Cases and Projects: Ethics and Professional Conduct in Business (Pg. 128) Assume
ID: 361507 • Letter: C
Question
Cases and Projects: Ethics and Professional Conduct in Business (Pg. 128) Assume you are the division controller for Auntie M’s Cookie Company. Auntie M has introduced a new chocolate chip cookie called Full of Chips, and it is a success. As a result, the product manager responsible for the launch of this new cookie was promoted to division vice president and became your boss. A new product manager, Bishop notices that the Full of Chips cookie uses a lot of chips, which increases the cost of the cookie. As a result, Bishop has ordered that the amount of chips used in the cookies be reduced by 10%. The manager believes that a 10% reduction in chips will not adversely affect sales, but will reduce costs, and hence improve margins. The increased margins would help Bishop meet profit targets for the period. You are looking over some cost of production reports segmented by cookie line. You notice that there is a drop in the materials costs for Full of Chips. On further investigation, you discover why the chip costs have declined (fewer chips). Both you and Bishop report to the division vice president, who was the original product manager for Full of Chips. You are trying to decide what to do, if anything. Discuss the options you might consider.
Explanation / Answer
Answer :
I would form a detailed audit and compliance report and back it up with reports from the quality analyst teams. Post which,
I would inform the division vice president and superiors across other lines of business that there are changes being made to the product's quality and quantity and ask them if they the management had authorised or approved these changes. I would request the management to implement stronger internal controls. audits and compliance checks.
The reason this is a clear ethical issue is due to the fact that Bishop has vested interests in the product. And put his personal interests before the interests of what good for the firm. The other reason why this is an ethical issue is because i could have three distinctive type of risks for the firm
- Reputational Risk : Consumers are quick to notice changes to a product or a service. Any news of the firm doing so could have a serious reputational risk and could compromise the brand equity and integrity of the organisation.
- Financial Risk : Since this call was taken without the consent of the share holders of the organisation, this could posed a serious financial risk to the organisation.
- Legal Risks : The legal risks of doing so are that changes in 10 % of the key ingredient may effect the net weight of the product as advertised on the product label. Since it looks like the decision to reduce the amount of chocolate chips by 10 % was taken with autonomy without the consent of the management and share holders of the organisation. it possible that the packaging team was not updated about the change in weight