Business Ethics and Customer Stakeholders, Essay Example

It has been recently brought to the attention of management from the Quality Assurance department about the toy whistles. The toy whistles have been found to contain a higher amount of lead than what is required by the United States regulations for children. The toy whistles were being developed and packaged by the Elementary Toy Division. The metal whistles are posed to be delivered within a shipment to South America. In taking into consideration the pressing situation, the purpose of this memo is to outline the three potential alternative decisions needed to properly address the issue of the metal whistles that are shipping to South America at the end of the week. The cost of remaking the products would tally close to $100,000, and if not pulled could result in several legal, ethical, and financial implications that could prove far larger than pulling the whistles altogether.

Alternative Decision Making Process

The decision making process that is pertinent in this situation consists of incorporating business ethics that aids in making a professional judgment in resolving the issue. In difficult situations, ethical decision making can lead to raised interpersonal issues, presents additional alternatives, unknown outcomes, and uncertainty in the direction of the organization. However, there are techniques and methods that have been utilized by major corporations in which deal with the difficulties in making logical ethical decisions.  The first step to the process is to establish a context that effectively addresses the problem. The organization will be able to organize a diverse group meeting of personnel from different relevant departments that are directly involved with the issue. The second step involves properly framing the problem. To address the key issue effectively in seeking a resolution to the ethical problem. The third step entails creating alternatives options by invoking a creative thought process such as brainstorming, and detailing the pros and cons of each option.

The next step involves generating the alternative options for handling the contaminated whistles that are being ship. With the reports from the loss prevention department, accounting, production, and quality control, we can gauge the different options. The stakeholders will also be a part of the process, as they will be directly impacted by any decision taken. Each alterative will be analyzed for the consequences that includes decrease in profits, the reputation of the Toy Company, safety recalls, future lawsuits, and building a company around an ethical reputation. The last step in the process is to prioritize the values of the company that is supported by the alternative options. In this case, the priorities includes protecting the public from potential hazardous material by not shipping the whistle, or recalling the toy.  Protecting the company from lawsuits if choosing to ship, the products to company that do not require lead testing, which could also decrease the organization’s financial burden. Finally, to maximize the profit of the company by ignoring the reports and shipping the products while providing a disclaimer that details the possible hazards from using the whistles.

Alternative Option 1

The first option is to do what is right. In using the utilitarian perspective, the duty of those in the higher position is to produce the greatest good that does the least harm; this includes the environment, the community, shareholders, employees, and the affected customers. The ethical decision would be to not ship the orders to any company, and inform the public of the reason why the toys were recalled. The pros of this decision is that it will increase the trust of the public, as well as increase the company’s reputation. “Ultimately, the only way to enjoy a good reputation is to earn it by living with integrity.” We can’t control our stories,” Seidman says. “We can control how we live our lives.” (Murphy, 2010) Other pros includes having consumer safety as a priority, enhancing the quality control of the company on prevention, raw materials, and manufacturing products. The cons however include negative publicity, lawsuits, damage of the company’s brand and image, while increasing the ethical and social responsibility of the company to consumers. Legally the company could face lawsuits, but the liability of the company would decrease corporate negligence liability, as well as penalty costs. The financially the company could suffer a major loss that could lead to bankruptcy, a decrease in company stocks, or a big hit to our profits. However, it could also mean we gain the public support by owning up to the quality control report and recalling the toys.

Alternative Option 2

The second alternative entails shipping the toys to South America and other countries where there is minimal or no lead regulations for products. This could decrease the liability charges and the company loss for future shipments, which will create a pro financial advantage. This also prevents legal obligation to the US regulations, as well as maintains the reputation of the company, and decreasing the financial burden. The cons however, include possible unethical practices, compromise of consumer health, need for expedited production workforce, and unreliable service for toy shipments. The company financially will suffer from increased cost of production short term, as well as creating a balance in financial when other contracts are made with additional countries. Legally, this decreases the liability from the US regulations, however ethically it is frown upon. The company will abide by not shipping the toys to the United States, but also take an approach in which the company believes that the lead traces are not hazardous to the health of consumers.

Alternative Option 3

The third decision involves maximizing the profit of the company by shipping the toys products, while ignoring the quality control reports, or the US regulations. This decision is a great disadvantage, in which could lead to severe legal implications that includes lawsuits, penalties, and other legal impacts. The advantage however is that profit will increase, preserve consumer perception, as well as prevent any negative publicity, and decrease the workload of the workforce. The cons however could damage the reputation of the company. The company financially will be include short-term profits, but the legal implications could lead the company to bankruptcy. This unethical approach leads to several issues with business ethics and sound decision-making.

Recommendation

The recommended alternative option for the company to take is the first decision in which provides a strategic toy recall, which pulls the shipment. This reason is the best overall, not only ethically in which provides the greatest good approach for the majority, but also in thinking long-term of the prevention in legal liability, consumer safety, and consumer reliability. In looking at the situation of Mattel in 2007, due to the lack of lead regulation in China, they had to recall close to a million toys because of lead contamination. (Story, 2007) While they did suffer a little pubic scrutiny, the company recovered overall, which put in better place stringent regulations for quality control over their toy products. This increases the company’s legal awareness, as well as public support.  Although the company will receive negative publicity and backlash because of this decision, ethically, financially, and legally, it will be the right thing to do. The consumer that is committed to the Toy Company will appreciate the honesty, as well as the trust that the company will but the consumer first. The social responsibility of the company is incumbent on the interests wants, and needs of the target markets. When delivering on the proposed desires of the consumers, we are able to as a whole enhance or preserve the society’s well-being, and consumer safety.  While it is motivational for both the consumer and the employee, overall having a positive social responsibility is helpful in the long run. (Murphy, 2007) By following the outlined regulations by the US, and showing social responsibility by providing safer toys to not only those in the United States, but abroad will have a positive impact on the company.

Ethical Decision Making

The company needs to improve their code of ethics, in order to know how to handle situations such as this when they arise. A code of ethics serves as guideline to act in an honest and the best moral manner. When acknowledged and followed by the entire organization, it is an effective and valuable tool, which prevents actions and behaviors that can place the organization at risk. More importantly prevent damage to the reputation of the company, or indirectly or directly harm the public.  A company that has been a similar situation is Mattel that has designed their code of ethics to acknowledge the priority of consumer safety. They include in their code of ethics/ code of conduct the values of; playing fair, playing together; playing with a passion; play to grow. More importantly, “the values statement includes a commitment to act with unwavering integrity.” (Mattel, 2014) This consist of obeying all the laws of communities and countries that the company conduct business with.

Recommendation for Code of Ethics

In crafting a code of ethics for the Toy Company, the three fundamental components of for the company is the customers, stakeholders, and corporate social responsibility. The priorities of any organization is to first serve the wants and needs of the stakeholder, and the customers. All business decisions are made in organization must line up with the interests of the stakeholders, but stakeholders more importantly have the social and legal responsibility to act in the interest that serves best for the entire organization. With the prevalence of many major corporate scandals in the public arena, it draws much attention to the concepts of social responsibility and ethical decision-making.  Corporate social responsibility and business ethics is a direct application of the ideas of the actual business practice. The public expects the organization to be honest and adhere to the laws and regulations that are put forth. According to Ferrell, “the relationship between a customer and a firm exists because of mutual expectation built on trust, good faith, and fair dealing in their interaction.” (Ferrell, 2004) These components will continue to serve the company as they abide by all legal regulations and laws in countries the organization conducts business.

References

Code of Conduct. (2011). Mattel. Retrieved from https://corporate.mattel.com/about-us/code_of_conduct.aspx#c1.0

Ferrell, O.C. (2004). “Business Ethics and Customer Stakeholders.” Academy of Management Executive. Vol. 18. No.2. Retrieved from http://danielsethics.mgt.unm.edu/pdf/Customer%20Stakeholders.pdf.

Murphy, Richard McGill. (2007). Why Doing Good is Good For Business. Fortune. Retrieved from http://archive.fortune.com/2010/02/01/news/companies/dov_seidman_lrn.fortune/index.htm

Story, Louise. (2007). Lead Paint Prompts Mattel to Recall 967,000 Toys. The New York Times. Retrieved from http://www.nytimes.com/2007/08/02/business/02toy.html?_r=0