The Tampering Trilogy: Exploring Ethical Considerations in Crisis Planning and Response

This paper examines the inter-relationship between crisis planning and management and ethical decision making processes and practices as an example of building an interdisciplinary approach to crisis planning. The actions of the key organisations involved in the recent pharmaceutical product tampering cases in Australia are used to explore how responses during crisis correspond to both classical and contemporary notions of ethical behaviour. Finally, the paper offers advice on the practical and specific steps organisations can take to incorporate ethical considerations in their crisis planning.. The Australian pharmaceutical industry was rocked during the year 2000 by two cases of product tampering which resulted in the hospitalisation of consumers. While police searched for culprits, the public debate focused on the response of organisations in crisis and the particular positioning of organisations as victims or perpetrators. Lerbinger (1997) argues that the erosion of a company’s reputation is the greatest danger in a crisis. To protect its reputation, an organisation needs to consider carefully its response to a crisis situation, recognising the importance of not only its own view on its response but the perceptions of its stakeholders (Dowling, 1994). Crisis managers need to consider the changing expectations of organisational stakeholders in determining crisis response strategies. To do so, enhanced crisis decision making models may be needed to help crisis managers plan and implement effective crisis response strategies for organisations. This paper examines the inter-relationship between crisis planning and management and ethical decision making processes and practices as an example of building an interdisciplinary approach to crisis planning. The actions of the key organisations involved in the recent pharmaceutical product tampering cases in Australia, Herron Pharmaceuticals and SmithKline Beecham, will be used to explore how a company’s response during crisis corresponds to both classical and contemporary notions of ethical behaviour. Finally, the paper offers advice on the practical and specific steps organisations can take to incorporate ethical considerations into their crisis planning. Crisis Response: Making Decisions to Protect Your Reputation More (1995) suggests that an organisation’s true character is revealed in a time of crisis. A crisis can be seen as ‘an event that brings, or has the potential for bringing, an organisation into disrepute and imperils its future profitability, growth, and, possibly, its very survival’ (Lerbinger, 1997, p. 4). Thus, an organisation’s response during a time of crisis reflects its ability to deal with challenges to its reputation and demonstrates the importance of the underpinning organisational values that drive such a response. Reputation management is critical to crisis response as a crisis can serve to either enhance or detract from an organisation’s reputation. Both danger and opportunity, the two words reflected in the Chinese characters for crisis (Dowling, 1994), are abundant in times of organisational crisis. For many organisations, the crisis situation represents a turning point (Fink, 1986) and the decisions made by the organisation during the early stages of a crisis will guide it towards either the possibility of a desirable or an undesirable outcome. Decision making is the very essence of crisis management (Fink, 1986). In fact, crises have been described as ‘occasions for decisions’ (Rosenthal et al, 1991, p. 17). Crisis decision making involves the ‘strategic selection of public announcements and policy decisions made by the organisation to alleviate a crisis and restore public confidence’ (Williams and Olaniran, 1994, p. 8). As such, crisis managers must make decisions on both the operational and communicative components of a crisis response, often during times of uncertainty and intense pressure to act quickly. Given the high stakes involved in dealing with crisis, significant attention has been paid to crisis management over the past twenty years. Many authors (see for example, Heath, 1998, Fearn-Banks, 1996, Lerbinger, 1997, Caywood & Stocker, 1993) have provided operational frameworks for developing crisis plans for organisations to help prepare for crisis. These frameworks identify critical elements of crisis planning including assessing pre-crisis reputation, identifying organisational risk, preparing organisational resources for crisis response in line with identified priorities, and implementing recovery and evaluation processes as part of post-crisis management. However, as Williams and Olaniran (1994) point out, there has been a stronger focus on explaining general processes and procedures organisations should follow in crisis compared with specific information on the complexities of crisis decision making. The true value of crisis response guidelines cannot be realised unless appropriate decisions are made by organisations. Lerbinger (1997) argues that crisis response strategies should draw on a wide range of disciplines including ‘hazard management, risk assessment, engineering, social psychology, sociology, political science, economics, public relations and general management’ (p. xi). Incorporated in general management is an understanding of the role of management values in shaping corporate culture and a focus on ‘right and wrong behaviour’ (p. xi) which Lerbinger describes as ‘the subject of ethics’ (p. xi). We believe the study of ethical behaviour provides a critical platform for understanding crisis decision making and directing more effective ethical responses from organisations in crisis. Ethical decision making extends far beyond the simplistic analysis of ‘right and wrong’ and provides a gateway to understanding the operationalisation of corporate values underpinning crisis response. The Tampering Trilogy: Response Strategies from Organisations in Crisis When Tylenol capsules contaminated with cyanide were linked to the deaths of consumers in Chicago, the prognosis for Johnson and Johnson’s Tylenol brand was not good. A major story in the New York Times assessing the damage caused by the product contamination case carried a dire prediction that ‘you will not see the name Tylenol in any form within a year...I don’t think they can ever sell another product under that name’ (Kleinfeld, 1982, p. 1). History proved the prediction wrong and the actions of Johnson and Johnson in handling the issue has become a textbook case on corporate responsibility (Boatright, 1997; Cullen,Victor & Stephens, 1989) and is variously referred to as 'the Tylenol textbook' (Strand, 1986), 'the gold standard' (Murray & Shohen, 1992), and 'the benchmark' (Thomas, 2000). Johnson and Johnson's management of the crisis was also strongly supported by the general public with 93% of those surveyed subsequently responding that the company handled its responsibilities well (Goddard, 1988). Some eighteen years after the international spotlight focused on Johnson and Johnson, the focus has turned to the Australian pharmaceutical industry with two product tampering cases occurring within months of each other. On March 16, 2000, a Brisbane father and son were hospitalised after consuming paracetamol manufactured by Australian company, Herron Pharmaceuticals. The medication was subsequently found to be contaminated by strychnine. On June 8, 2000, a Brisbane couple were hospitalised in Darwin with strychnine poisoning after consuming paracetemol tablets manufactured by US multinational, SmithKline Beecham. Both companies used many of the tactics developed by Johnson and Johnson in its crisis response to the Tylenol poisoning. Product recalls were launched and public statements were issued outlining the two companies’ disbelief at being the target of product tampering and the importance of consumer safety in the recall strategy. However, a major public issue arose for one of the companies, Herron Pharmaceuticals surrounding the delay in notifying the police over extortion threats made to the company. Public and political comment grew over Herron’s perceived delay in advising authorities and prompted an admission by the company that the decision they had made was ‘not necessarily the right one’ (Roberts, 18 March, 2000). However, in defending the company’s position, Herron’s Chief Executive Euan Murdoch suggested that ‘people should ask if it is reasonable to recall $40 million worth of products on the basis of a “vague note”’ (Roberts, 17 March, 2000). The difficulty faced by Herron in making a decision on the timing of official notification and subsequent recall strategy is representative of the difficulty faced by many organisations during crisis. Fulmer (1994) suggests that guiding such decision making processes is a new type of learning for organisations which must consider not only their own goals and values but the stakeholders who impact and are impacted by the organisation. Such stakeholders are diverse but include shareholders, employees, customers and communities of interest. Balancing the needs of these stakeholders and the needs of the organisation itself requires managers to make decisions and set priorities, often in times of high uncertainty. Such decision making is critical to the turning point approach (Fink, 1986) to crisis management. Lerbinger (1997) suggests that organisations must challenge their own goals and values to inform decision making strategies. He raises important questions for organisations to ask themselves either before or during a crisis, suggesting that ‘faulty answers’ (p. x) to such questions often result in crises. Does management concentrate so heavily on market and economic factors that it ignores political repercussions and social consequences of decisions? Is management so self-centered that it fails to consider the interests and concerns of employees, customers, local citizens, and other stakeholders? Does management have such a lopsided bias toward short-term profitmaking that it ignores what happens to its reputation and, therefore, to its long-term profitability and chances of survival? By withholding important information from its customers and other stakeholders, does it deliberately or unwittingly practice deception? Is it so amoral or immoral that it commits misdeeds that are unethical or illegal? (p. x) Ethical decision making models provide a useful framework to enable organisations to answer these questions and consider the consequences of their positions on relevant issues. Subsequent analysis of the Tylenol case praised Johnson and Johnson for exhibiting not only excellent crisis management skills but also high levels of ethical behaviour and corporate responsibility. These attributes are arguably just as important for organisations to consider when seeking to use ‘the Tylenol formula’, as the actual crisis response tools implemented. Different ethical decision making models will now be considered and used to provide explanations for how some of the decisions made by Herron Pharmaceuticals and SmithKline Beecham reflect corporate values and community expectations. Exploring Ethical Choices for Organisations In ethical terms, the choices made by organisations can be classified as being based on principles, outcomes or character. Each of these approaches have developed from long traditions of ethical reasoning and each provide frameworks for organisations to consider when making difficult decisions that involve various stakeholder interests. Principle-Based Approaches to Ethical Decision Making The notions of responsibilities and rights underpin the principle-based approaches to ethical decision-making. While the doctrine of duty, or deontology, has strong roots in the Judeo-Christian tradition from which both our moral and legal frames of reference are drawn, it was the Enlightenment philosopher Immanuel Kant (1724-1804) who defined the concept of responsibility or 'duty' in a way which forms the basis for contemporary understanding of this principle. Starting with the question: 'what ought I do', Kant developed a major principle of moral reasoning which he called the categorical imperative. Why does Kant view this principle as categorical? Because it is not dependent on anything else. As Korner (1955) puts it: ‘It does not tell us “Do your duty if this or unless that...”’ (p.136). It is categorical. According to Kant (1949), the first formulation of the imperative can be stated as: ‘Act as if ... your action were to become ...a universal law of nature’ (p. 416). This is the principle of universalisability, the notion that an action is only right if it can be made universal and reciprocal. The second part of Kant's categorical imperative is that of respect for persons. This principle is best understood as treating people as ends not means. In the case of product recalls, this means that the consumer is to be treated as a person with full rights to information, not simply as a sale. Such access to information became a major focus in the Herron case, with the withholding of information leading to public and political criticism of Herron’s actions. Post-Kantian approaches to the notion of duty refined it into a specific set of responsibilities, and implicitly, rights. In the Right and the Good (1930) the twentieth century English philosopher W.D. Ross (1877-1971) based his theory of duty on a critique of utilitarianism: that just because an action produces the maximum good doesn’t make it right. Instead Ross argued that good is promoted by certain selfevident duties which he calls prima facie duties. These duties are as axiomatic as the laws of mathematics. These prima facie duties are founded on morally significant relationships such as the relationship between parent and child, friend-friend, employer-employee, and creditor-debtor. The term prima facie comes from the Latin, meaning ‘at first glance’ and means that a duty may appear to be binding, but upon closer inspection it may be subject to a stronger duty. While the application of each of the duties depends on the situation, Ross (1930) does argue that the duty of malfeasance – of not harming others is the primary duty. He writes, ‘We should not in general consider it justifiable to kill one person in order to keep another alive, or to steal from one in order to give alms to another’ (p. 22). For contemporary business practice, Ross' notion of duty makes explicit the employeremployee relationship, and the seller-buyer or provider-consumer relationship. It is also probable that the director-shareholder relationship is one of prima facie duty. It is important to recognise that Ross is describing morally significant relationships, in the context of how ought individuals behave, and not the legal dimensions of such relationships, which can be and are prescribed by law. The nature of law is such that the precise legal relationship of persons to each other, and the specific legal duty of one to another, can sometimes only be determined after the event, and by the courts. Moral duties, on the other hand, are clearly understood in advance. For businesses to operate on a clear understanding of their moral duties, over and above their legal responsibilities, takes the decision making process to another plane. It is particularly important in a crisis that those moral principles be seen to shine through above and beyond the organisation's concern with its legal position. This is much more likely to happen if such moral values are imbued within the culture of the organisation before the crisis and are part of its character. Making such values part of the character of individuals and organisations is discussed more fully in a later section. However, in the case of the product recalls under discussion in this paper, Ross complicates the ethical dilemma facing business organisations and the choices they have to make. In the Herron case, CEO Murdoch had to choose between what he (and his advisers) considered an unspecified threat to the health and safety of their customers their prima facie duty to consumers against a very specific threat to the financial well being of shareholders and employees to whom the company also held prima facie duties. Real world ethical decisions are rarely pure choices between good and bad, but more often involve making a choice about the lesser of two evils. Johnson and Johnson wrote off $US100 million as a result of the 1982 Tylenol recall and $US150 million after the 1986 recall (McLeod & Adler, 1991, p.29). Murdoch would have been aware of the significant cost of a full product recall. In making a decision Murdoch had to choose between the financial cost of a recall and the reputational cost of not notifying authorities and undertaking an immediate recall, and financial cost alone. In the end, it can be argued that Herron sustained a financial cost and 1 A third ethical theorist, John Rawls (b 1921) author of Theories of Justice (1971) is not considered in this paper primarily because his work has more application to political theory than to the organisational behaviour that is the focus here. Like Ross, a critic of utilitarianism, Rawls developed a theory of distributive justice consistent with the principles of the liberal democratic state. some possible damage to its reputation, which it has assiduously sought to recover subsequently. Johnson and Johnson is considered by many to have had one overriding priority when first informed of the threat to consumer safety: ‘Warn the Public’ (Fearn-Banks, 1996, p. 103). This suggests a strong focus on the organisation’s prima facie duty to consumers, potentially at the detriment to its duty to other stakeholders. This was reinforced in Johnson and Johnson’s Credo which clearly outlined the company’s ‘first responsibility’ to all ‘who use our products and services’ (Gray, 1986 in Dowling, 1994, p. 44). Other stakeholders are listed in the company’s Credo including employees, communities in which the company operated and stockholders, with the latter listed as the ‘final responsibility’ (p. 44). Adherence to this priority list appeared to underpin the Johnson and Johnson response and result in a high level of public recognition of its corporate responsibility. Outcome-based Approaches to Ethical Decision Making Opposed to deontological approaches to ethics are those based on outcomes or consequences. There are three consequentialist approaches to ethical decision making: self interest, altruism, and utilitarianism. While self interest is acting primarily in one’s own interest and altruism is acting primarily in the interest of others, utilitarianism is acting to provide the greatest good for the greatest number. Classical utilitarian theory is presented in terms of the maximisation of pleasure and the minimisation of pain (Boatright, 1997, p. 35). In the case of Tylenol, there was certainly speculation following the crisis that the brand was doomed (Rundle, 1986) and a subsequent view that the way Burke handled the crisis enabled the brand to be revived (Fanin, 1983; Miller 1984; Murray & Shohen, 1992). As Davis (1999) asserted: Many would say that Exxon and Perrier will never recover the asset value of their brand because of the way they handled it, while others like Tylenol and Amoco continue to flourish and grow following similar tragedies. Customers accept mistakes if they are handled well (p. 22). Johnson and Johnson Chairman James Burke's actions certainly saved the Tylenol brand. To that extent they may be construed as self interested, even though mediated by his primary duty to consumers. Burke managed to secure a desirable outcome through highly deontological means. Herron's Murdoch has refuted that his actions in not disclosing the threat earlier were selfinterested. 'I admitted we were wrong...However the consumers will eventually see there a logic behind what we were doing. I cannot release the details, but it was not done in self interest,' (Elias, 2000, p.6). Recognising that not all information on the case is on the public record at this time, Murdoch's actions may reasonably be construed as principally utilitarian, given that that they were concerned with the minimisation of pain. SmithKline Beecham, on the other hand, appeared to have followed the Johnson and Johnson textbook more closely and did not enter into the consequentialist domain. Character-based Approaches to Ethical Decision-Making Character-based ethical decision making draws on neo-Aristotelian approaches to ethics developed by Alisdair MacIntyre (1984) who defined virtues as 'dispositions not only to act in particular ways, but also to feel in particular ways' (pp.149-150). A more recent definition is that of Mintz (1996) who sees virtues as ‘acquired human qualities, the excellences of character, which enable a person to achieve the good life' (p. 827). Moral virtue is a state of being and doing wrought through experience, rather than a result of a conscious, rational, cognitive decision making process. Authors such as Petrick and Quinn (1997) have applied virtue theory to organisations, arguing that it is insufficient to rely on the good character of individuals in an organisation: Managers who rely exclusively on the character of employees to sustain sound business practices, while neglecting to implement morally supportive intraorganisational systems...are unintentionally exposing their organisations to future ethical risk. (p. 54) According to Petrick (1999), the values that underlie a virtuous organisation include intellectual virtues, moral virtues, social virtues, emotional virtues, and political virtues. Among the moral virtues, Petrick lists leadership courage, prudent stewardship of resources, honesty and truthtelling, and promisekeeping. Virtue ethics is about internalising principles so that they become habits; about moving from a compliance-based approach which is essentially deontological to a values-based approach to ethical decision making. How then can a values-based approach been seen in the management of the crises under discussion? One of Johnson and Johnson's perceived strengths in handling the Tylenol case from a virtue ethics orientation was the role of their Credo in providing a strong values base for decision making (Boatright, 1997, p. 20). Like Johnson and Johnson, both SmithKline Beecham and Herron have statements of values. In assessing a values based approach, it is useful to examine the manner in which the stated values were congruent with the actions taken, and the extent to which their words and actions reflect a particular ethical position. SmithKline Beecham's values of customers, innovation, integrity, people and performance, as presented in the 1998 Annual Report are akin to several of Petrick's organisational virtues, particularly innovation and integrity. SmithKline Beecham CEO Alan Schaefer drew on these in describing the company’s crisis response saying: 'We had a structure to deal with this...(The plan) was set in motion in the first few hours and we have not moved away from those guiding principles, namely customer safety first and always' (Lloyd, 2000, p.14). Herron may have been constrained rather than assisted by its values statement in attempting to move from a utilitarian approach to a virtue or values based approach. Herron's values statement extols the virtues of good health to the individual and the community. As a statement of values this statement is rather limited and may not have provided a platform for Herron to construct a values based approach. For example, the final paragraph of the values statement on the Herron web site says, ‘when we learned of the poisonings by the terrorist, we decided within minutes to do a nationwide recall of paracetamol products. Our company values guided us in this decision. We did not hesitate to protect our consumers.’ (Herron, 2000, http://www.herron.com.au/values.html). It is difficult to identify from the company's values statement, the particular values to which the company is committing. This statement suggests that Herron may have been using a consumer sovereignty approach (Smith & Quelch, 1993) in deciding to recall the product. However, as argued earlier in this paper, the company appeared to follow a more consequentialist approach at the time of the initial threats, considering a range of stakeholder interests and potential outcomes. Ethical Responses to Crises: Some Guides for Crisis Managers What are the mechanisms that corporations can use to ensure their behaviour, and their responses in times of crisis are ethical? Corporations obviously need to be prepared for a crisis, and recognise that ethical issues will arise in the course of a crisis, and that their conduct and actions will increasingly be judged in ethical terms. The ethicality of corporate conduct is one of the measures by which organisations are being judged in times of crisis. Ethics commentators were quoted in reportage of the Herron Pharmaceuticals and SmithKline Beecham crises (Thomas, 2000), emphasising the growing interest in business ethics and the expectations of stakeholders. As part of the planning processes that accompany the development of crisis management plans, organisations also need to take the ethics agenda on board. This may involve the use of ethics audits, the development of ethics codes and/or the application of ethical decision making models in scenario-based planning. Organisations can implement ethics audits in different ways to assess their overall approach to difficult questions that involve ethical decision making. For example, ethics audits can be compliance audits which look at the extent to which the organisation is compliant with existing codes and regulatory requirements; ethical culture audits which probe the organisational culture for weak spots, and ethical systems audits which examine the various operating systems of the organisation such as financial management, human resource management, IT, distribution and logistics, and research and development. Essentially ethical systems audits probe to see if the operating principles of the organisation are consistent with its stated values, mission and goals. Such audits can be incorporated into the crisis preparedness research that often accompanies the development of crisis plans (see, for example, Mitroff & Pearson, 1993; Heath, 1998). There is a great deal of scepticism among ethicists about the effectiveness of codes (Longstaff in Preston, 1994, Farrell & Cobbin, 1996). The development of codes needs to be driven by the CEO, but also involve a wide cross section of employees from within the organisation. Involvement in the creation of codes offers greater hope of ownership of the values within those codes. Finally, the values made explicit in codes need to be internalised. That is to say, the values made explicit in the code need to become embedded in the organisational culture, and not simply remain a list of duties or principles with which individuals in the organisation have to comply. This moves an organisation from a compliance based approach to a values based approach. More (1995) suggests that while crisis authors differ on many aspects, one of the major areas of general agreement is on ‘crisis management planning being an integral part of organisational life, reflecting the organisation’s philosophy rather than being superimposed upon it’ (p. 34). Mitroff et al (1989) use the onion model of crisis management to focus on the centrality of corporate culture in crisis planning, claiming the ‘factors which constitute the core are often the most decisive...the health of the entire onion is often no better than that of its core’ (p. 273). In a time of crisis, conflict between an organisation's values and actions is likely to be exposed and lead to further depreciation of corporate reputation. Similarly, a perceived shift in ethical framework mid-crisis may leave the organisation open to criticism and lead to questioning of the actual foundation on which the ethical response was built.