LIBS 7018 Cases

Question 1

Ford Pinto and GM

Answer 1

Issue: The Pinto’s fuel tank was placed behind the rear axle, making it prone to rupture and fires in rear-end collisions

Corporate Decision: Ford engineers knew of the defect but chose not to design as it would delay product and add costs. Internal memo reveals a cost-benefit analysis showed it was cheaper to pay for lawsuits than to fix the design

Question 2

McDonald’s Happy Meal

Answer 2

Issue: The Happy Meal bundles food with a toy, directly targeting children causing child obesity, manipulative marking, and exploiting vulnerable customers

Corporate Decision: Management argued everyone was fine with the toy even though competitors are introducing healtheir options

Question 3

McDonald’s Hoty Coffee

Answer 3

Issue: A woman suffered third-degree burns after spilling the coffee which was far hotter than typically brewed coffee. McDonalds maintained their position highlighting the high serving temperature to preserve taste longer and reduce refill costs. With over 700 prior burn complaints, McDonalds continued their practice until a woman sued and won.

Question 4

Exxon Valdez

Answer 4

• The Exxon Valdez oil tanker struck a reef in Alaska.
• Million gallons of crude oil spilled into the ocean, contaminating several miles coastline.
• The disaster was one of the worst environmental catastrophes in U.S. history
• Ship captain was impaired and the crew fatigued
• Exxon had reduced the size of the crew to cut costs

Question 5

Deepwater Horizon

Answer 5

• The Deepwater Horizon offshore drilling rig exploded in the Gulf of Mexico cause the largest marine oil spill in history.
• Investigations reveal safety failures, poor risk management, and cost-cutting decisions contributed to the blowout.
• They skipped safety tests and ignored warning signs by maintaining a culture that emphasized efficiency and profit over rigorous safety protocols

Question 6

Nestle

Answer 6

Issue: Aggressive promotion of infant formula in developing countries, sometimes misleading mothers into believing formula was superior to breastfeeding. This led to malnutrition and infant deaths when formula was mixed with unsafe water.

Question 7

Beech-Nut and No Apple-Juice Juice

Answer 7

Beech-Nut marketed and sold “100% Apple Juice” for infants and children when in reality, it was composed of sugar and corn syrup. The company continued selling the product even after internal testing revealed it was fraudulent. Management attempted to sell of the no apple juice substance at fire prices but was caught.

Question 8

FTC vs Colgate Palmolive Co

Answer 8

Issue
* Colgate-Palmolive ran a TV advertisement for its shaving cream, claiming it could soften sandpaper enough to allow a razor to glide smoothly over it.
* In reality, the demonstration was deceptive: the “sandpaper” shown was actually simulated with sand sprinkled on glass, not real sandpaper.
* The Federal Trade Commission (FTC) charged Colgate-Palmolive with false and misleading advertising.
Corporate Decision
* The company defended itself by arguing that the ad was merely “puffery” and consumers would not take it literally.

Question 9

Bernie Madoff Ponzi Scheme

Answer 9

• He promised steady, above-market returns to investors, but instead used new investors’ money to pay earlier ones.
• Fabricated investment returns rather than admit poor performance
• Created fake account statements and misled regulators, exploiting gaps in oversight
• The fraud went undetected for decades, despite warnings from whistleblowers

Question 10

Arthur Anderson

Answer 10

• Enron engaged in massive accounting fraud, hiding debt and inflating profits through off-balance-sheet entities.
• Andersen was accused of failing to uphold auditing standards, overlooking irregularities, and later shredding documents related to Enron’s audits.
• Andersen prioritized maintaining its lucrative relationship with Enron over professional independence.
• Auditors signed off on misleading financial statements, despite evidence of fraud
• When investigations began, Andersen employees destroyed documents to obstruct justice.

Question 11

Martha Stewart

Answer 11

• Martha Stewart sold shares of ImClone Systems stock just before the FDA announced it would not approve the company’s cancer drug (Erbitux).
• The stock price dropped sharply after the announcement.
• Stewart’s sale was based on a tip from her broker, who had inside knowledge that ImClone’s CEO was selling his shares.

Question 12

Milgram experiment criticism of virtue ethics

Answer 12

• Milgram showed that situational pressures (authority, conformity) can override character. Even people who see themselves as “good” acted harmfully.
• Without concrete rules, virtue ethics can mislead — virtues can conflict (compassion vs. obedience), leaving people vulnerable to manipulation.
• Virtue ethics often depends on social norms to define virtues, and the experiment shows virtue ethics can reinforce harmful norms rather than challenge them
• Virtue ethics assumes moral education produces consistent character but the experiment shows peoples actions can vary dramatically depending on context

Question 13

Vioxx

Answer 13

• Clinical studies later revealed that Vioxx significantly increased the risk of heart attacks and strokes.
• Despite internal data showing cardiovascular risks, Merck:
• Continued marketing Vioxx heavily to physicians and consumers.
• Downplayed or delayed disclosure of adverse findings.
• Lobbied regulators to maintain approval
• Evidence suggested Merck was aware of cardiovascular risks early but continued to market the drug aggressively
• For arthritus

Question 14

Apple In: Severe Employee Abuse

Answer 14

• Allegations of inhuman conditions
• Workers signed anti-suicide contracts and worked like machines
• Worked excessive overtime with one day off every two weeks for low daily wages
• Working hours extended from legal limit
• Dormitories crowded with anti-suicide nets
• Work on call and work with hazardous chemicals

Question 15

Nike – Sweatshops

Answer 15

• Nike outsources labour-intensive manufacturing to other countries such as Indonesia
• Face allegations of poor working conditions and paying exploitative wages
• Workers lived in shared living quarters with multiple people and endured harsh living and working conditions such as feces-contaminated homes
• Burned waste near homes producing toxic fumes
• Journalists experienced the harsh experience of living off low wages and living in their homes, confronting Nike only to be harassment and deflection

Question 16

Chicken

Answer 16

• Overcrowding
• Improper disposal of waste
• Waste causing infection
• Rough handling
• High mortality rates
• Severe health issues
• Chickens killed when concious