Question

Stereo Technology, Inc. manufactures printed circuits for stereo amplifiers. A common product defect is a “drift” caused by failure to maintain precise heat levels during the production process. Rejects from the 100 percent testing program can be reworked to acceptable levels if the defect is drift. However, in a recent analysis of customer complaints, Marie Allen, the assistant controller, and the quality control engineer determined that normal rework does not bring the circuits up to standard. Sampling showed that about half of the reworked circuits will fail after extended amplifier operation. The incidence of failure in the reworked circuits is projected to be about 10 percent over five years.
Unfortunately, there is no way to determine which reworked circuits will fail, because testing will not detect the problem. The rework process could be changed to correct the problem, but the cost-benefit analysis for the suggested change indicates that it is not economically feasible. Stereo Technology’s marketing analyst has indicated that this problem will have a significant impact on the company’s reputation and customer satisfaction. Consequently, the board of directors would interpret this problem as having serious negative implications for the company’s profitability.
Allen included the circuit failure and rework problem in her report prepared for the upcoming quarterly meeting of the board of directors. Due to the potential adverse economic impact, Allen followed a long-standing practice of highlighting this information. After reviewing the reports to be presented, the plant manager and his staff complained to the controller that he should control his people better. “We can’t upset the board with this kind of material. Tell Allen to tone that down. Maybe we can get it by the board in this meeting and have some time to work on it. People who buy those cheap systems and play them that loud shouldn’t expect them to last forever.”
The controller called Allen into his office and said, “Marie, you’ll have to bury this one. The probable failure of reworks can be mentioned briefly in the oral presentation, but it should not be mentioned or highlighted in the advance material mailed to the board.”
Allen feels strongly that the board will be misinformed on a potentially serious loss of income if she follows the controller’s orders. Allen discussed the problem with the quality control engineer, who simply remarked, “That’s your problem, Marie.”

Required:
1. Discuss the ethical considerations that Marie Allen should recognize in deciding how to proceed.
2. Explain what ethical responsibilities should be accepted by:
(a) The controller,
(b) The quality control engineer, and
(c) The plant manager.
3. What should Marie Allen do? Explain your answer.



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  • CreatedApril 22, 2014
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