Module 11: Purpose of the Corporation: Stakeholder Focus -- Customers and Danger

Question

Module 11: Purpose of the Corporation: Stakeholder Focus -- Customers and Dangerous Products

Read the Memo and Explain in detail what the right decision should be and why.

Ann:                          So, this is the standard remote for the TF-300.   

Mark:                       So what’s the problem?

Ann:                          It's the reverse button. All of our models except the TF-300 have a button right on top of the fan itself that allows for the fan to be set to spin either clockwise or counterclockwise. Some people like to set the fan to blow air downward in the summertime to make it feel cooler in a room, and then reverse the fan's motion in the winter to draw air upwards and make it feel warmer. It’s on the remote for the TF-300 because our design team didn't want our customers with high ceilings to have to drag a ladder out twice a year in order to use the feature.

Mark:                       Uh, huh.

Ann:                          The problem is that with the old design, the fan had to be stopped for an owner to                                                    reach up and flip the switch. But the remote allows for the reverse feature to be                                                  engaged while the fan is still spinning. If the blades are turning, especially on a high                                                 setting, and the reverse button is hit, it causes problems.

Mark:                       What kind of problems?

Ann:                         Well at first, they just make a clicking sound, but after many times, the fans become very unstable.

Mark:                     So how many times would you have to do it before you got a problem                                                                               beyond the noises?

Ann:                          Fifty, maybe a hundred or more.

Mark:                       It’s no problem. Nobody's going to do it that many times.

Ann:                          What if somebody's kid gets a hold of it and they want to make a game of it?

Mark:                       All right. What if some kid decides to make a game of it? Then what?

Ann:                          Well, if a kid decides to make a game of it…Look, what we did was we tested fifty of                                                   these TF-300s, okay? Forty-five of them just ceased to operate. Three of them, well,                                                    they emitted sparks but they didn’t start a fire. One of them started a fire. And the last                                              one threw out a half-inch piece of metal from the inner casing with considerable                                                       velocity.

Mark:                       Wow. Define “considerable velocity.”

Ann:                          Well, not lethal velocity. But it was certainly fast enough to put an eye out. I mean, I                                             was there. I saw it. It hit the wall really hard.

Mark:                        And the one that started a fire, it was a big fire?

Ann:                          Not at the time that we extinguished it, but it would have spread, yes.

Mark:                       This is terrible timing. You know we’re gunning hard for the Rooms-to-Go contract. It could double our business.

Ann:                          I know.

Mark:                       Ernie, are you out on the floor?

Ernie:                       Right here, boss.

Mark:                       Could you come in here please? What do you think we should do with this?

Ann:                          Well the first thing has already been done. I talked with our designers to redesign our                                            future models to automatically kill the power anytime the reverse button is engaged.

Mark:                       Okay, so that’s good.

Ann:                          As far as the TF-300s, they're just, they’re not safe. We probably ought to recall them,                                            but because of the way they're put together, there’s no cheap fix for the mechanical                                                      problem. We probably should just replace it.

Mark:                       Probably.

Mark:                       Ernie, are you up to speed on this TF-300 thing?

Ernie:                       Yes, I am. Hey, Ann.

Mark:                       And what's your take?

Ernie:                       Well, we've sold about 50,000 TF-300s to date.   We’ve had no reports of any                                                                malfunctions, or fires from any of the customers, retailers, or from the government.                                         Zero.

Mark:                       Yeah. And how many jobs can we add if we get this Rooms-to-Go contract?

Ernie:                       Seventy-five. Give-or-take.

Mark:                       When do we expect that contract to go through?

Ernie:                       Six weeks. Maybe less.

Mark:                       Have you talked to Lawyer Dave about this thing?

Ernie:                       Lawyer Dave estimates legal costs at about $20,000 to $200,000 per incident if somebody gets hurt by one of the TF-300s. And no upper limit on a worst-case scenario if someone gets killed in a fire or is disabled by flying debris. He told me, manufacturers usually get hammered in those kinds of cases no matter what happens.

Mark:                       So, we’re talking maybe a million, million-and-a-half for a recall?

Ernie:                       That's about right.

Mark:                       Just talking dollars and cents, I mean, it would take a lot of lawsuits to add up to the cost                                     of one recall.

Ann:                          Unless somebody is killed in a fire, then all bets are off.

Mark:                       The timing on this is just terrible. You know, this Rooms-to-Go contract could set us up                                       for years.

Ernie:                       I know.

Mark:                       What does your gut tell you?

Explanation / Answer

The issue at hand, as described in the case is, the company has sold 50,000 units of TF-300 model of their ceiling fan, where they provide the feature of reversing the spin direction of the fan, controlled through a remote. This feature is used more than 50-100 times in a moving fan can result in dangerous situations like starting a fire or dismantling (creating a danger of hurting someone), but the probability of these instances is fairly low and the company hasn’t received any such complaint as yet. The company is gunning for a new contract which can add heavily to the company’s bottom line and add new jobs in the company, and if the company decides to recall the already sold models, the contract can be negatively affected. Recall will also cost the company around a million-and-a-half, and $20,000 to $200,000 if some injuring incident happens due to the fan. If the fan causes a fire or a death, the cost will have no ceiling, and company’s image will also be negatively affected.

Stakeholder theory states that any company has the ethical responsibility to take decision and act in the interest of its stakeholders. Stakeholders for the company include customers, employees, suppliers, financers, political groups, community, government bodies, trade unions and trade associations. In this case, the customers of the company (using the TF-300 model fans) are the company’s stakeholders and the company has a fiduciary duty to keep their needs and safety first. But the employees of the company and the shareholders are also company’s stakeholders and the loss of the new contract will affect them negatively. Hence the company should recall their TF-300 model fans but wait for another few weeks, and try and expedite the contract. Till then, the company should run an advisory for the current customers of the model, through personalized emails or other personal forms of communication, to prevent changing the spin direction when the fan is moving and prevent children’s access to the remote, as the company is planning to replace their current models with the new designs with better safety features and recall these old models to prevent the fan from “stop working”.

Related Questions

Navigate

• Browse (All)
• Browse M
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.