Outrage of the Week: Mattel in Shambles

First, the company apologized to its American consumers and laid the problem of defective children’s toys squarely on China’s doorstep. “Our standards were ignored, and our rules were broken” at Chinese plants, said Mattel CEO Robert A. Eckert in testimony under oath before Congress this week. Next, Thomas A. Debrowski, Mattel’s executive vice president for world-wide operations, issued an apology to Chinese officials and the Chinese people, saying

Mattel takes full responsibility for these recalls” and that “the vast majority of those products that we recalled were the result of a design flaw in Mattel’s design, not through a manufacturing flaw in Chinese manufacturers.

To confuse the issue even further the toy maker is beginning to backtrack from that apology with a statement about its Chinese statement. One fact that cannot be disputed is that Mattel clearly doesn’t know what it is doing. Not only did the company drop the ball in failing to ensure quality standards on the part of its Chinese manufacturers, it also failed in its own designs. It took too long to recognize that fact. It has frightened parents, placed children at risk and ill-served its own shareholders. With more than 20 million toys recalled, its reputation is in shambles. Yet, with all of this, the company’s board of directors has been basically invisible. There are no reports of resignations of top management. There is no indication that anyone in the company has been held accountable for what has occurred or that there have been any consequences as a result. Disappointing, too, is the apparent absence of any whistleblower within the company who might have alerted top management to problems either off shore or with its own design process. Is this a culture that discourages such action? The company thwarted efforts by Congressional committee staff to visit the plants in China that Mattel deals with, according to members of the House Subcommittee on Commerce, Trade and Consumer Protection. At the very least, the board needs to conduct a review of ethics standards and practices. It also needs to set up an independent committee of directors to investigate all the circumstances of what have brought the company to the brink of disaster.

Mattel is a classic case of what can happen when a company takes for granted the trust it holds and thinks it can coast on its good name. It is also an instructive lesson in what can occur with a country that is governed by a fundamentally corrupt dictatorship that hides most of what it does behind closed doors and secret police. One cannot imagine that Barbie or Ken would approve.

You have to wonder whether this company has really become anything more than a subsidiary of China Inc. and whether as a result of its plan to produce the lowest cost products from what turned out to be questionable sources of quality and regulation, it has created a situation where it now faces the prospect of going out of business altogether.

There are few things that outrage the consuming public more than that which endangers its children. For doing so, and making such a botch of how it handled those problems, Mattel is our choice for the Outrage of the Week.

The Outrage of the Week has returned to its regular Friday slot at Finlay ON Governance.