To: CEO

Board of Directors

Subject: Code of Ethics

As the Elementary Division Manager, I would like to bring to your attention a dilemma were experiencing with one of our elementary toy collection products, metal whistles to be exact. It has been discovered by the quality assurance manager after quality testing that the whistles have traces of lead. The lead amount found is slightly above the U.S. legally accepted limits for children ages 7 and younger. What is more, a great amount of this product is packaged and scheduled to be shipped to schools in South America, however, the costs to reproduce and repackage product is $100,000. I have been commissioned to establish and implement a practical way to resolve this problem.

There are three possible alternatives to resolve this crisis. Each of which having advantages, disadvantages, financial, legal and ethical considerations.

A. Distribute product to customers as-is and on scheduled time.
B. Reproduce and repackage the whistles to be shipped on scheduled time.
C. Reproduce and repackage the whistles to distribute at later time at reduced price.

Distribute product to customers as-is on scheduled time

The advantages of this decision are that we honored our negotiated contract with clients. We made expected profit without incurring additional expenses. The disadvantage would be the potential harm placed on clients based on lead found in whistles. Also, criticism from clients and public if lead becomes exposed. The financial consideration would be that our company could possibly save $100,000 for taking risk. The legal consideration would be potential lawsuits for failing to remove lead. Finally, the ethical consideration would be that it’s unethical to not reproduce and repackage whistles for sale. It goes all against our code of ethics to ignore lead problem just to make a profit.

Reproduce and repackage the whistles to be shipped on scheduled time

The advantages would be that our reputation will remain trustworthy. It would allow for employees to earn approved overtime which may be financially beneficial to them. It also illustrates that we are a responsible company with integrity you can trust to do the moral or legal thing. The disadvantages are that some employees may resent the idea of working longer hours or unscheduled days to produce the right quality product. We must not forget the $100,000 loss in revenue, plus additional cost associated with work hours will arise. The financial consideration would be the opportunity to earn repeated business. The legal consideration would be no worries of negative publicity or possibilities of lawsuits. It also puts us in compliance with U.S. legal acceptable lead limits. From an ethical standpoint, investing the time to rectify this lead issue and incurring the cost to make problem go away is the right thing to do. It shows our customers that we value them and not just in it for the money.

Reproduce and repackage the whistles to distribute at later time at reduced price

The advantages are that we would exhibit good business ethics and that we are an accountable company. We would also be avoiding future lawsuits pertaining to the distribution of products with traces of lead. Selling the product at reduced price would help ease doubt the customer may have about the products or our company. The disadvantages would be the $100,000 cost to reproduce and repackage the product, cost associated in overtime work hours, along with the reduced price provided to the client. One more disadvantage is to disclose to the customer the actual reason for the discount price may cause a negative perception in the public eye. The financial consideration would be that the company will suffer $100,000 deficit. This may put our company at a greater financial risk due to added cost such as overtime work, and price deduction.

Recommendation:

When it comes to selecting the best practice, I propose the second