Markkula Center of Applied Ethics

Dialogue on Business Ethics

All the cases we publish in Issues in Ethics are also posted on the Markkula Center for Applied Ethics Web site, the Ethics Connection, where lively discussion about the questions they raise may continue over many months. Below, we give you the flavor of this discussion. To see the entire conversation (and to add your own thoughts), please visit the site at

The Case of Nutritional Foods

Fred James, CEO of fresh juice producer Nutritional Foods, receives reports of poisonings that might be traced to his company's apple products.

Having clear knowledge that 1) handling of nonpasteurized products is critical, 2) product distribution is critical, and 3) continued growth and success are dependent on consumer acceptance, I would have previously developed contingency plans to address the likelihood of dilemmas cropping up in these three areas.

However, given the existing set of conditions, if I were the CEO of Nutritional Foods and my company, my company's integrity, and my own integrity were potentially on the line, I would immediately institute a proactive philosophy. Because my power as CEO would be greatest at home, my most practical priority would be to vet my own operation. I would initiate an audit of my in-house, product-and- process quality assurance program to determine whether there are any defects or weaknesses that might give rise to an impure product. I would immediately halt the shipment of any more product and take measures to ascertain that the product in-house satisfies not only corporate standards but also at least the next highest level of external standards.

In parallel, I would commence collecting a statistical sample of product at various stages in the pipeline from shipment to store shelf and submit the collection to testing by both in-house and independent labs. I would also expedite the acquisition of critical external information from personnel sent to the field and from involved health departments. In addition, I would begin making contact with health departments in my market areas to request immediate notification of any cases of food poisoning suspected of being caused by unpasteurized apple product (mine or the competition's). Once it became clear that Nutritional Foods products were indeed the culprits in the current poisonings, I would pull all products from store shelves until the investigation determined the exact cause, and I would call a news conference to announce this decision. At the conference, I would summarize what is known about the situation and commit to keeping the public informed through timely updates to the press.

I would clearly state that Nutritional Foods is doing everything it can to get to the bottom of the problem and will take whatever measures are necessary to prevent such a problem in the future. I would also state that I feel deeply about this incident and that I and the company have a moral responsibility to ensure the safety of consumers.

Nutritional Foods should determine how best to compensate those who were poisoned by its product. Because the company is small and growing fast, it has a better chance of surviving if it does the "right thing" up front and puts this whole mess behind it as quickly as possible. The alternative is to incur lawsuits that would drag out and continue to publicize the incident, with the potential for seriously undermining public confidence and jeopardizing the company's existence.

Finally, once the immediate crisis is over and the investigation is complete, I would publicly announce the establishment of a permanent corporate committee to actively pursue issues of public safety vis-a-vis our products. The committee would develop contingency plans so that Nutritional Foods could immediately address any public health reports, in contrast to its past philosophy of merely taking note of occasional reports that drift in.

The company must have a continuous inflow of critical information from all relevant sources so that it can respond quickly to potential or actual problems in an effective, forthright manner. It should seek to be a member of the community rather than a marginally interested supplier to the community.

Larry Quilici

The Case of the Performance Appraisal

What should the new chief financial officer of a family-owned company do when he discovers that the CEO intends to lay off a number of longtime employees whose work has not been formally evaluated for the past six years?

From the description, the extent of the employees' knowledge of their performance is unknown. They may have resisted appraisals because they knew they were not up to newer company standards. The big question is whether the CEO in his verbal appraisals was candid or just placated them. The ethical values of honesty and fairness would argue for informing them where they stand and then allowing them to choose for themselves whether they will coast along and retire or invest in their development to move up the performance rankings.

The problem for Frank is that the opportunity to behave ethically toward these people is past. The CEO most likely skipped his responsibilities and is now trying to dump them on Frank.

The best thing Frank can do is to demonstrate to the CEO the ethical problem and persuade him to accept responsibility this time. The CEO can directly address the people himself because it is really his ethical problem.

Jeffrey Bane