THE CASE OF NUTRITIONAL FOODS

(Product Responsibility)

Group 5Elvira Joselle R. Castro

Ian Lloyd CubeloJoseph Gener

Cristine Parajas

I. Relevant Details

Nutritional Foods, Inc. (NFI) – A $50M dollar manufacturer of healthful foods (natural and nonpasteurized) in Western U.S.

Fred James – Chief Executive of NFI

John Healy – Vice-President for Production of NFI

II. Timeline

July 20, 2013 (Morning)• Reports come from 2 county health

departments (Seattle and Southern California) of a possible link between an acute food poisoning of 2 children and an unpasteurized apple of NFI

July 20, 2013 (after the meeting)• 3rd and 4th reports of food poisoning

come from two new counties

II. Timeline

July 20, 2013 (mid-day)• Health officials from 4 counties are

virtually certain that NFI products are involved in the poisonings. Further, batch numbers from 2 cases are discovered to come from a single day’s production.

July 20, 2013 (end of work day)• 3 additional reports of possible food

poisonings are relayed by two newspaper reporters

II. Timeline

July 20, 2013 (late in the afternoon)• In an internet chatroom for nutritional

foods it was being spread that NFI has a food poisoning problem.

July 20, 2013 (7pm)• NFI announces publicly through its retail

network that it is pulling all batches of the unpasteurized product associated with all but one of the alleged poisoning.

II. Timeline

July 20, 2013 (late night) – July 21, 2013 (early morning)

• 50 more calls come in reporting cases of food poisoning and 5 more reports from health professionals who stated they were treating possible poisonings.

July 21, 2013 (9am)• 80% of newspapers carry the poisonings

in their frontpage.

II. Timeline

July 21, 2013 (9am)• Calls alleging adverse reaction to many

other products of NFI pour in. • 2 children who were part of the previous

incident are reported to be in critical condition.

• Fred James meets with the Crisis Action Committee of NFI

III. Assumptions

Fred James as Chief Executive has the power to decide for NFI Reports linking poisoning to the product are not conclusive

but is becoming clear to be possibly linked Move to pull out the products and any other attempts at

damage control will devastate the company’s reputation and stock price.

Showing concern to the affected consumers will show the public that they are admitting liability.

Showing concern includes giving financial aid to those affected.

Strategy considered for those seriously affected is paying for their hospital bills and other incidental costs.

The Crisis Action Committee only advises Fred James on possible actions

IV. Identify and Articulate the Ethical Dilemmas

Perspective : Fred James Chief Executive of NFI

Time Frame : During his meeting the Crisis Action Committee of NFI

 

IV. Identify and Articulate the Ethical Dilemmas

Dilemmas: (1) Whether do more in notifying the

public regarding the incident. (2) Whether to pull out ALL products of NFI

from the market. (3) Whether they should show concern

and help (includes financial aid) those allegedly made sick by their product (including those in critical condition).

 

III. Analysis

ARISTOTLE CORPORATE MORAL DEVELOPMENT IMMANUEL KANT UTILITARIANISM

ARISTOTLE

recall that phronesis requires the constant search for the mesotes

this in habituation creates a virtuous cycle

stopping at just recalling their product and notifying the public interrupts the flow in creating a virtuous cycle

ARISTOTLE

Conclusion: stopping the virtuous cycle will hinder

the honing of phronesis / practical intelligence

determining the mesotes (the right action, at the right amount, in right time, to the right peron, with the right means) is being limited

ARISTOTLE

Recommendations:In the meeting Fred James should… Direct the Crisis Action Committee to look for

other areas for improvement Create a fact finding body to re-asses the

process used in producing the final product and update these.

Provide health care assistance to those who were poisoned by their product

Conduct surveys on how the public feels on each action

ARISTOTLE

Specifically By creating a fact finding body to re-

asses the process used in producing the final product and update these.

Provide health care assistance to those who were poisoned by their product

Conduct surveys on how the public feels on each action

CORPORATE MORAL DEVELOPMENT

Moral Dilemma• Amidst the crisis that the company is

facing, should they just stop at recalling their products or they show concern to those who have been sick by their product

Stage Three – The Reactive Corporation• Begins to strike balance between profits

and doing right• Doing right is more to the advantage of the

company• Begins to recognize that the organization’s

role is not just purely economic one but it also has duties and obligations to the society

• Dominated by reactive mentality

CORPORATE MORAL DEVELOPMENT

Stage Three – The Reactive Corporation• Pulled out their products• Showed concern to those who were

affected• Worried on the effect to their reputation in

case they would show concern to their clients

• No code/policy that would guide them in this kind of situation

CORPORATE MORAL DEVELOPMENT

Recommended Actions to be takenIn the meeting Fred James should..• Direct that budget be allotted for the

welfare of the victims • Direct that a fact finding team be created • Direct a reevaluation of the processes to

avoid this from `happening again

CORPORATE MORAL DEVELOPMENT

KANT

Maxim:

When a critical report about our product possibly causing food poisoning has been

reported, I will only recall the specific product associated to the food poisoning

through my retail network, ask consumers to return all unused products to their local suppliers, and ask retailers to stop selling the said specific product

KANT

Universalizability:

(1) Imagine that this maxim is universal law

(2) Then, what and where is the sense of product responsibility(3) No one then, will be responsible or accountable for an action/circumstances of a certain wrongful act(4) therefore, it is not morally right.

KANT

Conclusion

It is not morally right to neglect customer product right and satisfaction. Selling and earning a profit is not just the key point on having a business but the end goal is that selling a product that will be beneficial and promotes a healthy lifestyle to the end user

KANT

Recommendations Be liable and or accountable to all the

victim of food poisoning by providing health care assistance

Educate all product consumer and retailers of the possible cause the food poisoning.

Utilitarianism (First Dilemma)Step 1: Identify the alternative actions or

policies availableAlternative 1: Fred James decides not to

further inform the public of the incident and limit the information to those disseminated earlier throug its retail network and by the media (including social media)

Alternative 2: Fred James decides to conduct a more aggressive information campaign of the incident

Utilitarianism (Assumptions) Health - US50,000.00 Life – 500,000 About 3,000 die of food poisoning each year. Half of the deaths in Western US Average wrongful death compensation 1,000,000 All of NFI’s outstanding goods distributed for sale is

equal to about third of its worth – US17,000,000.00 Products associated with the poisoning is equal to

1,500,000.00 including logistics Treating a person with food poisoning – 5,000 Treating a person with food poisoning (critical

condition) – 10,000

Utilitarianism (Assumptions) NFI’s distribution is limited only to Western US Children and adolescents of Western US are at risk of food

poisoning Children and adolescents constitute half of the population of

Western US According to a 2010 US Federal Census the population of

Western US is 71,945,553 Public Relations Fee – 100,000 for a full blown catastrophe Information campaign –500,000 NFI 500,000 shares outstanding with a par value of 100

each. 57 confirmed reports of food poisoning, 2 of which are in

critical condition

Utilitarianism

Step 2: For each alternative, estimate the foreseeable benefits and costs that it will produce in the future

Utilitarianism (First Dilemma)

Alternative 1“Not to further notify”

Benefits Costs

Savings on information campaign costs (tri-media) – 500,000

Health of the people put at risk35,972,777 X 50,000 = 1,798,638,825,000

Saving from Public Relations Fee (damage control) – 100,000 – 50,000 = 50,000

Legal fees for possible (class action suit) – 100,000

Savings from a lesser loss in stock price (one fourth of the value as supposed to half) 25,000,000 – 12,500,000 = 12,500,000

Possible compensatory damages for wrongful death 1,000,000 X1,500=15,000,000

13,050,000 1,798,653,925,000

1,798,640,875,000 net cots (negative utility)

Utilitarianism (First Dilemma)

Alternative 2“Not to pull out”

Benefits Costs

He will lead by example He will not close the deal

He will encourage a change of culture within the industry

He will not get the majority of the market share in the industry and hence he will not beat the number one competitor

He will show that deals should be closed based on merit and not on bribes

His sales and distribution will not increase

Increase in company morale

Alternative 2“To further notify out”

Benefits Costs

Health of the people saved 35,972,777 X 50,000 = 1,798,638,825,000

Cost of information campaign (tri-media) = 500,000

Savings from product liability suits (class action)Legal fees – 100,000

Public Relations (damage control) – 100,000

Savings from wrongful death compensation1,000,000 X1,500=15,000,000

Loss in stock price (half of par value) – 25,000,000

1,798,653,925,000 25,600,000

1,798,628,325,000 net benefits (positive utility)

Utilitarianism (Second Dilemma)Alternative 1: Fred James decides not to

pull out ALL of NFI’s products and continue pulling out only the specific product associated with the incidents.

Alternative 2: Fred James decides to pull out ALL of NFI’s products from the market.

Utilitarianism (Second Dilemma)

Alternative 1“Not to pull out”

Benefits Costs

Savings on not pulling out all products 22,000,000 – 1,500,000=20,500,000

Health of the people put at risk35,972,777 X 50,000 = 1,798,638,825,000

Saving from Public Relations Fee (damage control) – 100,000 – 50,000 = 50,000

Legal fees for possible (class action suit) – 100,000

Savings from a lesser loss in stock price (one fourth of the value as supposed to half) 25,000,000 – 12,500,000 = 12,500,000

Possible compensatory damages for wrongful death 1,000,000 X1,500=15,000,000

33,050,000 1,798,653,925,000

1,798,620,875,000 net cots (negative utility)

Utilitarianism (Second Dilemma)

Alternative 2“Not to pull out”

Benefits Costs

He will lead by example He will not close the deal

He will encourage a change of culture within the industry

He will not get the majority of the market share in the industry and hence he will not beat the number one competitor

He will show that deals should be closed based on merit and not on bribes

His sales and distribution will not increase

Increase in company morale

Alternative 2“To pull out”

Benefits Costs

Health of the people saved 35,972,777 X 50,000 = 1,798,638,825,000

Losses due to mass pull out 17,000,000 (products pulled out)5,000,000 (cost of pulling out, i.e. Logistics and information campaign)= 22,000,000

Savings from product liability suits (class action)Legal fees – 100,000

Public Relations (damage control) – 100,000

Savings from wrongful death compensation1,000,000 X1,500=15,000,000

Loss in stock price (half of par value) – 25,000,000

1,798,653,925,000 47,100,000

1,798,6069,825,000 net benefits (positive utility)

Utilitarianism (Third Dilemma)Alternative 1: Fred James decides not to

show concern to those affected by the incident

Alternative 2: Fred James decides to show concern by aiding (financially) those affected by the incident (including those in critical condition)

Utilitarianism (Third Dilemma)

Alternative 1“Not to show concern”

Benefits Costs

Savings on not showing concern = 50 x 5,000 = 250,0002 x 10,000 = 20,000

Health of those not helped 50 x 50,000 = 2,500,0002 x500,000 = 1,000,000

Saving from Public Relations Fee (damage control) – 100,000 – 50,000 = 50,000

Legal fees for possible (class action suit) – 100,000

Savings from a lesser loss in stock price (one fourth of the value as supposed to half) 25,000,000 – 12,500,000 = 12,500,000

Suit for damages and Wrongful death compensation 50 X 500,000 = 25,000,0002 x 1,000,000 = 2,000,000

12,820,000 30,600,000

17,780,000 net cots (negative utility)

Utilitarianism (Third Dilemma)

Alternative 2“Not to pull out”

Benefits Costs

He will lead by example He will not close the deal

He will encourage a change of culture within the industry

He will not get the majority of the market share in the industry and hence he will not beat the number one competitor

He will show that deals should be closed based on merit and not on bribes

His sales and distribution will not increase

Increase in company morale

Alternative 2“To pull out”

Benefits Costs

Health of the people saved 35,972,777 X 50,000 = 1,798,638,825,000

Losses due to mass pull out 17,000,000 (products pulled out)5,000,000 (cost of pulling out, i.e. Logistics and information campaign)= 22,000,000

Savings from product liability suits (class action)Legal fees – 100,000

Public Relations (damage control) – 100,000

Savings from wrongful death compensation1,000,000 X1,500=15,000,000

Loss in stock price (half of par value) – 25,000,000

1,798,653,925,000 47,100,000

1,798,6069,825,000 net benefits (positive utility)

Alternative 2“To show concern”

Benefits Costs

Health of those not helped 50 x 50,000 = 2,500,0002 x500,000 = 1,000,000

Cost for showing concern = 50 x 5,000 = 250,0002 x 10,000 = 20,000

Legal fees for possible (class action suit) – 100,000

Public Relations fee = 100,000

Saving from suits for damages and Wrongful death compensation 50 X 500,000 = 25,000,0002 x 1,000,000 = 2,000,000

Loss in stock price (half) = 50 x 500,000 = 25,000,000

30,600,000 25,370,000

5,230,000 net benefits (positive utility)

Utilitarianism

Step 3: Choose the alternative that produces the maximum benefit.

Fred James should…• Further notify the public• Pull out ALL products of NFI• Show concern to those affected

Utilitarianism

Conclusion:

Notifying the public of the possible link between food poisoning and NFI products; Pulling out ALL of NFI products from the market; and Showing concern to those affected by the food poisoning incident produces the maximum net benefits for EVERYONE concerned

Utilitarianism

Recommendations:In the meeting Fred James should:

• direct the Crisis Action Committee to constitute an investigative panel that will determine any deficiencies in their production line and distribution line

• order that NFI communicate with the U.S. Food and Drugs Administration in the recall of their products and to further determine if there is a link between NFI goods and the poisonings

Add other distribution channels or increase intensity of distribution in each channel.

Decrease price

Utilitarianism

Recommendations:In the meeting Fred James should:

• Order that NFI will pledge donation to an organization devoted to food poisoning research

• Direct that a PR be hired specifically to address the situation and rehabilitate the image of NFI

THE END