Running Header: INTRODUCTION to BUSINESS ETHICS 3

Running Header: INTRODUCTION TO BUSINESS ETHICS 3

Defective Products and Ethical Concerns

American InterContinental University

BUSN 310

Unit 1 IP

Introduction

Making a good impression with the new Chief Executive Officer and other company executives can be very rewarding as it gives one visibility. One major factor that can impact this first meeting is delivering news that can ultimately affect the company’s bottom line. One has discovered that the organization is manufacturing potentially defective products that could inflict serious harm to consumers. There are other extenuating circumstances as it relates to the corporate code of ethics and customer notification of the possible defective merchandise. It is extremely important that all relevant information is obtained before meeting with senior level management with possible solutions.

Receiving an invitation to attend a meeting with the new Chief Executive Officer (CEO) and other executive managers is exciting and can prove very beneficial. Not many employees are invited to attend executive gatherings so one would like to take advantage of this opportunity by making a positive first impression. Unfortunately, as product manager of one of the company’s most profitable products, one is aware of a potentially dangerous situation; there are some defects in the product that could inflict serious harm to potential customers. This has caused concern for several weeks now and the employee feels obligated to bring this dilemma to the attention of the new CEO, directors, and other managers.

1. How would you effectively present the issue of potentially defectiveproducts to the CEO, other directors, andmanagers?

Prior to approaching management, one must research the situation and compile a report with all the relevant research and data supporting this discovery. One’s predicament resides in the realm of ethics; company allegiance versus an ethical responsibility to notify the consumer. The situation must be handled with care as to not place blame as if the problem is being intentionally withheld from the consumer in the name of profits. As one walks a fine line of loyalty, it is wise to gather all the facts and present both sides to management.

Since one has an audience of professionals that want “just the facts”, a PowerPoint presentation may be the most effective approach rather than distributing a report as it condenses the data. A significant factor is explaining the options available to the company. For example:

Ø  Financial impact

Ø  Maintaining customer loyalty

Ø  Long-term business reputation / ethics officer

One of the obvious initial concerns will be the financial impact; from possible manufacturing line modifications to product recall. One must first meet with all pertinent staff to determine where the defects lie and rectify the situation with as little delay as possible. The next phase to this process is recalling product already on store shelves or in warehouses awaiting delivery.

2. How would you specifically notify customers of such an occurrence?

As the organization works in-house to resolve the problem, it would be wise to personally contact the company’s largest customers alerting them of this possible calamitous situation. It should then be followed up with a letter assuring customers that everything is being done to rectify and resume business as usual. It is imperative that the organization address the situation before rumor and innuendo permeate an already sensitive matter.

The final element would be to consider the company’s long-term reputation. It is again advisable for the company to inform its long-standing loyal customers and suppliers that they are addressing the situation and not trying to sweep it under the rug or turning a blind eye entirely. Trust is paramount and if the organization desires to maintain its positive image within the industry, they must be upfront as early as possible. According to Nayar (2009), contrary to popular belief, “Corporate governance is not merely ensuring adherence to a set of rules or about smart brand-building exercises to manage perceptions; it is less about policing and posturing and more about nurturing trust as an intrinsic part of an organizational culture while concluding trust is the only currency that can sustain a corporation through the turbulences over its lifecycle” (para 4).

Also, having an individual employed that is capable of making ethical decisions is extremely vital. There are a plethora of processes available, but there are steps that are fairly commonplace; 1) determining if it is an ethical issue, 2) obtaining all the facts, prior to making a decision, 3) seek alternative solutions, 4) test one’s decision, and 5) implement the decision (“Ethical decision making,” para 4). Utilizing these procedures will assist an ethics officer in making sound management decisions that are in accordance with the company’s established code of ethics.

Unless authorized by senior level management, it would be wise for the appropriate personnel to interact with customers and the public in general. As previously stated, the organization would save face by working with their public relations department in assuring its immediate suppliers and those primarily involved that the dilemma would have a direct impact on. From this point forward, a press release should be issued notifying prospective consumers as well those already having possession of the potentially defective product what the risks are, and proper procedure for returning the merchandise for future replacement or refund.

3. What kind of internal actions would you take to prevent future problems?

Many products undergo stringent testing prior to public release. A sure-fire method is to institute backup procedures that tract the manufacturing process from start to finish. Oftentimes, there are minor details that are overlooked and ultimately create monumental concerns later; as in this situation. Another viable option is to work in conjunction with the U.S. Consumer Product Safety Commission (CPSC) to assure that products are in compliance with federal guidelines prior to release. This agency is under federal jurisdiction and is “charged with protecting the public from unreasonable risks of injury or death from thousands of types of consumer products” (CPSC, n.d., para 1). They can also work with companies regarding the proper procedures in alerting consumers when a product recall must occur. These internal controls will aid in the elimination of guesswork. There should also be written procedures on product development administered by a project management team. The organization must derail any and all shortcuts for the sake of getting merchandise to market ahead of competition. The primary concern and ultimate goal should be safety first. Even in situations where a product has already been released, some errors are unknown until discovered by consumers and even in these instances; it can be a learning process. There can never be too much rechecking in these circumstances as it relates to consumer safety. A company would rather deal with a product recall versus a consumer fatality resulting in financial litigation. Finally, when a company is producing a global product, a definite advantage would be to have a “Centralized product and brand management that ensures consistent quality” (Rastegard, 2011).

4. What can be done to ensure that a strong sense of business ethics permeatesyour company?

The reputation of not only corporate America, but companies worldwide has been tarnished by greed. Many analysts look to the highly competitive global marketplace as a reason or symptom of unethical behavior. Many market watchers contend that ethics has no place in the business arena. Unfortunately, the recent financial misdeeds of Enron, WorldCom, Tyco, Bernard Madoff, Arthur Anderson, et al, has only succeeded in consumer mistrust and confirmed that businesses are again only concerned with profits regardless of the methods used to obtain them. There has been much written of late in regards to corporate social responsibility (CSR). Communities in general and the public at large place their undying trust in companies to play fair and do the right thing. Corporate social responsibility is a real element that many organizations need to revisit and can be defined as “operating a business in a manner that accounts for the social and environmental impact created by the business while the business maintains a commitment to developing policies that integrate responsible practices into daily business operations, and to reporting on progress made toward implementing these practices” (AsYou Sow, n.d., para 1). In order for sound ethical attitudes to permeate throughout the organization, it must be instilled in every employee from the moment they are hired. The company must possess a solid code of ethics that are visible and a part of the corporate culture. Ethics in a business environment is a form of professional ethical behavior that scrutinizes principles of moral consistency as it arises in a corporate environment. There are many aspects to business or corporate ethics but the primary concept addresses the application of its relationship with every facet of the company; individuals and the organization in its entirety (Wisegeek, n.d., para 1). The crucial factor to business ethics must be instituted, implemented, and adhered to from management down to its base level. If management is unethical, so will its employees be. One must also possess an environment where employees feel free to report unethical behavior. In so many occasions of late, employees seeking to do the right thing, have been ostracized, terminated, and labeled as whistleblowers. How can companies ever expect to obtain a level of respect if those striving to be honest and promote fairness are bribed into silence to condone unethical behavior, or are in fear of reprisal should they report such activities? It is said that “If we destroy our reputation in search of profits; we destroy our pride and ourselves” (Nayar, 2011, para 8).

Also, employing an ethics officer that will enforce the company’s ethics policy is a sound business practice as well as complying with federal regulations. Measuring methods can include in brief, employee training, number of calls on the ethics hotline, a confidential line for staff reporting, and annual review of the ethics code. These processes are straightforward and necessary to ensure things happen as planned and provide feedback on the use of resources (Ruthford, 2006, para 1).

In conclusion, having the opportunity to alert corporate executives to a potentially financial predicament has its advantages and disadvantages. The bridge that joins them is the ethical decisions one must make. Albeit, recent major indiscretions have diminished the public’s trust in businesses to act according to their own mandates, but one should not judge every company by the unethical acts of some. When one has obtained all the appropriate information, now is the time to address management with possible solutions.

References

As You Sow. (n.d.). Corporate social responsibility. Retrieved from http://www.asyousow.org/csr/

CPSC. (n.d.). Recalls and product safety news. Retrieved from http://www.cpsc.gov/cpscpub/prerel/prerel.html

Ethical decision making: How to make ethical decisions in 5 steps. (n.d.). Retrieved from http://www.mftrou.com/ethical-decision-making.html

Nayar, V. (2009). Corporate ethics isn’t about rules; It’s about honesty. Retrieved from http://blogs.hbr.org/hbr/nayar/2009/01/corporate-ethics-isnt-about-ru.html

Rastegard, F. (2011). McLaren CEO learns from recall. Harvard Business Review, 89 (1/2) Retrieved from Business Source premier database.

Ruthford, C. (2006). Why measure ethical effectiveness. Retrieved from http://www.ethics.org/resource/why-measure-ethical-effectiveness

Wisegeek. (n.d.). Business ethics. Retrieved from http://www.wisegeek.com/what-is-business- ethics.htm