Executive Summary
The present paper examines the case of the 2007 Mattel toy scandal – the company faced a great challenge in replacing huge numbers of spoiled and dangerous toys. Alongside the financial loss, the challenge included ethical issues that were successfully handled by Robert Eckert, the CEO of Mattel. The paper considers his ethical leadership framework, examines their compliance with basic guidelines of ethical behavior and the code of ethics in economics. Multiple variants Eckert had at his disposal as well as his final decision and its consequences are analyzed in the form of a case study. The concluding part is followed by the group’s recommendations that would improve the efficiency and constructiveness of Eckert’s approach to solving the ethical problem Eckert faced in 2007.
Introduction
Mattel Scandal
Mattel, a giant toy-producing company that has a global presence had to recall more than eighteen million toys (18m) from the markets around the world in the year 2007. A number of things were not in order, and if left to the consumers, the toys would have led to serious harm. The reasons for the considerable recalls of products were that the toys manufactured on the facilities based in China were dangerous for children’s health due to the lead paint discovered in the toys and the second reason for the recalls was “a design flow” of a number of magnetic toys that were threatening for children’s case due to the possibility of coming “apart from the toy with the risk of being swallowed by children” (Weiss 2008, p. 80). Besides, there appeared not only the threat but some cases of injuries and even death were reported (Weiss 2008).
The company had to recall the loose magnet toys so as to replace them with the ones designed using recent technology that utilized fixed magnets. On August 2, 2007, the Today show reported the news that “a ‘global recall’ from Fisher-Price involving approximately one million toys” was performed (Weiss 2008, p. 79). On the whole, Mattel “recalled 21,334,000 articles” of toys during a series of three recalls that took place during one year (Magno 2008, p. 8). As it comes from the recall and replacement statistics, the company faced huge losses because of the scale of damage and the number of previously bought toys. However, the challenge that turned out more problematic was not the financial damage but the set of ethical dilemmas that the company faced: mere replacement had nothing to do with the restoration of the company’s reputation, so decisions in the ethical dimension were inevitable.
Though the recalls were conducted and the issue was given publicity since “Mattel ensured consumers were aware of the recalls by placing ads in major newspapers and posting notices on popular web browsers” (Warner 2008, p. 32), it took the company considerable time to gather the data pertaining to the recalls and to notify the agency (Weiss 2008, p. 80). Hence, the problem revealed the necessity of searching for an innovative ethical approach that could help not only keep the company afloat but also help it acquire its former prosperity. Since the leadership team of the company is headed by Mr. Robert Eckert, the implementation of his leadership should be considered first of all when analyzing the ethical issues and conflicts that have become a part of the history of Mattel.
Evaluation of Eckert’s Leadership
On the whole, Robert Eckert has been characterized as the man who “underpromised, over-delivered, trimmed the fat by cutting jobs, and kept the product line basic” (Oppenheimer 2009, p. 193). Assessing the ethical framework that Eckert “adds to his armory” when reacting to the analyzed ethical issue, it can be defined as consequentialism or its particular form, utilitarianism, an ethical theory that pays great attention to the consequences of the events, aftermath and the reaction to them. The Chief Executive Officer had a number of options at his disposal as the crisis unfolded. He would have looked the other way and waited for the toys to be rejected by the market. The other option was to bribe those that had identified the problem so as to ensure that no one talked. This would have made the unsuspecting consumers go forward and buy the faulty toys. Then of course there is the option of organizing for the recalls of the faulty toys. This is the option that the Chief Executive officer took and the results will be examined in this report.
Actions Taken by Eckert
Robert Eckert knew that the owners of the company had invested massive resources in the production of the faulty toys. What was he to do so as to ensure that they did not lose out in the whole crisis? Was recalling the toys not plunging the business into massive waste and thus hurting the stockholders? What about the consumers whose children were swallowing magnets due to the non-fixed magnets in the toys produced under outdated technology? Was the company not morally obliged to save these children? Market ethics dictate that consumers should be protected at all costs even as sellers search for profits (O’Neill 1998, pp.21). How about the workers who had spent long hours in factories painting the toys and fixing the magnets? Was their work not going to waste because of the recalls? These are the ethical concerns that Eckert faced when viewed from a theoretical point.
From the present case study, it turns out that Eckert was seeking the greatest good for the greater number of people, consumers, in particular, choosing to reveal the data on recalls. He stated: “You have to deal with those things. It’s not the unfortunate events that we want to be judged on. We want to be judged on how we address the issues” (Warner 2008, p. 32). However, some traces of ethical egoism could be observed in Mattel’s case on the part of Eckert, such as the accusation of the Chinese contract manufacturers of the product design defects.
As noted elsewhere in this report, Eckert had the option of doing nothing at all when the problem surfaced. The consequence of this would have been the loss of confidence on the part of consumers of Mattel products. This would have led to the eventual demise of the company from the business world. In addition, toys that would have reached consumers who were still ignorant of the faults would have inflicted untold harm to their children. The other option of bribing those who had identified the problem, as well as those who would have taken the company to task for selling its faulty commodities, would have led to serious harm to consumers. Corruption is rampant in the systems around the world and bribery may or may not have worked. Under this option, the faulty toys would have been discovered in the long run and consumers would have run away anyway. There are businesspersons who believe that there is no business ethics, and this would have been such a nice option for them (Maxwell 2003, pp.11-15).
The last option that Eckert had was the recall, and this is what he did. The ethical considerations here were the harm the faulty toys would have done to the company name if left in the market and the harm the toys would have done to the children using the toys. The ordinary eye sees consumer interest as the driving force, but company interest was first in this case. The blurred line between company interest and consumer safety concerns can lead to wrong conclusions (Duska 2007, pp.35-36). The fusion of company survival concerns and consumer safety issues gives a two-theory framework as guidance for Eckert’s actions.
Main Body
What is Ethical Leadership?
In the wide field of corporate ethics, much of what is dealt with is viewed from a professional and applied angle. The elements have a practical orientation in that the impact is visible in society, and they have a moral touch that calls for the need to mind the harm that may be inflicted on a third part even as the business owners make their ends meet in terms of profits (Badiou 2001, pp.12-16). In the Mattel recall case, the toys had already been distributed to various stores around the world. They had reached the market in their faulty nature and therefore the smaller area of marketing and sales ethics is in play.
Ethical leadership is extremely in every company because it affects the professional competence and skills of the leader; ethical behavior is appealing both for the employees of the company and the stakeholders involved in the process of the company’s operation. Wilcox (2010) notes that a truly ethical leader should possess ethical awareness, ethical judgment and the ability to enact ethical decisions appropriate for every particular situation (p. 8). Ethical leadership rests on the basis of ensuring compliance of the company’s actions with its social and ethical mission; it ensures building and sustaining relationships with stakeholders far beyond the economic measures. It also dictates showing interest and concern for others in the personal, humane dimension, and not only with the considerations of marketing or management. Ethics is an indispensable element of leadership because it makes the leader attractive to the public; it also equips him/her with all necessary tools for communication with the community and satisfying the far-ranging needs that exceed buyer-seller relationships, which is extremely important in cases of conflict.
Ethical Issues and Dilemmas
“Leadership” at Mattel is understood as “the ability to develop and communicate a compelling picture of the future that inspires and motivates others to take action” (Mattel 2010). The same official website of the company suggests that the leaders who direct and control Mattel “align themselves with Mattel’s core values, exhibit leadership competencies and drive for success in [their] business strategies” (Mattel 2010). Evidently, the organizational culture of any company plays a major role in its successful existence since it can be rightfully compared with “a personality” of a company reflecting that “actions of top management also have a major impact on an organizational culture” of the company (Robbins 2005, pp. 229, 234).
Since Mattel has been recognized as the company that realizes potential ethical issues and takes “steps to strengthen its commitment to business ethics” (Ferrell, Fraedrich, & Ferrell 2009, p. 356), the present paper will be devoted to the identification of possible recommendations that could have been administered by Robert Eckert during Mattel’s recalls of 2007.
On the whole, the specificity of Mattel’s production can be considered a factor that inspires the arousal of numerous ethical issues (Ferrel, Fradrich, & Ferrel 2009). The basic issues identified by Ferrel, Fradrich, & Ferrel (2009) include the concerns relating to the children’s rights, since children for the unquestionable majority of the target market of the company. The same authors also mention the international environment as the factor complicating business transactions that lead to the arousal of conflicts based on ethical grounds (Ferrel, Fradrich, & Ferrel 2009). Nonetheless, this is not the limit of ethical issues that became the prime concern of Mattel, so each of them deserves separate attention.
Considering the key ethical dilemmas characteristic of the analyzed case, it is necessary to mention that “some crisis experts chastise Mattel for having to issue a recall at all” (Warner 2008, p. 30). Thus, one of the ethical issues is the series of recalls themselves. On the one hand, the recalls were sure to become the decisive factors that could threaten not only the financial stability of the company but also its reputation in the eyes of consumers and the business world on the whole. However, on the other hand, Eckert stated in his testimony that “nothing is more important than the safety of our children” (Testimony of Robert A. Eckert 2007, p. 1). This is why the dilemma was solved for the entire benefit of the consumers and the events were given publicity.
Also, it is possible to define one more ethical dilemma that the CEO of Mattel encountered in the course of the series of recalls. The blame was shifted to the Chinese manufacturers of the toys. However, if the blame of the Chinese manufacturers seemed evident in the case of the lead paint usage, it could be questioned as far as the accusation of the improper design of magnetic toys is concerned. In fact, the Chinese government stated that “85% of the recalled products were faulty because of mistakes in their design, which was directly performed by Mattel” (Magno 2008, p. 8).
Consequently, it seems that though the guilt of the Chinese manufacturers was present, the accusation was unfair to a certain extent. It is known that Eckert made an appeal to the Chinese contract manufacturers, stating the following: “I, like you, am deeply disappointed by recent events. We were let down, and so we let you down” and the decision was made to distance Mattel from the contract manufacturers (Weiss 2008, p. 81). However, it is known that this ethical dilemma was solved by public excusal and Mattel’s taking “full responsibility for these recalls” and the apology was given to “Chinese people, and all of our [Mattel’s] customers who received the toys” (Coombs & Holladay 2010, p. 480).
Ethical Framework of Eckert’s Decisions
Mattel as a company does not exist in a vacuum. There are numerous parties that are part and parcel of the company. The difference between these parties is the degree of involvement. The first part involves the stockholders of the company. These are the people whose capital runs the company. They are also referred to as shareholders. Ideally, they are the ones who make the decisions that determine the direction that the company moves. But in today’s business world, responsibility is highly delegated and much of the serious decision-making is left in the hands of the Chief Executive Officer. This is why Bob Eckert understood that it was his responsibility to move with speed and do what he thought was best for the company. The stockholders are instrumental in their capacity as the capital owners in that in the absence of their capital, the company does not exist.
Leaving the above aside, the employees of Mattel as a company are another important constituency. They dedicate long hours towards the wellbeing of the company and to them; the company is their second home. The sacrifices they make as demonstrated by the stretched working hours in times of pressure show the level of attachment that exists between the company and the employees. It is the dynamic nature of the company’s employees that keeps the company moving forward in a highly competitive business environment. It is important to note that this is not exclusively concerned with Mattel but the whole business world. It is more relevant to Mattel because the nature of the commodities that the company deals in relies on employees’ enterprise and creativity. The point is that the toy designs have to be interesting to the children and safe at the same time and this is not going to be the work of the stockholders. It is the employees who do the designing in most cases.
The last constituency, though surely not the least significant one is the consumer. In some cases, this constituency has been declared the most significant element in any business given that even with the capital from the stockholders, if the consumers of the commodities funded by stockholders and produced by employees are not present, the company is as good as not being in the market. Their vital position has made the modern business world move an extra mile in ensuring that their needs are met and their voices are heard.
All the constituent parties covered above play a part in the business. The business ethics theories that guide business discussions are the stockholder theory which argues that the sources of the capital that runs the company are the most important and the stakeholder theory that argues that all stakeholders are supposed to be taken care of if a company is to succeed. Then there is the social contract theory that takes the position that consumer and employee interests are to be satisfied in business without necessarily breaking existing law. This is the nature of the ethical world in business (Bradie 1994, pp.18-21).
The final decision of Mattel to assume responsibility for the recalls demonstrated Eckert’s adherence to the framework of deontological ethics. Considering the framework utilized by Eckert in his decision-making, it is possible to state that the CEO of Mattel resorted to the ethical decision-making framework that helped him to improve his decision in the crisis situation (Ferrell, Fraedrich, & Ferrell 2009). Surely, such a challenge could have had multiple alternatives, and it is hard to state that the decision made by Eckert was the best one, but it had much rationality and reached its effect to a certain extent. The solution will be reviewed further to understand the advantages and disadvantages of Eckert’s actions.
First, under the stakeholder theory, Eckert wanted to ensure that the toys were recalled as a way of protecting the company by showing consumers that the company wanted the best for them and therefore when there was a mistake in the commodities that reached the market, the company was willing to go the extra mile and recall them despite the huge cost of both production and recall. Then there was an evident concern that consumers were to be protected at all costs. Thus, toy recalls were meant to ensure that children making use of the toys were not hurt in any way. The other party in the stakeholder theory is the employees who are factored in through company interest. If the company died, the employees would lose their jobs. From this angle recalling the toys meant that consumer confidence was retained and company life assured. This directly meant that the employees’ jobs were secured.
Though the reaction of Mattel’s CEO has been tackled in the above sections of the present report, it is possible to sum them up separately. Thus, the actions taken by Robert Eckert in response to the recalls were as follows: the positive ones included cooperation with the CPSC and the introduction of an innovative three-point safety check system. Besides, the leadership of Eckert prescribed by his position in the company inspired his public apology before the parents of children who belonged to the number of consumers that might be harmfully affected by the products of low quality. However, there also were negative responses to the events of 2007, such as a considerable delay of the revelation of the truth both to the CPSC and the public. The shift of the blame on to the Chinese manufacturers also seemed to be unethical behavior of Eckert though it was remedied by the apology addressed to the Chinese people.
Conclusion
As it comes from the present case study, Robert Eckert had a moral dilemma during the toy recall by Mattel. Nonetheless, the steps he took in handling the recall were the best in the circumstances if some minor drawbacks are neglected. Eckert’s success can be explained by the application of efficient business ethics theories in the process of decision-making. The CEO of Mattel took stakeholders’ concerns and the social contract considerations into account, which contributed to the outcome of his actions. There is evidence that he was concerned about the loss of customers in case the company continued selling bad toys, and that he took care of children’s health that was at stake in case of utilizing toxic and dangerous toys. These strategic measures and concerns played a key role in the social response to the toy recall and helped Eckert fulfill his recovery strategy and to win the former respect and popularity for his company and its products.
Recommendations for Ethical Decisions of Eckert
My team’s advice to Eckert would involve the following proper quality control systems. Judging from the preliminary review of the problem, it is clear that one set of toys was affected by lead paint applied at Chinese plants. The second set had been produced under earlier technology that had been rendered obsolete by developments in the field. This means that the design problem that was due to scientific or design developments could not be the fault of anyone. On the other hand, the paint problem means that some people who were in charge of ensuring that the quality of the products (toys) was up to market standards did not carry out their duties as required. Had they done so, the paint problem would have been detected long before the toys were on the market.
It is on these grounds that I and my team would advise Eckert to put in place a well-trained quality monitoring or control team. The emphasis is that the company has a moral obligation to the millions of children around the world who would get hurt by faulty toys. The extension of the argument is that faulty toys in the market will hurt consumers who will shift to other toys and therefore make the company lose business. This would hurt stockholders and the employees of Mattel. This piece of advice if taken into account will make the company avoid a repeat of the crisis.
As Global Citizenship Report of Mattel (2009) quotes the statement uttered by Eckert: “One thing remains constant: our [Mattel’s] commitment to creating safe, high quality and innovative toys in a responsible and ethical manner” (unpaged). In order to make this statement work and the company meet the requirements it sets for itself, it is necessary to ensure that the possibility of occurrence of similar problems is reduced.
Mantel should improve its policy and process of production in terms of certification of suppliers and materials they use to manufacture toys. It is necessary to introduce innovative tests and certified laboratories for their application. As for the organizational culture of the company, it also requires improvement. Since Mattel has numerous manufacturing facilities in China, it is necessary to establish organizational culture and ties with these facilities and provide inspections and other measures of control of the facilities. Leadership improvement remains an urgent necessity as well; the company’s executives should take prompt actions in case of necessity and if time is needed “to evaluate any reports of safety hazards”, this process needs optimization so that the consumers could become aware of the situation in time (Weiss 2008, p. 81).
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