A good leader can make all the difference in the world when it comes to crisis action planning. The Harvard Business Review quotes a lesson that Continental airlines learned during its crisis situation: "Strategic direction is never more crucial than during a crisis. Leaders must find the most leveraged plan of action, stick with it and continually monitor the company's performance against it" (pp. 117-118). So, while it is important to have good leadership and strategic planning in times of non-crisis, nowhere is it more important that a leader knows how to lead than when a crisis has actually occurred. This means being able to remain cool under pressure, being able to convince others not to panic, and being prepared to develop and implement a plan of action that allows the crisis to cause as little damage as possible. In terms of ethics, I would have no problem admitting liability and taking care of the sick individuals as well as possible. If a company is liable, they should admit it. Otherwise, not only are they acting unethically, but they are also risking alienating customers who are unlikely to accept their denial of responsibility anyway. People tend to be relatively forgiving of mistakes when those who make the mistake own up to what they have done. Since there was obviously no malicious intent involved in this case, it is unlikely that admitting liability and helping the sufferers and their families would harm the company's reputation. In fact, more than likely, it would enhance it.

According to Campbell (2007) businesses that are socially responsible focus on the long-term success of the enterprise. Corporate leaders that only take a short-term view of the business while making decisions have a tendency to distort the true cost of doing business irresponsibly, both for industry and for society. It is therefore paramount that...

This approach would require that managers relinquish short-term gain in favor of long-term benefits. However such an approach is often avoided because measurable returns from socially responsible acts are not always immediate.
The public is demanding increasingly stringent ethical standards on the part of corporations and more and more consumers are making many of their purchase decisions based on the ethical reputations of the companies with which they deal. As BSR (2003) reports, "There is a growing body of data -- quantitative and qualitative -- that demonstrates the bottom-line benefits of socially responsible corporate performance." These studies indicate that consumers respect corporations that are socially responsible, including those who make mistakes and take responsibility for their actions.

Overall, I think that Nutritional Foods failed most notably in the sense that it neglected to anticipate and prepare for a crisis situation such as this. Companies that are blindsided by unexpected events are more likely to perpetuate the problem because they go into "panic mode" and start making critical decisions off the cuff. Not all crises can be averted, however, they can be effectively managed when they are properly prepared for.

References

BSR - Business for Social Responsibility (2003) Overview of corporate responsibility, http://www.dcp.ufl.edu/ckibert/Poland/MiscMaterials/CSR-Overview-bsr.htm

Campbell, J.L. (2007) Why would corporations behave in socially responsible ways?" Academy of Management Review 32, 946-67

Fink, S. (2000) Crisis Management: Planning for the Inevitable. Blackprint Harvard Business Review on Crisis Management (2000) Harvard Business Press