Ethical failures in Kolcraft's Travel-Lite crib recall

Ethics

The Kolcraft Travel-Lite crib had a design defect that resulted in five toddler deaths. The company issued a recall but poorly managed the recall process, such that two deaths occurred post-recall. This paper discusses the actions of Kolcraft and the ethical considerations surrounding the case, relying on the Kantian perspective and agency theory as derived from Friedman's writing on the social responsibility of business.

Kolcraft's Travel-Lite crib was subject to a design flaw that resulted in five infant deaths. Kolcraft management performed poorly during both the design process and the recall process. The result was across-the-board ethical failure. The company could have improved on its performance had it better understood the moral imperatives of the situation, which were dictated by the CPSC and not the company. The company also failed to take into account the prevailing ethical custom in the United States, which holds manufacturers of products for children to a higher standard of performance than merely upholding the law.

Discussion Part a

Kolcraft had several goals in mind when developing the Travel-Lite crib. The company was responding to what it perceived as a gap in the marketplace for a travel crib. It viewed competing products in the space as being poor. Thus, the root objectives with the crib were to build a better product than was currently on the market and to build out the market niche that it saw. The company's product development process was ad hoc. Plans were drawn up with loose specifications to meet the criteria that had been identified when the niche was determined. The product testing process was also relatively ad hoc. In order to gain market share, Kolcraft licensed the Playskool name from Hasbro.

There are a number of problems with the Travel-Lite crib. From a safety perspective, the main issue is with regards to the upper side bars. Those bars can be collapsed by the force exerted by a toddler. When this occurs, sometimes the collapsed causes the toddler's neck to fall into the V that is created when the side bars collapsed. As a result, the toddler strangles in the V. This problem was unknown to Koltun prior to the first death. Product testing did not reveal the problem. Now that the problem has become known, the recall has been issued. Koltun needs to implement the recall and formulate strategy for handling the recall situation.

There are several steps to managing this recall. Health Canada prescribes the following steps for enacting a product recall. The first step is to identify a person within the company who can coordinate the recall. If there is an employee with experience in recalls, that is preferred. The second step is to identify all products that need to be recalled. Koltun has done that. Warehouse stocks of recalled products should be isolate to ensure no future stocks reach the market. The products that have been distributed need to be tracked. This process entails identifying accounts that have received the product and gathering contact information. These accounts will need to be informed of what actions they need to take, in the form of a formal recall notice. The effectiveness of the recall needs to be checked -- in this case the recall has a fairly low effectiveness rate with just 23.5% of Travel-Lites accounted for. Consumers need to be notified. Koltun went through pediatricians whereas Health Canada prescribes the use of media (Health Canada, 2005).

Discussion Part B

In general, Kolcraft in general had a communication style that bordered on passive-aggressive. Kolcraft's communication is indirect and self-enhancing. The company fails to respond to communications directly. Kolcraft's responses hint at anger without articulating the company's perspective in a meaningful way. Outcomes are de-emphasized in the communication. The most classic passive-aggressive communication comes with the CPSC and is characterized by evasiveness, indirectness and a masked truculence (Rose, 2007). The company in general avoids the issue when dealing with the public. For example, they choose to communicate with the public indirectly via pediatricians, essentially conscripting the doctors to do the company's dirty work, should they choose. The communications with Hasbro are only marginally better. The company remains in contact with Hasbro, but is indirect in the communications and makes no meaningful attempt to foster a coordinated strategy. Thomas Koltun addresses the public with vague pablum about being concerned about the safety of children, an utterly meaningless statement that fails to address even the most basic concerns the public might have.

When Kolcraft brought this product to market, it had a set of ethical obligations. The primary stakeholders in this situation are the customers, the owners of Kolcraft and the employees of Kolcraft. There is also a direct ethical obligation to Hasbro. The primary obligation of Kolcraft towards consumers is to create a safe product. Kantian ethics provide a solid grounding for explaining the ethical considerations of Kolcraft in bringing this product to market. This moral imperative (Johnson, 2008) has been given to the company by the consumer protection laws, especially the codes surrounding cribs and travel play areas. Kolcraft's contention is that because its product is unique, not wholly in either product area, it is not subject to any specific laws. Kolcraft's interpretation is that this negates any moral imperative. That is an incorrect assessment. The company is still subject to governance from the CPSC, so the moral imperative still exists even if there are no specific laws codified for the product category. In addition, the threat of a civil suit from consumers also creates a moral imperative that the company outright ignored.

With regards to the owners (Koltun family), employees and Hasbro, Sanfred and Thomas Koltun also have an ethical obligation to protect the integrity of the Kolcraft business and the Playskool name. The licensing agreement implicitly creates this moral imperative on the part of Hasbro. While it could be argued that Koltun owes no duty of care to himself, he does owe a duty of care to the employees of the company that he should not recklessly endanger their livelihoods. There is less grounding for a Kantian moral imperative on this point given the doctrine of at-will employment, but this duty of care is again implicit given the role of management in preserving shareholder wealth, which by extension provides some moral obligation to protect the business and therefore its employees from the consequences of negligent or criminal behavior.

In recalling the product, the moral imperative is dictated by the CPSC. The agency guides the process the initiating a recall. The underlying principle by which the agency operates is a form of consequentialism (Sinnott-Armstrong, 2006). During the process of brining the product to market, the agency takes the view that foreseeable consequences should be avoided (with implications for product testing). In light the laissez-faire regulatory style prior to the product being released onto the market, the more important ethical view is the actual consequentialism to which the agency subscribes. The CPSC, as governing body, view Kolcraft's responsibilities to the public in terms of actual outcomes, in particular taking the view that minimizing negative consequences is the ideal objective. Kolcraft does not view its own obligations the same way. Its underlying ethical philosophy is obfuscated somewhat by its passive-aggressive communication style but Sanfred's dismissal of culpability for the first death indicates that he does not share the ethical view of the CPSC. In this situation, however, the regulatory power of the CPSC sets the ethical obligations for Kolcraft

The implication then is that the company failed to meet its ethical obligations both prior to the launch and subsequent to the launch. The company attempted to dictate the ethics of the situation but in neither case was in a position to do so. As a result, the company not only failed to behave ethically but it potentially put itself in a difficult financial position as well, meaning that it also failed in its duty to the firm's owners and employees.

Ethical Considerations

The continuing danger presented by the Travel-Lite places Thomas Koltun at an ethical crossroads. While he is new management, the company retains all of its original ethical obligations. Thomas in his professional capacity is an agent of the corporation and must behave accordingly. The company has to this point failed to live up to its obligations to its stakeholders. Thomas can choose to continue that legacy or he can choose to begin living up to his ethical obligations.

There are two additional points worth considering in discussing the ethical crossroads at which Thomas finds himself and his company. The CPSC bears a degree of culpability at this point. It is charged with the oversight of the industry and as such it essentially sets the moral imperative for ethical action. The company's previous ethical failures were in direct relation to that imperative. At this point, the CPSC has closed the file on the Travel-Lite. It could be interpreted that the agency has now ceded the previous imperative. There is no new imperative from the agency. Indeed, the agency's lack of follow through in the Travel-Lite case has been considered to be an example of regulatory failure as much as it is considered an example of corporate ethical failure (Felcher, 2003).

Thus, Thomas may choose whatever ethical path suits the company best at this point. According to agency theory, his responsibility to the company would mean that he upholds the former ethical obligations in order to prevent the possibility of civil suits. This new ethical guidance will yield the same result as if Thomas adheres to the old ethical standards, but is rooted in different concerns. For example, if the Keysar suit does not yield a large judgment against Kolcraft, the downside risk to the company would be all but eliminated, meaning that Thomas has very little ethical imperative to act if he believes that such a civil lawsuit is unlikely to succeed.

The other point to consider is the degree to which the company will be impacted. Similar products from multiple manufacturers had similar problems, with similar outcomes. The V problem and the deaths that resulted from it were not unique to Kolcraft. This mitigates the potential damage to the company vis-a-vis its competitors, who care essentially in the same position. If no competitor can gain moral high ground, then the issue of goodwill deterioration is if not moot then at least of reduced relevance.

In the most basic economic sense, agency theory suggests that the company only need comply with the law (Roberts, 2004). The law provides sufficient ethical guidepost, given that the role of the agent is to enhance shareholder wealth. At the intellectual root of the agency theory of enhancing shareholder wealth, however, is the work of Milton Friedman. While Friedman's work has been distilled to this singular concept, it is sometimes misunderstood in the context of corporate ethics. The theory of agency as understood by Roberts fails to account for Friedman's full theory regarding social responsibility. The modern understanding of agency theory and the obligation of business to simply produce profit without any other ethical consideration is essentially a straw man. What Freidman (1970) wrote was that the role of free enterprise is "to make as much money as possible while con-forming to the basic rules of the society, both those embodied in law and those embodied in ethical custom." That ethical custom was left undetermined. Thus, even the advocates of a strict application of agency theory must consider that there is at least an obligation to some form of societal ethical norm. It is not a stretch to suggest that in American society undertaking actions that could reasonably be predicted to result in the deaths of toddlers violates the societal ethical norm.

Since the issue of specific ethical custom is ill-defined, a company does need to come to some understanding of the ethical customs before marketing its products. Of specific interest in this case is the fact that Kolcraft produces goods of which the end user will be an infant or toddler. The reaction of Sanfred to the death of the first child hints at a view that the parent is the end user and is therefore ultimately responsible for the use of the product. That the Travel-Lite case became a cause celebre for overhaul of the product recall system indicates that Sanfred's understanding of American society's ethical custom was incorrect. Indeed, while the parents are responsible to some degree for the usage of the product, they are not the ones who pay the highest consequence for its defect. The child, if killed, bears the ultimate cost for the defect and therefore ethical custom would dictate that the company owes a duty of care towards the child. A company marketing to adults may owe very little duty of care over a joint that bends too easily -- an adult is unlikely to be injured let alone killed and moreover can understand the cause-and-effect consequences of his or her actions. A toddler less than a year old has no such cognitive faculty and faces far greater risk to health in the event of misadventure, necessitating a higher degree of duty of care on the part of the manufacturer to the end user.

Lost in the firestorm surrounding the inaction or inadequate action of Kolcraft and the CPSC is the responsibility of Hasbro. That company is not the end manufacturer, so there are limits to its responsibility towards the end customer by virtue of the fact that it has a lower degree of control over the condition of the final product. However, it bears the same if not more responsibility in terms of the agency agreement. The Playskool brand is more exposed than the Kolcraft brand, so in order to protect shareholder interest, Hasbro has a substantial ethical obligation to ensure product safety. It is worth remembering that it entered into the agreement with Kolcraft voluntarily and had full ability to negotiate a contract that met its satisfaction. Hasbro was motivated by the desire to extend its brand, and while concerned about product quality was perhaps not concerned enough. As a result, it exposed its shareholders to a civil suit and the evisceration of goodwill on the Playskool brand.

Conclusion

Kolcraft failed in its ethical duties to virtually all stakeholders. There were other failures as well, both at Hasbro and at the CPSC, but as manufacturer Kolcraft failed in its duties across the board. The company's responses to the issue were insufficient and needlessly exposed the company to legal action and the loss of goodwill. Had the company understood from the outset that it bears a special responsibility when marketing products with infants as the end user, it would have been better prepared to make smarter evaluations of the ethical circumstances surrounding the marketing and recall of the Travel-Lite.

Works Cited:

Health Canada. (2005). Recalling consumer products -- a guide for industry. Health Canada. Retrieved April 26, 2010 from http://www.hc-sc.gc.ca/cps-spc/advisories-avis/child-enfant/recalling-guide-2005-04-rappel-eng.php