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The Information Due to the Customer
The Information Due to the Customer

Added06/15/1992

Updated11/19/2015

Author(s) Michael Pritchard
Authoring Institution Center for the Study of Ethics in Society at Western Michigan University
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Contributor(s) Michael Pritchard
Notes Case study originally published in “Teaching Engineering Ethics: A Case Study Approach” by Michael Pritchard. Center for the Study of Ethics in Society, Western Michigan University, 1992.
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Authoring Institution (obsolete) Center for the Study of Ethics in Society, Western Michigan University
Rights For more information on permissions to use this material please see: http://onlineethics.org/permissions.aspx
Year 1992
Publisher National Academy of Engineering, Online Ethics Center
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  • Posted 12 years and 9 months ago

    I



    Christine should talk with Vernon. There are two different
    issues that are raised by Vernon's not passing along either the
    savings in cost of production or the information that the
    custom made parts are to be made with a different material than
    XYZ's engineers had originally thought would be necessary.



    First, as Christine points out in her original conversation
    with Vernon, "In most cases the performance will be virtually
    the same--although some parts might not last quite as long." It
    is unclear whether there are two problems here, or only one.
    Christine may be saying both that some of the parts will have a
    shorter lifetime than they would were they made of the other
    alloy and that for some of the parts, or--and this is also
    unclear--for some of the features of the parts, the performance
    will not be the same as it would be for those made with the
    other alloy. Either all the parts will be used in the same way,
    but the failure rate will be higher in general (perhaps because
    the parts are not as strong now), or, perhaps, some of the
    parts will be used in ways different from other parts, and they
    will not perform as well as ones made with the other alloy
    would perform. In short, the parts will be of lesser quality
    than those ordered, and that diminution in quality will
    manifest itself either in a shorter lifespan for some of the
    parts or in decreased performance for some of the parts, or
    both.



    In either event, ABC will be getting an inferior product for
    its money. One way to come to understand whether anything moral
    is at issue is to ask whether a change will cause any harm, and
    ABC will be harmed because it will have to purchase new parts
    sooner than otherwise, and that will cost them more money,
    and/or because it will have an inferior product produced with
    these parts because the performance with them will be inferior
    to what would have been the performance expected of the part
    made with the other alloy. So ABC will be harmed by changing
    the composition of the parts, and anytime harm occurs because
    of one's actions, one needs to assess whether one ought to act
    in that way.



    One ought not to cause harm unnecessarily, and so one needs
    a good reason for causing it. Physicians have a good reason to
    cause pain to patients by inoculating them because the patients
    are benefited in the long term by being immune from diseases
    that would cause them more harm. So the question is whether XYZ
    has a good reason for causing harm to ABC. The answer is that
    it has a reason, namely, increased profits, but that is not a
    good reason for causing harm. Christine is right when she
    thinks that "the customer isn't getting what was promised." If
    I promise someone something, and then substitute something
    else, I have broken my promise, and we thus have two harms
    here--the harm that comes from breaking one's promise and the
    harm that comes from causing ABC to spend more in the long run
    for the custom made parts.



    The harm that comes from breaking one's promise may seem a
    minor harm, but think of what might happen were ABC to discover
    that the reason the parts it ordered have a shorter lifespan
    than it thought they would have is that XYZ has substituted
    something different from what ABC thought it ordered. Not only
    would ABC have the basis for a legal suit, presumably--if the
    order originally included specifications for the alloy to be
    used--but it also would no longer have any reason to trust XYZ
    to deliver what was promised. Everything ordered would have to
    be checked, that would increase ABC's costs, and it might
    decide that the increased costs of doing business with XYZ were
    not worth it and might take its business elsewhere. Breaking
    one's promises often does not cost one much: if no one finds
    out, and one generally keeps one's promises, then no one will
    be the wiser. But when one is found out, the cost are usually
    so high as to outweigh any advantage one may have had from
    breaking the promise to begin with. So Vernon risks losing ABC
    as a customer should ABC ever find out that the parts they
    ordered are not exactly what they got.



    But I mentioned that there were two different issues raised
    by Vernon's actions. The second is perhaps somewhat more
    problematic because it raises the question, "What is a fair
    profit?" Is one entitled to charge whatever the market will
    bear, or should one pass along any savings to one's customers
    and charge only what gives one a decent profit for one's work?
    We may bring out the issue more clearly by supposing that XYC's
    suppliers find a new source for the alloy originally thought
    necessary and that the price to XYZ is significantly lower than
    what XYZ had calculated it would be in determining that the
    final price should be $75 per part. Does XYZ have an obligation
    to pass onto ABC the savings from their discovery? Suppose that
    the savings are not, say, $2 per item, but $35 per item.
    Whereas before XYZ was making a profit of, say, $20 for every
    $75 item sold, now it is making a profit of $55 for every item.
    Does it make a difference how much of a profit XYC is
    making?



    This question raises issues that take us far beyond this
    case, but we can say a few things about it. One is that
    discovering that one can purchase something at a cheaper price
    is itself not without cost: one has to hunt in catalogues,
    presumably, talk to suppliers, make new arrangements, cancel
    old ones, and so on. So XYZ has incurred some costs in lowering
    its costs, and it should be entitled to recoup those costs. It
    thus is not obligated to pass on to ABC all of its savings in
    purchasing the alloy at a lower cost.



    But should, again, ABC ever become aware that XYZ made a
    profit of $55 on every $75 item--and one must realize that,
    among others, salespersons talk--then XYZ will get a reputation
    for gouging. That is, they will become known as a company that
    will make as much money as they can whenever they can. This
    will have its effects on their business, for instance.
    Companies will bargain that much the harder to lower the price,
    thinking that XYZ will be making enough profit even with a
    lower price, and XYZ will find itself having to mark up items
    in order to have a bargaining position. It will thus price
    itself out of the market for some potential customers, who will
    see the price and not realize that XYZ is willing to bargain.
    But even those who bargain with XYZ and come up with a contract
    will be left not being completely sure that they came up with a
    good contract. They will still wonder if, perhaps, XYZ has not
    still made a big profit and will hunt around for other
    suppliers. So XYZ will perhaps lose customers, who will feel no
    loyalty to a supplier who will gouge when it can.



    So, by all means, Christine ought to talk further with
    Vernon. He is taking a short-sighted view--take the profits
    upfront and do not worry about the potential long-term
    consequences--and is causing harm to ABC when that is
    wrong.



    II



    If Christine's entire further conversation with Vernon is as
    reported and all he says is, effectively, that he is just doing
    good business, then she ought to press the point further. He
    presumably thinks he is doing "good business" because he is
    making more money for the company from this contract than he
    would if he passed along the savings to ABC, but he is making
    more money only because he is supplying a different product to
    ABC than was originally contracted for. Whether the contract
    itself specifies the content of the part or not, it was
    presumably presumed by both during the negotiations that a
    particular alloy would be used. Or, to put the point perhaps
    less contentiously, XYZ presumed it, and ABC would have no
    reason for thinking any other alloy would be used. It is not
    good business to cheat a customer, and that is effectively what
    Vernon is doing.



    He is also assuming, without evidence, that ABC will be a
    satisfied customer. But if the parts are not as long-lived as
    it thought they would be, and if there is a higher rate of
    failure in some functions than it would there would be, ABC may
    well not be a satisfied customer and may look elsewhere for a
    supplier next time. It is not good business to encourage
    customers to go elsewhere the next time they have to purchase
    parts.



    III



    If the original contract specifies that the parts are made
    from the alloy originally chosen, then Christine cannot sign a
    report "verifying that the specifications for the part have
    been met." They have not been met, and it is her professional
    obligation to make sure that what is produced is what was
    contracted for.



    In addition, if the original contract is as indicated, then
    it is probable that Vernon knew that all along. He is thus not
    just taking advantage of a loophole in the contract by
    substituting one alloy for another when the contact did not
    make it clear what was necessary, but clearly breaking the
    contract in order to increase the profits to the company. So,
    whereas one might just think him slightly sleazy in trying to
    wring as much money as he can from the contract, now one must
    think him criminal in not only breaking the contract himself,
    but also urging someone else in the firm to do the same--and to
    cover for him. For if Christine signs the report, Vernon can
    always claim, in his defense should things come to that, that
    he just took the word of the engineer here, that she is the
    professional who ought to know about such matters, and that he
    is just the salesperson, or whatever, and certainly not
    professionally competent to make such judgments.



    So Christine cannot sign the report. That would break a
    contract with XYZ, and it would open her to the legal
    repercussions if XYZ should find out and sue, as they would be
    entitled to do.



    IV



    If Vernon is able to get another engineer to sign the
    report, Christine is in an awkward position because now, should
    she act further, she will not only get Vernon, but also a
    fellow engineer in trouble.



    But she has an obligation to take the matter higher if for
    no other reason than that the company may be sued by XYZ. It is
    not enough morally just to act within the law, but it is always
    a mistake not to act within the law. One pays in so many
    ways--monetarily, by having to pay damages as well as for the
    original difference in costs, and politically, as it were, by
    being presented publicly as a company willing to cheat its
    clients for extra profit.



    That a fellow engineer may well be harmed is unfortunate,
    but if he had a good reason for signing the report, despite the
    discrepancy, he will give it, and if he did not, it is not up
    to Christine to protect him when the company as a whole may be
    harmed by his and Vernon's actions. One is not obligated to
    protect a fellow profession from his or her own mistakes, and
    the obligation is especially weakened when others may be harmed
    by those mistakes. Christine now only has to be concerned about
    the harm being done to XYZ, but also the harm that may be done
    to ABC.



    In addition, she may be harmed, knowing all this, and yet
    not acting. We are sometimes in the unfortunate position of
    coming to know something that necessitates our acting when we
    would prefer not acting. Seeing a parent abuse a child, for
    instance, creates a prima facie obligation to do something, and
    one must at least consider what one ought to do in such a case,
    perhaps investigating whether the abuse is longstanding or not.
    Here the harm is clear, and that Christine is no longer in the
    chain of authorization for its occurrence is not important.
    What matters now is that she knows it. To prevent harm she must
    act.

  • Posted 12 years and 9 months ago

    The main focus of this case is a deceptive business practice
    and an engineer's responsibilities with respect to it. ABC has
    just signed a contract worth at least $375,000 with XYZ. We do
    not know the basis of the contract, but it was probably a bid
    on specifications developed by XYZ. Again, we do not know
    whether the materials to be used in the parts manufactured by
    ABC were detailed in the contract. It is conceivable the
    contract could have merely called for dimensions, strength
    requirements, and the like, without dictating the particular
    alloys that should be employed. If ABC did not make any
    contractual agreements regarding specific alloys and the newly
    discovered alloy meets all of the specifications, then there
    does not seem to be a problem in this case, and the company
    deserves come credit for its inventiveness. In particular,
    Christine Carsten might deserve a bonus for helping the company
    make an additional 24 percent profit.



    Let us assume, however, as seems more reasonable in the
    case, that a particular metal was specified. While the
    less-expensive alloy has generally the same properties, it is
    demonstrably inferior in certain respects, and without question
    it is a different metal than was originally agreed to in the
    contract. By failing to inform XYZ of the alternative alloy and
    possibly renegotiating the contract, Christine's firm is, from
    a moral point of view, engaged in deception motivated by the
    prospect of selfish gain. From a legal point of view, ABC is
    probably involved in fraud and deceptive nondisclosure.
    Deceptive nondisclosure here involves the failure to tell the
    client about some important fact regarding composition of the
    product. Fraud, of course, is a misrepresentation of material
    fact that leads another to take some action to that party's
    detriment, in this case, XYZ paying more money for a part than
    is justified. We should not assume that ABC would lose in a
    business sense by disclosing to XYZ the possibility of the new
    alloy with a lessened production cost. XYZ may be favorable
    toward the lower production cost and less concerned about the
    long-term durability of the part. Having already won the
    contract on the basis of a different alloy, it is probably the
    case that ABC's production cost might be less than its
    competitors' no matter what alloy is used. Renegotiating the
    contract with XYZ may lead to even more profit than ABC
    expected originally. Furthermore, in XYZ's eyes, ABC comes off
    as an inventive, progressive group that might be looked upon
    with favor in future contract negotiations.



    By contrast, if ABC does not inform its client of the alloy
    change and the misrepresentation is discovered, ABC might find
    itself sued for the total cost of this contract. There is also
    the possibility of lost contracts and lessened reputation in
    the future. If one of the slightly inferior parts is related to
    some kind of product liability case, ABC could be responsible
    for still more damages. Even if no court actions occur, the
    possible discovery of the use of the alloy will certainly not
    rest well in future relationships between ABC and XYZ.
    Christine's suggestion that XYZ will not discover the change of
    alloy is not likely to be true. While XYZ would probably not
    undertake expensive unprompted testing of the material, it is
    not unreasonable to suppose that something could prompt them to
    do the testing. Even if ABC kept the alternative alloy secret
    for a year or two, XYZ might eventually learn the information
    through, say, a disgruntled employee of ABC or through one of
    ABC's competitors. Looked at in terms of consequences, ABC's
    nondisclosure is exceedingly risky behavior, whereas disclosure
    and possible renegotiation of the contract would bring
    favorable results. Aside from consequences, ABC has both a
    legal and a moral duty not to engage in deception in contracts.
    Vernon Waller's opinion that failing to disclose the new alloy
    to XYZ is "good business" is simply wrong.



    What should Christine Carsten do? It is likely that there
    are many more people at ABC involved with this parts order than
    Vernon Waller and Christine Carsten. Another engineer, John
    Richards, is mentioned later. While Vernon Waller authorized
    the sales agreement with XYZ, it is not clear from the story
    that he has final authority regarding any changes in that
    agreement. At the very least, Christine should insist on a
    meeting of all engineering and management people at ABC who
    have key roles regarding this project. It is unlikely that the
    others attending such a meeting will unanimously concur with
    Vernon Waller. If they do, Christine would be well-advised to
    look for employment elsewhere, because her ethical and
    professional standards will likely be tested again in the
    future.



    If Christine has had any experience in projects such as
    this, she knows that at the end of the project she is required
    to sign off on the report verifying the contractual compliance
    in the production process. Should her falsification of the
    report or falsification by any other registered engineer become
    known to the appropriate officials, registration might be
    revoked, at least for a period of time. While disciplinary
    practices differ among the states and in Canada, revocation is
    certainly a possibility. The widely used educational film The
    Truesteel Affair, a film made in Canada but circulated through
    the National Society of Professional Engineers in this country,
    details the consequences of a professional engineer falsifying
    a report on the fabrication of some construction steel. One of
    the messages in that film is that the engineer involved should
    have sought advice from his fellow engineers, especially from
    the officers of his local professional society. If the events
    in our case move to the point that Christine is asked to sign
    an inaccurate report, she would be well-advised to follow that
    same advice. This warning also applies to Christine's fellow
    engineer John Richards. John's signing the verification report,
    however, does not let Christine off the hook. She still knows
    of and has been party to the deception, and, furthermore, she
    knows that a fellow engineer signed a deceptive report. She may
    have a professional obligation to report John Richards'
    actions. She should at least do what she can to inform John
    Richards of the seriousness of the situation and to bring home
    to him her reservations about the type of action he has been
    asked to do.



    Is the price really right? Morally and legally, the price
    seems far too high for Christine Carsten. It is also likely to
    be too high for John Richards and others at the ABC
    company.

  • Posted 12 years and 9 months ago

    After reading about the casual manner Christine Carsten
    proposed a material substitution in a part ABC was to begin
    manufacturing for XYZ, my first inclination is to take
    Christine to the engineering reference bookshelf, reach for the
    engineering standard practices and have her read them.
    Especially the section on preparing engineering change
    proposals. She should have prepared a value engineering change
    proposal (VECP) for the proposed material substitution. The
    VECP would describe the proposed substitution of the less
    expensive metal alloy to make the part, the projected impact on
    the performance and life of the part, and the projected
    manufacturing cost savings. After review and approval of the
    VECP by engineering, it would be forwarded to Vernon Waller to
    review with XYZ. If XYZ accepts the VECP, Vernon would
    negotiate a revised pricing agreement. The VECP is critical
    since the price per part the XYZ is paying to ABC is based in
    part on the cost of materials.



    Vernon's acceptance of Christine's casual presentation and
    his decision not to tell XYZ is as irresponsible as Christine's
    engineering. Further, by signing the report, John Richards
    knowingly falsified product information compounding the
    problem. What if the material change is discovered by XYZ's
    receiving inspection? (A simple Rockwell hardness test may be
    all that is needed to tell the difference.) What if the parts
    fail under warranty, and XYZ is forced to absorb the cost of
    repair or replacement? Don't Vernon, Christine, or John foresee
    that if some of the parts fail earlier than anticipated, XYZ
    might decide to investigate the cause of failure, do some
    testing on their own, and find out about the material
    substitution? What are they going to say or do when XYZ calls
    regarding the counterfeit parts supplied by ABC? Pull out the
    report signed by John Richards and claim that XYZ is doesn't
    know what they are talking about? Is the $90,000 that Vernon
    will make for ABC enough to pay for the lawyers or make up for
    the business ABC is going to lose? Ethically, Vernon has not
    just done "good business." He has proposed to steal $18 per
    part from XYZ by delivering counterfeit parts. Since Christine
    is responsible for proposing the material substitution, she
    must continue to press Vernon further on the issue.



    Well, Christine backs off deciding there is nothing further
    she can do and the counterfeit part is produced. At this point,
    I'd like to know who authorized production of the counterfeit
    part? Did engineering? Did Vernon? Who prepared the report
    verifying that the specifications for the part have been met?
    Was it engineering or was it Vernon? Noticing the original
    alloy composition is listed in the specification causes me to
    think that Vernon made the alloy change unilaterally, and
    didn't bother to change the original part specification because
    Christine told him that no one would notice the substitution
    "unless they were looking for a difference and did a fair
    amount of testing."



    Were I Christine, I would insist that the report be
    corrected to list the cheaper alloy. If this couldn't be done,
    she should correct the report so it states the proper alloy
    used in the part, and sign it. She should be responsible for
    her engineering. In refusing to sign the report, Christine
    probably thinks she is doing the ethical thing. However, by
    backing off the issue when she felt there was nothing more that
    she could do and not insisting on maintaining the integrity of
    the product specification either as originally written or by a
    VECP, she abrogated her responsibility as an engineer to
    participate in none but honest enterprises (Order of the
    Engineer). Her proposal was instrumental in Vernon's decision
    to substitute the lower quality alloy in the part. The
    counterfeit part is as much her responsibility as it is
    Vernon's even though she didn't sign the report. Vernon's lack
    of business ethics and concern for the quality of the product,
    and Christine's undocumented engineering contribute equally to
    this situation.



    Assuming XYZ relies on supplier quality certification to
    minimize receiving inspection costs, transmitting the report
    misrepresenting the part opens ABC disqualification as a
    supplier when they find out about the cheaper alloy. They may
    also demand a retroactive price adjustment. When this happens,
    how will Vernon's doing "good business" stand up? Since
    Vernon's ethics are situational, will he say that he didn't
    know anything about the change and that engineering made the
    substitution and then covered it up by signed a report
    specifying the original alloy? Will Christine and John be the
    scapegoats since there is no documentation to the contrary?



    Aviation is inherently safe, but it is totally unforgiving
    of any carelessness. What if the part manufactured by ABC goes
    into an aircraft manufactured by XYZ and in one case its
    performance is not virtually the same, causing an accident?
    There will be a public investigation. Imagine the consequences
    to Vernon, Christine, John, and ABC.



    Vernon, Christine, John, and probably ABC better clean up
    their operation. Contracts needs to get out of engineering
    decision making, and engineering needs to get more disciplined
    and documented in its interface with contracts, especially
    since ABC as a custom part manufacturing firm relies on
    engineering to design the parts they contract to manufacture.
    They must recognize that in the long run it is better to do
    what is right rather than what is expedient, be honest and
    trustworthy in their relationships, and truthful and accurate
    in what they say and write.

  • Posted 12 years and 9 months ago

    The first relevant standard business practice is that of
    appealing to the letter of the agreement or contract in any
    dispute between corporations. The most stupid, self-destructive
    thing a corporation could do is to deliberately violate one of
    the specific terms of a contract (in this case, the
    specification of the more expensive materials). By so doing
    they set themselves up for big losses through the triggering of
    penalty clauses against them, or through claims for damages
    (including punitive damages) by XYZ. More generally, violation
    of any part of a contract may render the whole contract null
    and void, hence relieving XYZ of any its obligations under the
    contract, including the obligation to pay ABC for the
    parts.



    The second relevant standard business practice is the
    certainty that corporations such as XYZ will have some kinds of
    ongoing quality control procedures, including routine
    spot-checking of all materials and products. Any violation of
    specifications by ABC, especially one which applies to all of
    the items (they would all be made of a cheaper material) is
    bound to be detected.



    This is so because, given the contemporary legal and
    regulatory environment, no company could stay in business for
    long which did not regularly and exhaustively test every aspect
    of its products. The reasons for this are simple. It is now
    relatively easy for customers to complain about poor quality
    and safety defects to government or other regulatory bodies,
    and those bodies have the power to paralyse or shut down a
    company altogether, even on minor infringements of
    regulations.



    At the same time, the legal climate encourages customers to
    engage lawyers on a contingency basis to sue corporations for
    actual and punitive damages caused by inadequate products, and
    juries often impose huge fines against businesses in such
    cases. No company dares risk such consequences, and so they are
    increasingly forced to go to extreme lengths to ensure fully
    effective quality control on their products.



    As an integral part of this quality control, the products of
    a company's own suppliers inevitably come under the same
    intense spotlight. So fraudulent behavior by a supplier will
    inevitably be detected. Admittedly, in a few instances a
    substitution or defect may not be detected right away, but no
    company can risk the chance of future detection of their fraud,
    given that the evidence is incontrovertible (a battery of
    scientific analyses of material composition constitute
    irrefutable evidence of fraud) and as permanent as the product
    itself (the material of most products will last for thousands
    of years at least).



    A more likely scenario for attempted fraud than that given
    in the current case would be one in which the exact composition
    of the material was not specified in a written agreement
    between ABC and XYZ. Perhaps the specification was given orally
    only, or perhaps XYZ just assumed (following past practices,
    perhaps) that the more expensive material would be used. Should
    ABC even consider using a cheaper material in such cases?



    Answer: no, because here another reality of the contemporary
    business environment comes into play. This is the increasingly
    intense competition occurring in virtually every business and
    industry. Whereas at one time companies such as ABC one could
    rely on customers such as XYZ to give them business out of
    habit or convenience, now the reality is that XYZ will be
    looking for the best part at the best price. If any supplier
    (such as ABC) even gives the appearance that it might be
    shortchanging XYZ, XYZ will immediately remove ABC from its
    list of approved suppliers.



    This is not because XYZ has any increased moral sensitivity
    to fraud attempts, but simply because, given the contemporary
    cutthroat business climate, they dare not damage their own
    credibility or competitiveness through further use of
    questionable suppliers such as ABC.



    Somewhat ironically, then, ethical values such as business
    honesty, or giving full value for money, are most directly
    enforced in cases such as these by the brutal, survival-based
    market realities of our world economy.

  • Posted 12 years and 9 months ago

    XYZ orders 5000 custom made parts from ABC. A price is
    agreed on based in part on the cost of materials to be used in
    the part. ABC discovers a less expensive alloy that can be
    substituted "only slightly compromising the integrity of the
    part." The customer won't be able to detect the substitution
    unless they do "a fair amount of testing." The part is still of
    "good quality" but "might not last quite as long." There is a
    simple, one word description of this way of doing business:
    Fraud!!



    The alloy substitution should be made, if and only if, the
    customer (XYZ) agrees to the substitution, with disclosure of
    what this substitution does to the expected life of the part,
    and an appropriate price reduction is made.



    If ABC goes ahead with the substitution without notifying
    XYZ and the substitution of the less expensive alloy is
    subsequently discovered, I can assure you that ABC will have
    lost a customer. In no way can such substitution be considered
    good business.



    Christine must share her thoughts about the impropriety of
    substituting the less expensive alloy with Vernon and if he
    fails to listen to reason, she must carry her feeling about
    this wrongful act to a higher level of management.



    Vernon's actions are unethical and some of his defensive
    statements border on the ridiculous. For example, "This is
    business, not engineering" is belittling to the engineers in
    the company. Sound business is built on having a
    well-engineered product. Vernon states, "We're not in the
    business of giving away money." However, he is literally asking
    XYZ to do just that by paying full price for a part in which a
    cheaper material has been substituted!



    Christine should not sign a report falsifying the
    composition of the alloy in the part and when Vernon persuades
    someone else to sign the report, she should go over Vernon's
    authority to higher management to report this. The future of
    ABC's business depends on the elimination of deceitful
    practices such as Vernon endorses and uses.



    I was Director of Research for a major corporation for over
    20 years. Our Analytical Department routinely ran a
    "fingerprint" analysis on many of the components,chemicals,
    plastics, cleaners, paints, etc. that we purchased and
    periodically checked for adherence to the specifications agreed
    on at the time of purchase. We once had a problem in a metal
    cleaning operation--analysis proved that the problem was due to
    change in the chemical composition of a cleaning compound. The
    change in the chemical composition of the compound cheapened
    its manufacturing cost and reduced its cleaning efficiency; we
    were not notified of the change and no adjustment was made in
    our purchase price. WE NOTIFIED THE COMPANY WE WERE AWARE OF
    THIS UNAUTHORIZED CHANGE AND CEASED TO DO BUSINESS WITH
    THEM.

  • Posted 12 years and 9 months ago

    Christine realized that a material change without permission
    from the customer XYZ is not proper. Legally and ethically,
    honesty is required in a case such as this. Handled honestly,
    both ABC and the customer XYZ could benefit from a lower cost.
    Given no cost (or performance) incentive, XYZ would have no
    reason to agree to a slightly inferior material. Christine
    certainly reacted ethically by pursuing this subject with
    Vernon. Aside from the ethical issue here, it is also possible
    that there are important factors that Christine and Vernon are
    not aware of, and this "closet" decision could be a large
    financial risk.



    When Vernon disagrees with her objections by saying, "This
    is business, not engineering," he is implying unethical
    behavior (dishonesty) is justified as a part of "good"
    business. This dishonesty is clearly not an ethical business
    decision, but it is also not an ethical engineering decision.
    In fact, what is the distinction between business and
    engineering on an ethical matter? In addition to this, it is
    blatantly bad business based upon potential financial risk.
    Ethically, Christine should press further, but depending upon
    her position in the company relative to Vernon, this could be
    difficult, and she might be risking her job to do so.



    When Christine refused to perjure herself by signing the
    report, she acted ethically, but if she allows the report to be
    released with the other engineer's signature, she is still
    allowing (and therefore condoning) a dishonest action. At this
    point she faces a difficult array of decisions. The lower the
    managerial level at which she could influence corrective
    action, the "safer" might be her position within the company.
    Since this dishonest decision was made by Vernon, who appears
    to be in a marketing position, an engineering manager might be
    able and willing to intervene. She might even be rewarded for
    her actions. If the managers above her all support Vernon's
    decision, then perhaps she should be seeking employment
    elsewhere anyway!



    Looking back over this scenario, Christine would have been
    wise to more aggressively pursue an honest approach at the
    outset. Customer XYZ would then have been dealt with honestly
    regardless of the "negotiations" within ABC to achieve that. By
    the time the less expensive parts have been produced, it is too
    late for XYZ to play a part in the decision, and belated
    honesty will be very costly (in goodwill and perhaps dollars)
    to ABC.

Cite this page: "The Information Due to the Customer" Online Ethics Center for Engineering 6/15/1992 OEC Accessed: Friday, May 24, 2019 <www.onlineethics.org/Resources/csaindex/Customer.aspx>