Engineers and management: The challenge of the challenger incident

The Challenger incident was a result of at least four kinds of difficulties: differing perceptions and priorities of the engineers and management at Thiokol and at NASA, a preoccupation with roles and role responsibilities on the part of engineers and managers, contrasting corporate cultures at Thiokol and its parent, Morton, and a failure both by engineers and by managers to exercise individual moral responsibility. I shall argue that in the Challenger case organizational structure, corporate culture, engineering and managerial habits, and role responsibilites precipitated events contributing to the Challenger disaster. At the same time, a number of individuals at Morton Thiokol and NASA were responsible for the launch failure. Differing world views, conflicting priorities of the engineers and managers on this project, and the failure of either engineers or management to take personal moral responsibility for decision-making contributed significantly to the event. Patricia H. Werhane is the Wirtenberger Professor of Business Ethics at Loyola University of Chicago. She is one of the founding members and past president of the Society for Business Ethics and editor-in-chief of Business Ethics Quarterly. Her publications include Ethical Issues in Business, coedited with Tom Donaldson, Persons, Rights, and Corporations, and Adam Smith and His Legacy for Modern Capitalism forthcoming with Oxford University Press.     

Book reviews

Journal of Economics -     

FINANCIAL FUTURES AND IMMUNIZATION

This paper investigates the ability of any portfolio that contains both bonds and financial futures contracts to immunize a lump sum liability having the same initial duration and value as the portfolio itself. An analysis of second order conditions shows that immunization against a local change in interest rates is possible only if the number of futures contracts lies within a critical interval; the endpoints depend on cash flow characteristics of the specific bonds and contract being combined. Immunization against any large change in rates is impossible if the portfolio contains any long position in futures but is achieved by some portfolios that contain short positions in futures.     

Gender, Time Use, and Public Policy over the Life Cycle

In this paper we compare gender differences in the allocationof time to market work, domestic work, child care, and leisureover the life cycle. Time-use profiles for these activity categoriesare constructed on survey data for three countries: Australia,the UK, and Germany. We discuss the extent to which gender differencesand life-cycle variation in time use can be explained by publicpolicy, focusing on the tax treatment of the female partnerand on access to high-quality, affordable child care. Profilesof time use, earnings, and taxes are compared over the lifecycle defined on age as well as on phases that represent thekey transitions in the life cycle of a typical household. Ourcontention is that, given the decision to have children, life-cycletime use and consumption decisions of households are determinedby them and by public policy. Before children arrive, the adultmembers of the household have high labour supplies and plentyof leisure. The presence of pre-school children, in combinationwith the tax treatment of the second earner's income and thecost of bought-in child care, dramatically change the patternof time use, leading to large falls in female labour supply.We also highlight the fact that, in the three countries we study,female labour supply exhibits a very high degree of heterogeneityafter the arrival of children, and we show that this has importantimplications for public policy. Footnotes ¹ E-mail addresses: pfapps{at}law.usyd.edu.au; ray.rees{at}lrz.uni-muenchen.de     

Evaluating the Ethics of Inversion

In the last five years, a number of U.S. companies have either moved their locus of incorporation to countries with more favorable tax laws, or announced such moves. Given this trend toward “inversions”, and the polemics that have accompanied it, we offer two ways in which the ethics of such a move can be evaluated. We provide multinational executives with two applications of ethics to inversion: Kant’s deontological theory and the consequentialist perspective of utilitarianism.     

The Effect of Regulation on Insurance Pricing: The Case of Germany

This article analyzes the impact of policy form regulation on the unit price of insurance and determinants of premium changes using the 1994 deregulation of the German property–liability market as a natural experiment. Our result show that policy form regulation did not increase prices above competitive levels. Factors influencing premium changes are significantly different for the two time periods, pre‐ and post‐deregulation, indicating that regulation affects insurance pricing. Focusing on highly competitive lines after deregulation, we find a significant price decrease, and this decrease is offset by higher prices in the remaining other lines.