis conducted by Ford did not include the value of social capital. Defined by Fukuyama as trust and including virtues like truth telling, meeting obligations, and reciprocity, social capital was the missing link in the Ford Motor Companys infamous equation (p. 99). Had Iacocca measured the long-term benefits of engendering consumer trust through safe vehicles, Ford might have averted the negative economic repercussions of the Pinto recalls including the subsequent bad publicity. Underestimating the value of social capital undermined the companys integr...