You are the CEO of a mid-size manufacturing company that produces sporting equipment. For several years, you have been struggling to keep your company profitable in an increasingly competitive market. The company is the major employer in your small city of 35,000 people. It is critical to the city’s economy.
Recently, a major sporting equipment company informed you of their desire to acquire your company. There are many possible advantages to such an acquisition. It could save the company. A team from the larger company has begun working with you, your management team, and your Board to hammer out the details for this proposed acquisition. Everyone on your side is favorable to this move and the other company’s terms seem generous.
As with many consumer product businesses, annual revenues for your company are dependent on strong holiday sales. A few days ago, the VP for Quality Assurance and a few of the engineers reported that they had discovered a defect in the safety helmets you produce. The report further indicated that there is a small percentage chance that a portion of the helmet support webbing could fail in a severe crash. There is an even smaller chance of an injury resulting from such a failure since most of the supports would remain intact. Also, it is industry knowledge that no helmet can protect against the most catastrophic of crashes. To date, no injuries have been reported for consumers wearing your helmets. These helmets account for about 60% of the company’s revenues. It is late August and you are already fulfilling the holiday orders for most of your large retail chain customers. You have some decisions to make.
You reflect on the fact that a major dip in revenue could jeopardize the pending acquisition. Furthermore, given the timing, such a loss of revenue could endanger the company as it now exists. It might even make it necessary to enter into bankruptcy. The economic impact on your employees and on the city at this time of year would be disastrous.
What should you do?
- You can order that all current production be stopped, pay overtime to your engineers to design a fix, and pay overtime to the operators to catch up from the lost production time. This will result in lower profits, but they would likely be manageable.
- You can pay shipping costs for all inventories already delivered to your retail merchant customers so that the helmets can be returned for expedited modifications and redelivered in time for the holiday sales. This would have a greater negative impact on profits.
- You could issue a public recall of all defective helmets. This would be devastating for both revenues and profits and would most likely kill the proposed acquisition.
- You could (create your own alternative):__________________________________________________________________________________________________________________________
Write a short essay. What would you do? What stakeholders would be harmed and which ones would likely benefit. Why would you choose this course of action? What are the ethical implications of your decision?