Question

Fuego Phones International is a corporation that recently kicked off the sale of its new smartphone, the Rapid Fire 6. After three months of sales, the management team has received some troubling reports that the Rapid Fire 6 phones are unexpectedly catching on fire. The management team asks the accounting department to run some numbers to determine how much it would cost to recall the Rapid Fire 6 phones, to suspend manufacturing, and to conduct more tests to determine the phones safety.

After running some numbers, the accounting department states that it would be more cost-effective to leave the phones on the market shelves and propose settlement proceedings for anyone who was injured and initiates a lawsuit. In-house legal counsel agrees and states most consumers will not seek legal action against Fuego Phones Intl.

You are the CEO of Fuego Phones Intl. and must decide what to do. Remember, if you recall the Rapid Fire 6 phones, it will result in a delay of dividends paid to shareholders, loss of market share, and a loss in revenue, affecting shareholder profit. Consider the following questions regarding this example:

• Analyze the ethical reasoning theory are you operating Fuego Phones International under.
• Identify the pros and cons of leaving the Rapid Fire 6 phone on the shelves because you feel your duty as a corporate manager is to maximize shareholder profits.
• Determine an approach to recalling the Rapid Fire 6 phone because you feel the corporation owes a duty to the public, consumers, and the government in terms of social responsibility.
• Identify a company that is acting in a socially responsible manner and discuss specifically what it is doing.

Answer 1

As per Kantian ethical theory, moral law is categorically imperative on all individual and thus they must act on moral grounds and in this case it applies as the company should recall the phones ethically and not leave for negative implications like physical injury which can cause brand damage, high cost of litigation and delays in new product rollout and loss of customer.

Settling the lawsuit and charges is not recommended option as it can save shareholders profits and costs to companies to payoff dividend in short run but on long run it can cause serious brand damages which can bring regulatory issues and surrender of licenses.

As corporation social responsibility, the brand must recall all phones with issues through public notification on all mediums and must compensate for losses incurred through notional value.

Samsung has recently recalled S9 Galaxy phones due to fire burst and has compensated them successfully to settle all dues and acted as ethical corporation.