Recall relationships

Please elaborate on a point made in the article about product safety, "Making Retailers Responsible?" ("Keeping Current," March 2008, p. 16). In that article, which used toy products as an example, is a statement that "U.S. companies that sell the products have ‘the ultimate responsibility' at the end of the day to make sure that their products are safe …"

I'm certain I am not familiar enough with the various entities involved, but to me it seems as though the toy companies are getting off the hook with such a shifted focus. So please explain the relationships and chain of discussions among suppliers, manufacturers and retailers relative to the following:

  1. Which entity ultimately states the product requirements? Is it the retailer, or is it the toy company?
  2. Which entity ultimately analyzes the requirements to design the products?
  3. Which entity ultimately provides the product specifications?

Wally Robinson
State Teachers Retirement System
Columbus, OH

Expert response

I will try to answer your questions, but let me state in general that the party bringing the Chinese products into the United States will be held ultimately responsible for the safety of the products. So, if it was a U.S. toy company, retailer or household appliance company that supplied retailers with coffee makers or microwaves, or a lawn and garden supplier that distributed lawn mowers or electric drills to retailers, those importers of the products would be held responsible for the products themselves.

Some retailers, like Toys R Us and Wal-Mart, also import products directly from China and place them on their store shelves without any middleman involved. In those situations, the retailer will be held directly responsible for product safety.

Those who import products that don't meet U.S. safety standards will face fines from the Consumer Product Safety Commission and will be at fault in a product liability lawsuit. You can't sue a Chinese manufacturer that doesn't maintain a presence in the United States.

Regarding the questions posed:

  1. The party that orders the product from China is responsible for the product, whether that same company or importer told the Chinese company how to build the product or whether they imported something designed and manufactured by the Chinese company.
  2. The importing or purchasing entity would ultimately be held responsible for analyzing the design of the products it imports. Many of these U.S. companies or retailers are hiring third-party companies in China to analyze what they are purchasing and ensure the products comply with all requirements.
  3. In some cases, the U.S. company supplies the Chinese manufacturer with product specifications. In some cases, the Chinese manufacturer creates the product specifications. In both cases, the U.S. entity that imports them to the United States will be responsible for the product, regardless of where the product specifications originated.

Randall Goodden
Chairman, ASQ Product Safety and Liability Division

Who should be responsible?

The March 2008 issue of QP featured much discussion of business ethics, also known as corporate social responsibility. While the pieces were somewhat informative, they featured the common assumption that businesses giving back to society through philanthropy are more ethical than those that do not. Such an altruistic view resonates well with adherents of Judeo-Christian ethics, as well as many of the postmodernist persuasion, but it is by no means a universally accepted principle.

None of the pieces addressed the topic of ethics, choosing rather to rely on a nebulous lay connotation. However, even a fairly straightforward definition of ethics—a code of values to guide actions as they relate to interactions among people—indicates that many people who would consider themselves quite ethical would disagree with the conclusions and prescriptions contained in the March issue.

Consider Bjørn Andersen's view that the highest level of social responsibility is philanthropy, or giving back to society ("A Framework for Business Ethics," p. 22). This statement at least implicitly assumes the firm at some point took something from society. What did it take? What it provided were, among other things, jobs, tax revenues for the local, state and federal governments, and increased spending in the local economy. One could argue as easily that it is society who should give back to the firm.

There is nothing intrinsically wrong with philanthropy. Nor is there anything ethically superior about it. A firm has options regarding use of profits. They might choose to reinvest most or all in the company to improve long-term capital or increase wages. Arguing that philanthropy is a moral imperative might be comforting to Kantians around the globe, but throwing money at certain charities or the arts might well be performing a disservice to your employees and shareholders.

Andersen argues that "the more money a company can charge for a product or service of less value, the higher the profits." Any student in an introductory economics class should recognize flaws in that statement.

First, if the price increases while holding quality constant, value (by definition) decreases. Such an occurrence will reduce, not increase, the quantity demanded. Depending on the price elasticity of demand at the given price, revenues (and therefore, profits) might also decrease. Secondly, even if Andersen's assertion were correct, it would hold true only in the short run. Other firms would be expected to enter the market and offer better value, thus further reducing the profits of the high cost/low value firm in question.

Denis Leonard ("Strong Foundation, Solid Future," p. 30) focuses on the environmental improvement dimension of social responsibility. While often accepted almost tautologically as a given, simply supporting "green" initiatives is not necessarily (and indeed often is not) socially responsible. Analogous to philanthropy, pumping funds into environmental improvement efforts at the expense of employees and shareholders might be far more socially irresponsible. Many green initiatives amount to paying more money to pollute more and do absolutely nothing to improve living conditions for anyone.

In the sidebar "Quality and SR" (p. 34), ASQ Executive Director Paul Borawski quotes Genichi Taguchi: "A good or service demonstrated good quality if its production and use caused little or no harm to society." How does one measure harm? Is harm measured by levels of deadly chemicals in the plant? If so, such a metric is valid.

If harm measurement is based on Al Gore's latest documentary (in which he parades around in an SUV exhorting us to do our part to stop global warming while he pays $31,000 per year in electric bills), then it is incoherent and meaningless. Harm can be whatever corporate actions are no longer en vogue from an environmental perspective as defined by some self-proclaimed elite group.

It would be helpful if we could obtain a stronger foundation for corporate social responsibility and business ethics. This is not simply directed at the March issue of QP. Business schools have a notoriously spotty record in this regard. In any event, firms have responsibilities to their employees and shareholders to conduct business efficiently. Unless they have engaged in theft, they have taken nothing from society. Society should be more thankful for the benefits derived from businesses, rather than demanding unearned payments.

J. Douglas Barrett
Professor of quantitative methods
University of North Alabama

As an instructor in Environmental Issues and Ethics, as well as an industrial consultant, I must strongly affirm the statements and examples delivered by Mr. Barrett. Total life cycle costs were long ignored (and often still are) in environmental plans. Hiding the net results of action is probably more prevalent in environmental 'protection' than in corporate business. Without consideration of ALL of the elements in an economic/social cycle, it is not objective to state that one course of action or another has any inherently "better" ethical standing.
--Steven Cooke, CQA, CQE, 06-08-2008

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