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THE CASE OF NUTRITIONAL FOODS

(Product Responsibility)
Group 5 Elvira Joselle R. Castro Ian Lloyd Cubelo Joseph 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 days 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 companys 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.

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

CORPORATE MORAL DEVELOPMENT

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 organizations 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 taken In 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

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 available Alternative 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 NFIs 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)

NFIs 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 Savings on information campaign costs (trimedia) 500,000 Saving from Public Relations Fee (damage control) 100,000 50,000 = 50,000 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 Costs Health of the people put at risk 35,972,777 X 50,000 = 1,798,638,825,000 Legal fees for possible (class action suit) 100,000 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 To further notify out Benefits

Alternative 2 Not to pull out

Costs

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

He will lead by example

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

He will not close the deal

He will not get the majority of the market share in the industry and hence he will not beat the number one competitor Savings from product liability suits (class action) Public Relations (damage control) 100,000
Legal fees 100,000

He will encourage a change of culture within the industry

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

His sales and distribution will not increase


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

Savings from wrongful death compensation Increase X1,500 in company morale 1,000,000 =15,000,000

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 NFIs products and continue pulling out only the specific product associated with the incidents. Fred James decides to pull out ALL of NFIs products from the market.

Alternative 2:

Utilitarianism (Second Dilemma)


Alternative 1 Not to pull out Benefits Savings on not pulling out all products 22,000,000 1,500,000 =20,500,000 Costs Health of the people put at risk 35,972,777 X 50,000 = 1,798,638,825,000

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

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


Benefits

Alternative 2 Not to pull out

Alternative 2 To pull out

Costs

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

He will lead by example

share in the industry and hence he will not beat the number one competitor Savings from product liability suits (class action) Public Relations (damage control) 100,000
Legal fees 100,000

He will encourage a change of culture within the industry

Losses due to mass Costs pull out 17,000,000 (products pulled out) He will not close the deal 5,000,000 (cost of pulling out, i.e. Logistics and information He will notcampaign) get the majority of the market = 22,000,000

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

His sales and distribution will not increase


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

Savings from wrongful death compensation Increase X1,500 in company morale 1,000,000 =15,000,000

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 Savings on not showing concern = 50 x 5,000 = 250,000 2 x 10,000 = 20,000 Costs Health of those not helped 50 x 50,000 = 2,500,000 2 x500,000 = 1,000,000

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

Legal fees for possible (class action suit) 100,000 Suit for damages and Wrongful death compensation 50 X 500,000 = 25,000,000 2 x 1,000,000 = 2,000,000 30,600,000

12,820,000

17,780,000 net cots (negative utility)

Utilitarianism (Third Dilemma)


Benefits Benefits Health of the people saved 35,972,777 X Benefits Health of those not helped 50,000 = 1,798,638,825,000 50 50,000 = 2,500,000 Hex will lead by example 2 x500,000 = 1,000,000 He will encourage a change of culture within the industry Costs Costs Losses due to mass Costs pull out Cost for showing concern = 17,000,000 (products pulled out) 50 5,000 = 250,000 Hex will not close the deal 5,000,000 (cost of pulling out, i.e. Logistics and 2 x 10,000 = 20,000 information He will notcampaign) get the majority of the market = 22,000,000 share in the industry and hence he will not beat the number one competitor Savings from product liability suits (class action) Public Relations (damage control) 100,000 Legal fees for 100,000 Legal fees possible action suit) Public Relations fee = 100,000 He will show that deals(class should be closed His sales and distribution will not increase 100,000 based on merit and not on bribes Savings from wrongful compensation Loss price (half of par value) Saving from suits fordeath damages and Lossin instock stock price (half) = 50 x 500,000 = Increase in company morale 1,000,000 X1,500 25,000,000 Wrongful death compensation 25,000,000 =15,000,000 50 X 500,000 = 25,000,000 2 x 1,000,000 = 2,000,000 1,798,653,925,000 47,100,000 Alternative 2 Alternative 2 To pull out ToAlternative show concern 2 Not to pull out

30,600,000

25,370,000 1,798,6069,825,000 net benefits (positive utility)

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

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