[SOLVED] On January 6, 1992, the “growing controversy

On January 6, 1992, the “growing controversy over the safety factor led the U.S. Food and Drug Administration to call for a moratorium on breast implants.”1 As January wore on, the crisis deepened until, on January 30, the Toronto Globe and Mail carried a New York Times Service report titled “Dow Corning Fumbles in Damage Control.” Among other critical points, the article stated,
Regardless of whether Dow Corning Inc. ever convinces regulators its silicone-gel breast implants are safe, the company seems likely to be branded as bungling in its handling of the problem, say public relations and crisis management experts.
“It’s a textbook case of crisis management,” … “it looks like the lawyers are in charge, trying to limit their liability.” “But the damage is much worse to the corporation if they lose in the court of public opinion than if they lose in the court of law.”
Consultants concede that, because Dow Corning argues there is little evidence supporting many of the injury claims, it is difficult for the company to act sympathetically with- out appearing to undermine its legal strategy. (p. B1)
The controversy escalated until, on March 20, one month after the U.S. authorities called for sharply restricted use and their Canadian counterparts opted for a moratorium, Dow Corning canceled its breast implant line. The company also offered up to $1,200 each to women in the United States not covered by private insurance who needed to have their implants removed. In addition, $10 million was to be spent by the company on research into breast implants.2
Among the issues raised by this unfortunate controversy is how faulty breast implants could come to be sold by Dow Corning, a company that had been lionized for almost a decade in three Harvard cases for its outstanding ethics program. The basic details of this program3 are as follows:
Six managers serve three-year stints on a Business Conduct Committee; each member devotes up to six weeks a year on committee work.
Two members audit every business operation every three years; the panel reviews up to thirty-five locations annually:
Three-hour reviews are held with up to 35 employees. Committee members use a code of ethics as a frame- work and encourage employees to raise ethical issues.
Results of audits are reported to a three-member Audit and Social Responsibility Committee of the Board of Directors:4
Interestingly, although the silicone breast implant operation had been audited four times since 1983, and the ethics audit approach had failed to uncover any signs of problems, Jere Marciniak, an area vice president who is chairman of the Conduct
Dow Cancels Implant Line
Rob McKenzie
Financial Post, March 20, 1992
Beseiged Dow Corning Corp quit the breast implant business yesterday, offering money to some women in the U.S. who need their implants removed, but leaving Canadian taxpayers to fund any medical costs here.
Bert Miller, president of subsidiary Dow Corning Canada Inc., said the number of medically necessary removals will not be as high as critics expect.
“I honestly don’t think it’s a huge amount,” he said.
Dow Corning insisted its gel-filled sacs are no health hazard.
“Our reasons for not resuming production and sales, therefore, are not related to issues of science or safety, but to the existing condition of the mar- ketplace,” Dow Corning chairman and chief executive Keith McKennon said in a statement.
Miller told reporters in Toronto he was “personally quite convinced that there’s been no unnecessary risk that wasn’t worth the benefit.”
He added: “We at Dow Corning stand by our product.”
Many women say the company’s silicone-gel implants maimed them or caused other health problems, either by leaking or bursting.
On Feb. 20, a panel of the U.S. Food and Drug Administration recommended use of the implants be sharply restricted. In Canada the Department of Health and Welfare has imposed a moratorium on their use.
Dow Corning, a Michigan-based joint venture of Dow Chemical Co. and Corning Inc., sold more than 600,000 breast implants, including an estimated 27,000 in Canada.
Besides ceasing production and sales, the company said it will spend US$10 million on research into breast implants. In the U.S., it will offer up to US$1,200 each to women who for medical reasons need their implants excised, but are not covered by private health insurance.
Miller said such surgery in Canada is covered by health-care programs.
Women who fear their implants will harm them, but as yet show no ill effects, are not eligible for aid.
“If she has no physical manifestation and the implant is not giving any problems, she should be calmed,” Miller said. Bryan Groulx, a manager of business development for the Canadian unit, added: “We’re not here to provide unnecessary surgery.”
One of Dow Corning’s strongest critics, Ottawa consultant and breast-implant expert Dr. Pierre Blais, said yesterday’s announcement was “a courageous and an appropriate decision.”
Breast implants account for about 1% of Dow Corning’s sales.
Committee, has stated that “he has no plans to touch … the ethics pro- gram.… ‘It will still aid and guide us through this difficult time.’”
Questions
1. Why did the Dow Corning ethics audit program not reveal any concerns about the silicone-gel breast implant line?
2. What are the critical factors necessary to make such an ethics audit program work effectively?
3. Was the announcement on March 20 well advised and ethical?
4. Are there any other ethical dilemmas raised by the case?

Question: On January 6, 1992, the “growing controversy