Listeriosis is an infection caused by the bacterium Listeria monocytogenes. Listeria is a common bacterium found in all sorts of food plants but is dangerous at high levels, especially for adults over fifty, pregnant women, newborns, and people with a weakened immune system. The listeria at Maple Leaf was found in two of its industrial sized slicers. The experts believe it was buried deep inside the machines where it couldnt be cleaned during sanitation. Hospitals and retirement homes were providing the contaminated Maple Leaf meats to their patients and residents respectively. Seniors, vulnerable to the bacteria, became ill and some eventually died.
Michael McCain, Maple Leafs CEO, offered a sincere apology immediately after the officials confirmed the link between the outbreak and Maple Leaf products. He described the crises as the toughest situation weve faced in the 100 years of this companys history. He then, as a precaution, expanded the recall to include all 220 products produced at the Toronto plant. The costs were estimated at $20 million.
So who was responsible? Obviously, the listeria was linked back to Maple Leaf, but what about the regulators? Shouldnt they have set more stringent policies to prevent such occurrences? Or maybe situations like this cant be avoided since listeria cant be fully eliminated from food plants like Maple Leafs. Maybe the hospitals or retirement homes should be more careful with the food they provide to people with weak immune systems. Some of the points given might be stretching it but they are valid arguments, nevertheless.
Maple Leaf had a choice to make; it could have tried to defend itself and divert responsibility by pointing fingers or it could have taken responsibility. Mr. McCain made the choice to take full responsibility. We had a breach, and we took accountability he says in an interview with Macleans magazine. He expanded the recall to include all 220 products produced at the plant, which cost an estimated $20 million. He committed to implementing safety standards that are amongst the most conservative in the world. Finally, he decided to handle lawsuits as promptly as possible by giving people what they wanted for the most part.
The decisions that Mr. McCain made seem to be costly ones, at least in the short run. It can be argued that Maple Leaf, being a public company, has an obligation to maximize shareholder first and foremost. Increased costs could negatively impact shareholder value. So did Mr. McCain make the right choice? To answer this question we use Menu Foods, Tylenol, and Mattel as examples and summarize using Tuckers five questions.
In March 2007, Menu Foods, a manufacturer of over 90 brands of dog and cat food, recalled 60 million cans of pet food after it was discovered that the pet food contained wheat gluten tainted with melamine and cyanuric acid. The combination of the chemicals caused kidney failure and death in some cases. The source of the toxic chemical was traced back to Chinese pet food manufacturer, ChemNutra. The company did not handle the recall in a timely manner and it failed to assume full responsibility. Rather the CEO tried to portray the company as a victim. Ultimately, the recall cost Menu Foods an estimated $53.8 million and the company faced multiple lawsuits. The companys stock price fell as much as 91% within a year of the recall and was eventually purchased by Simmons Pet Food in August 2010.
In 1982, several people died as a result of taking Tylenol, which was contaminated with cyanide. After investigation it was discovered that the Tylenol were tampered with. Johnson and Johnson, the parent company, recalled all 31 million bottles and created a tamper-proof bottle. The recall and the new bottle design cost Johnson and Johnson over $100 million. It was a costly move for the company in the short-run but it was a smart and ethical strategy in the long-run as it helped rebuild costumer confidence in the companys products.
Similarly in August 2007, Mattel recalled 20 million Chinese manufactured toys that had potentially toxic lead paint and magnets that could be dislodged. Mattels CEO took personal responsibility and the company aggressively notified the public about the recall. Mattel handled the recall quite well and was able to maintain a good brand reputation.
From the three examples provided above, the observation can be made that consumers react much more favourably to companies that take full responsibility when they make a mistake, work quickly to resolve the problem, compensate those affected fairly, and act in an honest and transparent manner. Tylenol and Mattel might have made costly decisions in the short run but were able to restore customer confidence and improve shareholder value in the long run.
Tuckers five questions is a useful way to assess Mr. McCains decision to take full responsibility and take costly measures to improve the safety program of Maple Leaf. First, was the decision profitable? In the short run no, but in the long run yes the decision was profitable as sales levels were maintained. Two, was it legal? Yes. Three, was it fair? Yes, for the most part it was fair. The people that lost family members will not get them back, but impacted individuals were compensated as fairly as possible.
Furthermore, the consumers and shareholders were communicated to in an honest, genuine, and transparent manner. The fourth question asks, was it right? Yes, the right thing to do in a sensitive situation like this was to admit to the mistake and act in the most virtuous way possible to correct the wrong. The final question asks, was it sustainable? Maple leaf committed to making its safety standards among the most conservative in the world. This commitment was a long-term decision that has helped foster a culture of high standards that will enhance sustainability in the long run.
In conclusion, Mr. McCains decision to take full responsibility and act in an honest and transparent manner was the right and ethical decision to make. He was able to restore customer confidence in the company and increase shareholder value in the long run.