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Friday, October 29, 2021

Firms that face a recall notice are more apt to fight the order if it involves the injury or death of people using the product, according to a researcher at the University of Iowa’s Tippie College of Business.

Miranda Welbourne Eleazar, assistant professor of management and entrepreneurship at the Tippie College of Business and study author, found that rather than doing the expected and pulling a dangerous product off the market, a firm is more likely to refuse to recall a product when it causes more pain.

The study examined more than 800 recall notices recorded by the U.S. Consumer Product Safety Commission (CPSC) between 2012 and 2014. Her study found that:

—when someone is injured using a product, it leads to 31% increase in the amount of time it takes to issue a recall.

—when someone is killed using a product, it leads to an 86% increase in the amount of time to recall.

—It takes longer to recall products that cause a greater number of deaths than products that cause injuries.

The study also found that when young children are killed or injured, the time to recall increases by 56% compared to when adults are killed or injured.

Welbourne Eleazar points to recent examples of a well-known toy company that didn’t recall a baby rocker until 30 children had died while using it. In another case, a furniture manufacturer didn’t recall an unstable dresser until eight children had died and many more injured from the dresser falling over on them.

To explain firm leaders’ decisions to fight recalls of dangerous products, Welbourne Eleazar is developing the concept of “immoral entrenchment,” which suggests that firms’ responses to threatening crises lead to collective moral disengagement among decision makers. She says immoral entrenchment results in firms’ denial of responsibility and unethical behavior in the face of highly negative consequences. The behavior feeds on itself, she says, so leaders dig in their heels the more they’re pushed to recall.

She obtained records from the CPSC showing that in the case of a product meant to help babies sleep, executives resisted product recalls by pointing to thank you letters received from parents saying the product was the only thing that helped their babies sleep. They suggested overwhelmed parents would turn to more desperate methods to get their children to sleep that would be even more dangerous than the rocker.

Similarly, in the case of the furniture company, leaders simply blamed the parents for not fastening the dresser to a wall properly.

She says some firms used so many of their resources fighting recalls that they eventually went bankrupt, such as the novelty company that made ornamental magnets that were frequently swallowed by children, requiring surgery to extricate them.

She says these findings are important for boards of directors to understand because board members can influence firms’ decisions, potentially leading to fewer injuries and deaths associated with their products and reducing potential reputational and financial harm to the firms.

Welbourne Eleazar’s paper, “Immoral Entrenchment: How Crisis Reverses the Ethical Effects of Moral Intensity,” will appear in a forthcoming issue of the Journal of Business Ethics.

CONTACT: Tom Snee, 319-384-0010 (o); 319-541-8434 (c); tom-snee@uiowa.edu