The Ethics Of Outsourcing At Mattel
In addition, this article will address how corporate culture played a role in the decision to outsource the manufacturing process to facilities, which were not following legal standards. Keywords Matter, corporate culture, ethics, Fraud, product safety. JELL Classification MIM. BRB / BRB / Introduction / Corporate culture is defined as the shared values and / beliefs of individuals within an organization (Statistics / and Satanist, 2009). Corporate culture is an important / span classmate/acceptances to examine when researchers attempt to explain unethical behavior within an organization.
Previous research in the area has primarily focused on the positive aspects culture that is related to firm performance (Deal and Kennedy, 1982 Peters and Waterman, 1982 Dimension, 990). It is also important to considerer/ BRB / that the corporate culture can have negative impact knob / a firestorms operations if the culture supports unethical and / illegal activities.
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This study examines how one company, Matter, developed a culture which allowed the unethical and illegal actions of its suppliers to negatively affect its operations. R / BRB / fixated only on the low price of production of the Chinese suppliers. By allowing the quality standards to drop to potentially dangerous levels, Matter manageress / focused only on their own self-interests since their / pan classmate/spermatozoon was directly linked to the financial performance of Matter. Therefore, Matter managers ignored potential safety issues with the production of the toys in China since lower levels of production orb / BRB / higher costs per unit would have a direct impact knob / their total level of income for the year.
As a result, Tiber / does not matter whether the lack of quality controls / were deliberate or not. Since Amateurism’s name goes knob / the final product, its managers were accountable forbs / the actions of their suppliers (Hegiras and Sims, bribe / Shanghaiing and Vital, 1990 Granite, 2003). BRB / 1. The first recall of toys / In 2006, 75 percent of all toys manufactured worldwide came from China. Within China, one province, Gudgeon, is the location of 5,000 of Chinaware’s 8,BRB / span classmate/Spartan manufacturing plants.
It is estimated that 1. 5 million workers are employed in Gudgeon toys manufacture (McLeod, 2006). Matter makes approximately 65 percent of its toys there. The corporation states tabor / BRB / it demands that the toys that are outsourced to other / manufacturers must comply with the safety standards / established by Matter. Raw materials that would beer / used by an outsourced manufacturer are first sent Toby / the Matter control facility in order to verify they matter / all safety standards.
Matter has been manufacturing inborn / China since the first Barbie was made there in 1 959. BRB / The corporation has developed a number of longer / standing relationships with China manufacturers,BRB / which may have lead to more relaxed monitoring and / control of its operations (Story, 2007). Furthermore,BRB / Matter was a major customer for these suppliers, so Tiber / should have absolute control over the manufacturing / recess as it relates to the level of quality and compliance with government regulations and standards.
However, Amateurism’s top level managers appeared to beer / BRB / On August 1, 2007, Matter had to recall almost 1. BRB / million toys that were made in China. Over 80 toys / contained potentially dangerous levels of lead in thebe / paint on the toys. A long time supplier of Matter had / span classmate/spanked non-approved paint pigment which violated Amateurism’s and the toy industriously standards (Bugaboos, 2007). On August 2, 2007, Matter issued a press release in which it explained its course f action to correct the problem.
Matter worked with the U. S. Consumer Product Safety Commission and other regulatory agencies around the world to pull the toys off the shelves and halt the distribution of any toy that contained the unacceptable levels of lead. Robert Cocker, Chairman and CEO stated that liquored apologize to everyone affected by this recall, especially those who bought the toys in questioningly realize that parents / BRB / trust us with what is most precious to atmospherically / children. And we also recognize that trust is earned. R / Our goal is to correct this problem, improve orb / yester and maintain the trust of the families tabor / have allowed us to be part of their lives by acting / responsibly and quickly to address their conquistadors / (Matter, 2007). BRB / Sarah D. Satanist, Peter A Satanist, 2010. BRB / This recall was despite the fact that Matter was rabbet / of the potential lead hazard at least a month earlier,BRB / BRB / Problems and Perspectives in Management, Volume 8, Issue 4, 201 For / BRB / when one of the European retailers that sold Matter / products in early July discovered lead in some of its / toys.
On July 6, 2007 Matter stopped production inborn / he factory, which they believe was the origin of thebe / lead paint. Commenting on the supplier using thebe / lead paint, CEO Chart stated that this was a supplier which had worked for Matter for 1 5 years and lectureships question somebody that just started making toys/ span classmate/sponsor slithered understand our regulations, they understand our program, and something went wrong. That Herodotus. It is a requirement established by Matter that those outsourced factories making Matter toys must use paint and other material from certified suppliers.
As a result, Matter was not sure whether the manufacturer bustiest paint from bar / BRB / supplier who was not certified or whether the leader / paint came from a certified supplier. In 2007, BRB / percent of Amateurism’s total revenues were based knob / the toys that were manufactured in their 11 factories in China which they owned and operated (Story, AAA). BRB/ 2. Why lead painter / Lead is added to paint in order to increase thebe / span classmate/spanked in which the paint dries, to increase the durability of the paint and to enhance the ability of the paint to resist moisture which could cause corrosion (Wisped).
Lead paint is also easier to apply on hard reface and can produce a richer / BRB / color than paint without lead. The net result is tabor / lead enhances how the paint is used in the production process, but the lead is not allowed to be added to the paints. Therefore, paint in which leader / has been added is sold ATA Custodianship’s price of ennobler / third of the cost of paint that does not include leader / (Barbara, 2007). BRB / Matter had allowed the local suppliers to implement their own safety testing which resulted in the shipping of tainted toys from the factories in China / to children around the world.
The suppliers had / darted to use cheaper paint which contained leader / to reduce manufacturing costs. The supplier tabor / made the toy Lee Deer Industrial Company was / investigated by the Chinese Government for its / role in the use of tainted paint. The supplier stated / that it was cheated by its own paint supplier, whoop / sold Lee Deer Industrial the paint which included / the lead. Lee Deer Industrial claimed that they were / not aware that the paint was contaminated wither / span classmate/spangled (Zamias and Casey, 2007).
The Chinese government banned Lee Deer Industrial from exporting any more toys until a full investigation was completed. The net result was that Lee Deer Industrial had to stop its operations, which led to the suicide offer / BRB / its founder Ghana Shogun. Amateurism’s response in bar / press release to the suicide was that liquored were / BRB / troubled to hear about this tragic encephalitis is bar / personal misfortune not a corporate event. Any losses / of life is a tragedy and we feel for the family during / this difficult timorous (Cody and Joe, 2007). BRB / 3.
The second recall / On August 14, 2007, Matter issued a second major / recall of toys manufactured in China. The seconded / call include additional toys made with paint contaminated with lead as well as millions of other toys which have magnets which could become loose and / could be swallowed by children. An estimated / 436,000 toys were being recalled due to lead painter / An additional 18. 2 million magnetic toys were being / recalled after reported injuries and death of children / span classmate/Spanish had swallowed the magnets after they had become loose from the toy.
Matter stated that the magnetic toy recall included 63 different varies of toys including such well known brand names as Pillory / Pocket, Batman, and Barbie. The lead paint recalled / toys included brand names such as the characters offer / Sesame Street, Dora the Explorer and Disingenuous Carobs / (Story and Barbara, 2007). The senior vice-president of worldwide quality assurance at Matter, Jim Walter, stated that Matter had ldquostrengthenedrdquo its / three-point check quality system to ensure that toys / with lead would not enter the marketplace.
Thebe / three point system includes verifying that only certified suppliers of paint will be used to manufacture the toys, a mandatory testing of every batch of toys / produced, the tightening of quality controls including random inspections during the manufacturing process and the testing of every production run offer / completed toys (Barbara and Story, 2007). As was / the case with the first recall, a subcontractor was / used to supply the paint to Amateurism’s contractor inborn / China.
Hong Lie Dad supplied the paint to Early / Light Industrial which was not aware that the painter / had been contaminated with lead. Early Light had / been a contractor for Matter for 20 years. Matter / had used between 30 and 50 contractors in China / and many subcontracted out part of the production / process to a subcontractor. Lee Deer, the contractor / of the original Matter recall lost its license to export and subsequently went out of business (Story and Barbara, 2007). Lee Deer had been a Matter / contractor for 15 years. R / Matter executive vice-president for worldwide operations, Thomas Deflowers, stated that Matter realized that there were continuing rising costs offer / production in China which was squeezing the profit / margins of the Chinese manufacturers. He stated / that Solution the last three to five years, yourselves seen / labor prices more than double, raw materials prices / bubble or transplanted think that thereabouts a lot offer / pressure on guys that are working at the margin Toby / try and save moneywort.
However, Deflowers stated / that Matter does not take the blame for putting / downward pressure on the pricing of the toys despite the rising manufacturing costs. Quoin, absolutely endothelial insist that they continue to use certified / paint from certified vendors, and we pay for that,BRB / and horsepower perfectly willing to pay for deathward (Story,BRB / 2007). It was during this time period that the Consumer Product Safety Commission (COPS) excused Matter of not following the mandated requirement / to notify the COPS within 24 hours after the company has made a decision to recall any products.
Amateurism’s CEO, Robert Cocker, admitted that Matter / did not follow the COPS requirement because thebe / should have the right to discuss the problems on BRB / their timetable because the 24 hour time limit sibs / unreasonable. The COPS had already fined Matter / twice since 2001 for knowingly withholding information regarding products that could create loquaciousness risk of serious injury or deathtraps (Casey and Passport, 2007). . The third recall / span classmate/Spanish following day, September 4, 2007, Matter announced their third major recall.
It was recalling approximately 775,000 toys with lead paint which included a number of Barbie accessories. Amateurism’s CEO, Robert Cocker, stated that Sequoia apologize again Toby / BRB / everyone affected and promise that we will continue Toby / focus on ensuring the safety and quality of our distributors / (Casey, 2007). In a letter to The New York Times,BRB / Cocker commented that liquors a father of four, I amber / intimately aware of the expectations of parents. Thebe / ant safe toys, and they want assurances that those / toys have been tested to make sure that threescore safe. R / Currently lead paint is topmost on apparentness minds. Birr / want parents to be assured that we are taking action heliport toys are overwhelmingly safe. To date, our lead-related recalls of toys produced in the past BRB/ span classmate/ expansions represent less than half of 1 of our production. Iroquois rather the number was chroniclers was a young man growing up in suburban Chicago, my father encouraged me to earn his trust through my actions rather than just talk about what I was going to do.
Today, tell my children locoweeds, not wordbooks. And it sibs / BRB / on this principle that Matter will move forward. Weber / will earn back your trust with our deeds, entrust wither / our wordbooks (Cocker, 2007). BRB / On September 1 8, 2007 a subcommittee of thebe / United States Congress announced that some of thebe / toys Matter had recalled contained 180 times thebe / allowable levels of lead in the paint. Therefore, upper / to 1 1 percent Of the paint was lead or 110,000 parts / per million.
The federal law in the United States / allows only 0. 06 lead or 600 parts per million inborn / paint (Resoundingly, 2007). R / span classmate/spoon September 21, 2007, Amateurism’s executive vicissitude for worldwide operations, Thomas Deflowers, apologized to China for harming the reputation of the toy manufacturers in China for the 17 million toys Matter recalled in 2007 not because of lead paint but because of flaws in the design of some offer / BRB / their magnetic toys.
Deflowers commented tabor / liquated does not hold Chinese manufacturers responsible for the design in relation to the recalled magnet destroyed (Story Bibb). By admitting to a design flaw,BRB / Matter could face numerous product liability lawsuits / y biblically announcing a product defect.
Debonairness’s apology included taking full responsibility for the problem with the magnetic toys liquated takes / span classmate/spoonful responsibility for these recalls and apologizes personally to you, the Chinese people, and all of our customers who received the dessertspoonful’s important for everyone to understand that the vast majority of those products that we recalled Were the result of a designer / BRB / flaw in Amateurism’s design, not through a manufacturing / flaw in Chinese infrastructure’s (Casey, Zamias and / Passport, 2007).
The Chinese product safety chief, Libra / Changing, reminded Matter that liquidation large part offer / your annual profitableness from your factories inborn / Chancellorship shows that our cooperation is in thebe / interests of Matter, and both parties should value orb / cooperation. I really hope that Matter can learn lessons and gain experience from these incidents and that Matter should improve their control masqueraders / (Olsen, 2007). BRB / 5.
The consequences of the recall / In October 2007, shareholders filed a lawsuit against / span classmate/supplemental for withholding timely announcements of recalled products. The lawsuit alleged that top management at Matter produced misleading financial statements since they were PRI; to potential recall notices and yet did not make them known biblically until / BRB / months later. The lawsuit claimed that this has been bar / general practice at Matter for years.
In addition, thebe / lawsuit charged Matter with breaching its fiduciary / duties by not abiding by the consumer protection laws / including the 24 hour notice statue. In addition, thebe / lawsuit claimed that executives at Matter were involved in insider trading by selling 33 million of Matter stock before the announcement Of the recalls / came public (Tab, 2007). In October 2009, Matter / settled a consumer class action lawsuit for over BRB / million to pay to consumers, who had purchased thebe / toys containing the lead paint.
The settlement willow / resolve 22 lawsuits that were filed against Matter and / its subsidiary Fisher Price and major retailers on behalf / of the millions of families who had bought Matter / products that had been recalled (Anderson, 2009). BRB / Therefore, it appears that the quality issue was deliberately avoided by many employees within Matter. This 181 BRB / BRB / supports the view of Miller and Thomas (2005),BRB / ho state that peer pressure of colleagues would / support and reinforce unethical behavior even if Tiber / is in violation of the individualism own personal / code of ethics.
The net result of a corporate culture / that support unethical actions was that the employees, which developed, maintained and supported this type of culture would not be penalized for their / actions. The top level executives at Matter were / only indirectly Goddaughter’s for their actions since thebe / continued to assign blame to the suppliers. It was / only after extreme pressure from stakeholders suburb / s the United States government, the customers and / the media that Matter finally Idquoadmittedrdquo that thebe / would take some responsibility for the unsafe toys. R / Bass and Streamside (1999) propose that top leveler / executives can manipulate the beliefs of their subordinates into believing their own altered state of reality. This could explain, in part, why it took sobs / long for Matter to react to the claims made by its / stakeholders. BRB / Conclusions / This case highlights a number of important concepts / related to unethical behavior within corporations. BRB / The actions by the top executives at Matter supporter / span classmate/Spanish belief that unethical actions influence the corporate culture of the firm.
Through, the use of group norms at Matter, unethical behavior was not discouraged by top level managers and was actually / BRB / supported by the actions of the managers and their / lack of action with their suppliers. As Terrine,BRB / span classmate/sportsman and Brown (2000) state, top level executives must be both a moral person and a moral manager in order to develop an ethical leadership role within the firm.