1. Chapter 13-1 Chapter 13 BUSINESS & SOCIETY Ethics and Stakeholder Management Carroll & Buchholtz 6e Business and Society: Ethics and Stakeholder Management, 6e Carroll & Buchholtz Copyright ©2006 by South-Western, a division of Thomson Learning. All rights reserved Prepared by Deborah Baker Texas Christian University  CONSUMER STAKEHOLDERS: PRODUCT and SERVICE ISSUES

2. Chapter 13-2 The Issue of Quality Driven by: Increase in family income (busy lifestyle) Intense global competition The Issue of Safety Driven by: Public’s increasing concern with safety & risk-free products Business’s responsibility to address it Product Issues

3. Chapter 13-3 Product Quality What are customers looking for? Perceived Quality Aesthetics Serviceability Features Reliability Conformance Performance Durability Dimensions of Quality

4. Chapter 13-4 Ethical Issues of Quality -Based on the concept of DUTY Contractual Obligations Due Care Obligations Social Costs Obligations

5. Chapter 13-5 Contractual Obligations B. have responsibility to: –Comply with terms of sale –Inform customer about product –Avoid misrepresentation –Not coerce the customer.

6. Chapter 13-6 Due Care Obligations Because customers are vulnerable (have less knowledge & expertise about product) the co. has ethical responsibility to: Live up to product claims Take care to avoid consumer injury that could result from product.

7. Chapter 13-7 Social Costs Obligations If a product causes harm, the co. should pay the costs of an injury-- even if the co. took all reasonable precautions

8. Chapter 13-8 1900s Prevailing legal view Caveat Vendor “Let the seller take care” 1900s Prevailing legal view Caveat Vendor “Let the seller take care” The Issue of Safety “Free from harm or risk” 1800s Prevailing legal view Caveat Emptor “Let the buyer beware” 1800s Prevailing legal view Caveat Emptor “Let the buyer beware” Historical Perspective

9. Chapter 13-9 Today manufacturers are held responsible for products.  Can manufacturers make products that are “free from harm or risk” that are still affordable & useful? –Think about $ spent on warnings, packaging, package inserts  cost prohibitive? (Ex: Little Tikes Toys)  Can manufacturers predict all the ways a person could harm himself?

10. Chapter 13-10 Allegations in Product Liability Claims 1. Product poorly designed 2. Product poorly manufactured 3. Manufacturer failed to provide instructions or warnings 4. Manufacturer failed to anticipate misuse of product & warn us.

11. Chapter 13-11 Products Associated with Injuries -CPSC tracks ER visits  Sports & recreation activities & equipment  Home structures & construction materials  Home furnishings  Housewares  Personal use items  Home workshop tools  Product packaging & containers  Toys.

12. Chapter 13-12 Product Liability FIRST... Because of the number of cases where products resulted in injury, illness, or death & the amount of the financial award. SECOND... U.S. has become an increasingly litigious society (costs $200 B/ yr) DuPont stats THIRD… Rise in the doctrine of strict liability. Reasons for the Growing Concern

13. Chapter 13-13 Doctrine of Strict Liability Anyone in the value chain (design, manufacture, sale) of a product is liable for harm caused to the user if the product was unreasonably dangerous or defective! residency Absolute liability  Manufacturer held liable for failure to warn consumers of a hazardous product even if it had no way of knowing the product might be dangerous at the time of manufacture & sale (asbestos, drugs) Market share liability  Manufacturer held liable for delayed reactions to products years after consumption or exposure (DES)

14. Chapter 13-14 Other Issues Product Liability  Product tampering or extortion Should business held liable? Move toward tamper-resistant packaging  Product liability reform (tort reform) Limits punitive damages payoffs –($250,000 medical malpractice bill, Senator example) Arguments for & against

15. Chapter 13-15 Governmental Regulatory Agencies Dedicated to Product Safety  Consumer Product Safety Commission Established in 1972  Food & Drug Administration

16. Chapter 13-16 CPSC Works to reduce risk of injuries & deaths from consumer products. How? Develop & enforce safety standards Ban unsafe products Product recall Research on potential product hazards Inform & educate consumers Respond to consumer inquiries.

17. Chapter 13-17 CPSC Lack of compliance (Hamilton Beach) Lack of compliance (Hamilton Beach) Limited public access to key information Inadequate consumer notification Insufficient funding Holes in the Product Safety Net

18. Chapter 13-18 FDA Their Mission Review clinical research on regulated products Ensure foods, drugs, medical devices & cosmetics are safe, effective & labeled Regulates nutrition labeling Crackdown on deceptive product labeling Monitors accuracy of product claims

19. Chapter 13-19 How businesses are responding to consumer activists- Consumer Affairs Offices –Monitors customer satisfaction, complaints & co. responsiveness Product Safety Offices –Enforce effort to make safe product  audits, recalls TQM

20. Chapter 13-20 TQM Philosophy built aroundquality (continuous improvement),teamwork, productivity, &customer satisfaction.

21. Chapter 13-21 TQM Six Sigma Sigma is a statistical measure ofvariation from the mean  higher values mean fewer defects.Six-Sigma level of operation is3.4 defects per million.Most co. operate at four-sigma or6,000 defects per million (0.6% defectsor 99.4% yield).