Group Case Project

***This is my section of a group project****Each group will be designated by the instructor and will begin reviewing and discussing the organizational process of developing the case project. The format and method for solving the case must be based on the steps of Hosmer’s analytical process model (as outlined in Ethics of Management: A Multidisciplinary Approach). The central idea of the project is to apply the Hosmer analytical model—understand all moral standards, recognize all moral impacts, define the complete moral problem, determine the economic outcomes, consider the legal requirements, evaluate the ethical duties (this one is my section of the group project), and propose a convincing moral solution—to the questions at the end of your case; only apply those elements from the Hosmer model that are relevant. Each of the elements of the model that you include must become a Level 1 heading in your paper. As this is a paper that requires research, it must be written in third person. I have attached the case we will be working on (Case 1-5 – Lead Paint on Children’s Toys: Who Was Responsible?). My section of the paper will be about Evaluate the Ethical Duties. I have also attached the chapter of the textbook that talks about Ethical Duties. Please write a detailed outline and the written part. The written part should be 1-1.5 pages long. Please use 1-2 scholarly citations in APA format in the writing.
case_1.pdf

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Case 1-5
Lead Paint on Children’s Toys: Who Was Responsible?
RC2 Corporation of Oak Brook, Illinois, holds the relatively new position of marketing specialist in the
children’s toy industry. The company neither develops nor manufacturers the toys that it sells. Instead,
it contracts with large media companies and publishing houses for the rights to use the characters
developed by others such as Big Bird, Winnie the Pooh, Bob the Builder, and Thomas the Tank Engine.
RC2 then designs wooden or stuffed toys based upon those characters; contracts with low-cost
manufacturers, primarily in China, to make them; ships the finished toys in low- cost container vessels to
the United States and Europe; and distributes them through low-cost retail chains such as Walmart,
Kmart, and Toys “R” Us for final sale to the parents. It is a low-cost and high-volume business model that
has been highly successful.
RC2 was a relatively small player in the toy market, but its revenues had more than doubled in the five
years before the U.S. Consumer Product Safety Commission announced the company had been ordered
to recall half a million Thomas and Friends wooden railway train sets that consisted of model engines,
cars, and track sections because their paint coatings contained lead.1
Parents, of course, were surprised and shocked. Lead is known to be highly toxic. When ingested by
young children it can cause learning disabilities, behavioral problems, and growth concerns. In older
children and adults, lead poisoning can lead to high blood pressure, kidney failure, and stomach distress.
The adverse effects of lead upon health had become known during the 1960s, and laws were passed in
the early 1970s throughout the United States and Western Europe to restrict lead amounts in all
consumer products, and over time these laws had been extended on a nearly global basis. By 2007, for
example, it was illegal in China to use lead- based paint on export goods. Despite the parental concerns
and the relevant laws, however, lead paint continued to be found on many children’s toys. Soon, news
came out that one of the bigger toy companies, Mattell, was also recalling nearly one million toys due to
the discovery of lead paint used by a contract manufacturer in China.2
What went wrong? It was easy to blame the Chinese toy manufacturing companies, and many people
did. They explained that lead paint creates brighter, shinier colors that appeal both to the children who
play with the toys and the parents who purchase them. Also, lead paint flows more evenly, so that it is
easier and less expensive to apply. And finally, lead paint is much cheaper; it is said to sell in China for a
third of the cost of paint that would meet global standards of protection.
The general conclusion of those on this side of “it’s their fault” argument was that the Chinese
manufacturers had deliberately disregarded both the standards in their purchase contracts and the laws
in their country in search of high profits. There were others, however, who disagreed, believing some of
the responsibility should be shared by American and European multinational companies that put too
much pressure on Chinese companies to supply cheap products in the interest of increasing profit
margins.3
Those who believed that the responsibility extended beyond the Chinese manufacturers, who
admittedly had applied the lead-based paint for reasons of appearance and profit, cited a recent change
in the competitive structure of the children’s toy industry. Traditionally, this industry had three
participants: small manufacturing companies who designed and made toys, regional wholesale firms
who distributed the toys, and local retail stores who sold the toys. These toys were almost always
generic; that is, they were of the “If you’ve seen one stuffed bear, cast truck, or wooden locomotive
you’ve seen them all” variety.
Similar to many other industries, however, the children’s toy industry began to consolidate in search of
the dual economies of scale and scope during the 1980s. This was at the same time that children’s
television programs such as Sesame Street began to dominate the networks with content that was both
intriguing to preschool children and acceptable to their parents. The right to market toys based upon
the characters popular- ized on these programs quickly was recognized as a huge competitive advantage
by the media companies, who held the rights to those characters, the manufacturers who wanted those
rights for their toys, and the retail chains who wanted the high volume sales that would result.
The manufacturers, that over this period had grown by accretion, were caught between large and wellfinanced media companies that wanted high royalties and the equally large and well-financed retail
chains that wanted low prices. Numerous accounts have been published relating the experiences of
manufacturers and importers that had come with an appointment and a proposal to the headquarter
offices of one of the larger retail chains, had then been told that the chain purchasing department had
analyzed the costs of producing the items on that proposal in the expected volumes, and ended by
stating, “This is the price (as specific dollar figure) that you’re going to have to accept.”
There are far fewer anecdotal accounts of manufacturers and/or importers going similarly hat-in-hand
to the headquarter offices of the large media companies (generally in New York or Los Angeles, not in
Arkansas), but it can be assumed that they also encountered a similar “This is the price you’re going to
have to pay” rigidity. There was limited bargaining at either end of the value chain in the children’s toy
industry because both the media companies and retail chains, equally large and well-financed players,
held the pricing power.
The manufacturers, given those limits, quickly arranged for far less expensive production abroad and
turned themselves into marketing specialists. These changes in the competitive structure of the
preschool toy industry, from the traditional to the consolidated, are shown in the following graphic:
In the traditional structure of the preschool toy industry, it would seem clear who was responsible for
the use of lead-based paint upon the children’s toys, had such an event occurred. It would have been
the small manufacturing firms that designed and made the toys they sold to the regional wholesale
firms that, in turn, sold to the local retail stores that then sold to the public. The final price to the public
was the one that determined the overall demand, and the three participants had approximately equal
power to divide the profits.
In the consolidated structure, however, the responsibility for the lead paint on the children’s toys is not
so clear. Obviously, the foreign manufacturers were the ones that actually put the lead paint on the
children’s toys—but here the industry participants did not share equal size and power: the two on the
ends held very dominate positions. Without the consent of the national media companies, toys based
upon their popular television characters could not be manufactured and sold, and high royalty payments
were required to gain that consent. Similarly, without acceptance by the big-box chain stores, toys
based upon those characters could not have been sold in the volumes needed to pay the high royalties
that had been charged, and low unit costs were needed to obtain that acceptance.
Class Assignment
After an exceedingly harmful event occurs and the results become widely known, it is always easy to say
what should have been done to prevent that event from occurring. In this case, despite the legal
contracts that the marketing specialist firms, RC2 and Mattel, had with their Chinese suppliers that
clearly stated that no lead paint should ever be used, one fairly obvious preventive measure would have
been to test on a regular basis each shipment of wooden toys for lead in the paint. In the famous words
of President Ronald Reagan when speaking about an atomic weapons treaty his administration had
reached with the government of Russia, “Trust, but verify.”
1. Why, in your opinion, did the senior executives at RC2 and Mattel not setup a statistically reliable
sampling program to check for all of the obvious safety hazards that can appear on wooden toys for
young children: small parts that can be swallowed, sharp edges that could cut, or toxic chemicals that
might be present in the wood or have been added to the paint? Those marketing specialist firms had
already been forced, by recent changes in U.S. law, to inspect the operations of their Chinese suppliers
for unsafe working conditions and improper employment practices. Why did they not begin inspecting
those suppliers’ products when they arrived in the United States?
2. Who, in your opinion, should bear the costs of such an inspection program? Should it be the federal
government (to protect U.S. citizens), the marketing specialist firms (to protect their own interests), or
all of the members of the toys for young children value chain, from the national media companies to the
big box retailers (to protect their customers)? Remember, the last two participants named have strong
economic clout at each end of this value chain. How would you convince them to join in the effort?
3. Are there any good alternatives to an inspection program? Inspecting what someone else has already
done is totally inefficient in any economic sense—and it eventually led to inspection of the inspectors. It
would be far better to get it done right the first time. Getting it done right the first time should be the
primary task of management. Members of this class are, it is easy to assume, in a program on
management. How would you get it done right the first time?
4. Lastly, what exactly changed in the children’s toy industry that brought about this outcome in which
an unknown and unknowable number of very young children were badly hurt? So far as is known, after
lead paint had been found to be so harmful to the mental and physical development of children, there
had been no use of that paint on preschool toys until the consolidation occurred in the 1990s. Were the
managers in that new industry structure, both American and Chinese, simply less concerned about the
impact of their actions upon others, or was there something more basic going on? If so, what was the
more basic something, and how would you have dealt with it?
Chapter 4 Moral Analysis and Ethical Duties
We are concerned in this book with moral problems: the decisions and actions faced by managers in
which their firm’s financial performance (measured by the revenues, costs, and profits generated by the
firm) and the social performance (difficult to mea- sure, but represented by the overall well-being and
general satisfaction level of the population) are in conflict. These are the situations in which some
individuals and groups to whom the organization has some form of obligation—employees, customers,
suppliers, distributors, creditors, stockholders, local residents, national citizens, and global inhabitants—
are going to be hurt or harmed in ways outside their own control, while others are going to be benefited
or helped. These are also the situations in which some of those same individuals or groups are going to
see their rights ignored or per- haps diminished, while others will see their rights recognized and even
expanded. The question is how to find an equitable balance between financial performance and social
performance when faced with these conditions, and how to logically convince others to accept or
approve that balance.
One of the basic premises of this book is that this logical conviction of others is key for managers at all
levels of an organization that has encountered such a moral problem. It is key for the future of their
organizations, the future of their societies, and the future of their careers. Moral problems of this
“important for all” nature are becoming far more prevalent, due to the highly competitive nature of the
stressed global economy. Consequently, graduates of our business schools are going to have to know
how to effectively deal with the moral problems caused by that competition and that stress. The process
for effectively dealing with these problems under those conditions has been graphically portrayed in
each of the previous chapters, and is repeated in Figure 4.1 one last time for emphasis.
Within the diagram, there are three evaluative methods proposed to select the most equitable mix of
benefits distributed, harms allocated, rights recognized, and rights denied. We can’t avoid all of those
harms brought to other people, or all of those rights ignored for other people, but we can evaluate them
and find what we believe to be an equitable balance and then attempt to convince others that it is
indeed more equi- table than the alternatives. These evaluative methods consist of economic outcomes,
legal requirements, and ethical duties. All have an element of impartiality to counter the usual
assumptions of self-interest in management. Before moving on to the ethical duties, which will be the
subject of this chapter, let us briefly review the advantages and disadvantages of the first two, and the
sources of their impartiality, to illustrate the need for the third:
1. Economic outcomes, based upon impartial market choices. The rule here is that man- agers should
always use the least wanted and, therefore, the lowest cost resources owned by members of society to
produce the most wanted and, therefore, the highest price products sought by members of society
because this will automatically result in the greatest financial profits for the stockholders of the firm and
the greatest material satisfactions for the members of society. But, there are both practical and
theoretical problems with this approach; the most telling theoretical problem is that this “opti- mal
benefits for all” outcome will occur only if (a) all input factor and output product markets are truly
competitive, (b) all suppliers and all customers within those mar- kets are fully informed, and (c) all
external costs outside those markets are totally included. It certainly helps to know the economic
outcomes that come from a given decision or action, but we need something more to ensure that
competition, require that information, and compel that inclusion. That “something more” consists of the
legal requirements of the law, based upon participative social and political processes.
2. Legal requirements, based upon participative social and political processes. The belief here is that
managers should always obey the law, despite personal disagree- ments with some provisions of that
law, because law can be said to represent the collective moral standards of the members of our society.
Each member has a set of goals, norms, beliefs, and values that are primarily derived from his or her
religious and cultural traditions and his or her economic and social situations. Combined, these goals,
norms, beliefs, and values form his or her intuitive moral standards of behav- ior. These moral standards
of citizens are aggregated into the legal requirements of society through social and political processes
that move from informal groups to for- mal organizations to governmental institutions. Again, there are
both practical and theoretical problems with this approach. The most critical practical problem is that it
is difficult to write legal requirements with the precision and completeness that will cover all current
and future moral problems that may come before a court. The most telling theoretical one is that most
legal requirements do not combine the standards
derived from all cultural and religious traditions and all economic and social situa- tions evenly; some
are excluded. It certainly helps to know the legal requirements that apply to a given decision or action,
but once again something more is needed. The “something more” in this instance are the ethical duties
based upon universal principles.
Ethical duties based upon universal principles, and the application of those duties and principles in
moral analysis, is the topic of this chapter. What are ethical duties? Let us be very clear here. They are
duties you believe you owe to other people based upon your rational thought processes. No one can tell
you what you ethically owe to others. You have to decide on your own. But, there are some universal
principles that can help you to decide, and that you can then use to logically convince others to support
your proposed solution to a given moral problem.
What are universal principles? They are rules for decisions or actions that are (1) not limited to any
particular cultural or religious tradition or any specific economic or social situation, (2) are thought to
lead to the overall well-being and general satisfac- tion of the full society, and (3) have an easily
understood rationale why the application of that universal principle will lead to that beneficial result. Let
me give an example. This universal principle is from Aristotle, a well-known Greek philosopher who lived
382 to 324 BC. The rule he proposed was that to ensure an overall benefit to society, a person should be
open, honest, truthful, and proud of what he or she did. Why should this mix of personal characteristics
ensure benefits to society? Aristotle’s reasoning was that Greek society at this time was composed of
groups of citizens who varied in their types of activities and that the cooperation and coordination of
those groups was neces- sary to form a productive whole. If the members of each group knew what the
members of other groups were doing, with no intentional evasion or concealment, then everyone could
work together to achieve the benefits of unity. Why was pride important? This was the critical element
of the rationale: If members of one group were proud of what they were doing or planned to do, they
would be certain to inform others, probably even boast to others.
As an illustration of the use of this universal principle, let us go back once again to the first case in this
book, the one where health care insurance companies were pay- ing the health care consulting firms
who were advising small companies and public organizations on the selection of the “best” health care
policies for their employees. Those health care policies were complex and lengthy documents, and it
was difficult for managers at the small companies and public organizations to tell which policy would
provide the best coverage and care for any given group of employees with dif- ferent health care needs
When this practice of “pay to play” first became known, the executives at the health care insurance
companies and the representatives of the health care consulting firms—both those who made the
payments and those who received the payments—quickly made the standard proclamation: “We have
done nothing wrong.” But, according to Aristotle’s universal principle of personal virtue they certainly
had. If the payers and payees of those often substantial amounts were truly proud of what they were
doing, they would been open, honest, and truthful about the practice, informing everyone they knew,
and they would have been so proud that they would wanted to see this practice broadly reported in
both local and national newspapers.
Aristotle’s proposed principle was truly universal in that it could be applied to all and be understood by
all. Those two elements—applicable to all and understandable by all—are fundamental to moral
philosophy. They are the two basic points to remember as you begin the study of this often infuriating
discipline.
Definition of Moral Philosophy
The universal principles that will be described in this chapter have been derived over the centuries from
the study …
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