Red Lobster's Ethical Dilemma - Term Paper

Red Lobster's Ethical Dilemma - Term Paper

Gerry Mullen, CEO of Red Lobster restaurants, has been faced with a dilemma. He recently received an email from Terry Modotti, Vice President for Public Relations concerning the lobster retrieval in La Mosquitia, also known as the Mosquito Coast. The article states that many of the young working men are being killed and maimed to make lobsters available at cheap process to consumers in the United States. The men, known as buzos, must dive up to 130 feet for lobster, and face dangerous decompression sickness which begins with paralysis and ends in a slow death. This is due to the fact that there are no medical or decompression facilities on the boats, and there is also no equipment to aid the divers as they ascend to the surface of the water. However, there has been effort taken to try and help this negative situation on the Mosquito Coast. A non-profit organization, Sub Ocean Safety (SOS), founded by Bob Izdepski, was set up to help divers by installing decompression chambers allowing divers to gradually be brought to the surface. However, the divers do not reach the surface within the allotted five minute period which is needed for the chambers to be effective. SOS would also like to see regulations on diving--control over the number of dives per day, safety equipment on boats, and a limit on the lobster season to maintain the lobster population. Being the CEO of Red Lobster for a mere two years, Gerry has to make a decision as to what course of action he is going to take concerning this dilemma. There are many options that Gerry could execute--each complete with advantages and disadvantages; but Gerry needs to make a decision on only one option. By investigating the advantages and disadvantages of each option, I will be able to accurately advise Gerry as to which course of action to take.

The first option that Gerry could take would be to ignore the bad publicity and the dilemma in the Mosquito Coast altogether. If he were to do this, shareholders would continue to be profitable, and consumers would also continue to be happy with the company, never knowing what was happening to many individuals as a result of their large consumption of lobster. Another advantage to avoiding the situation altogether is that Gerry would be steering away from jeopardizing his reputation as a CEO. Since he is a recently appointed CEO, making an extreme decision such as to take action on the problem may create bad publicity for him and the company as a whole. However, by ignoring the dilemma, nothing is being done to help the divers, and they are still dying at a continuous rate. With more and more men dying from the decompression sickness, the boat companies are losing more and more man power, and fewer lobsters are being generated due to this. Furthermore, reputation may come into play as a disadvantage as well. If Gerry and Red Lobster fail to act upon the problems which are being faced by the divers, this could recreate bad publicity that the company is not helping its "sweatshop workers" and a bad reputation may be formed. With the disadvantages outweighing the advantages in this option, I would advise Gerry to investigate another option.

A second option that Gerry could take into consideration would be to take action on the media report and start purchasing lobster from another area. The main advantage to this is that Red Lobster would essentially not be targeted for bad publicity as a result of the change in location. However, there are many disadvantages to this option. For instance, the price of lobster may potentially rise due to the change in area. Workers may be paid more, and therefore boaters may charge a higher price for lobster. Also, lobster may be scarce in the new area, causing an increase in price. This increase in price may cause an increase in the selling price of the lobster at the restaurant. Furthermore, the price increase may cause customers to become dissatisfied and find their business elsewhere, considering that lobster is not at the low price that it used to be. Another disadvantage of implementing this option would be that net earnings would decrease due to a decrease in consumers, and shareholders will be angered by the decreasing figures of the company. With all of the negativity being placed upon the company as a result of this option, a bad light would be shown on the CEO and the company, especially since Gerry is relatively new. Since there are clearly more disadvantages than advantages for Gerry and Red Lobster by exercising this option, I would advise Gerry to further pursue other options.

Another option with which Gerry could investigate would be for Red Lobster to offer to pay a higher price for lobster to boat companies in the Mosquito Coast in order for the divers to receive a higher salary cut. A possible advantage to this is that it would provide a better living environment for the divers. It is stated in the article that after the sacabuzos (middlemen), boat captains, and fish processors take their share of the money, what remains for the buzos is a mere $2 per pound of lobster fetched. Within a two week time period, this rate will amount to about $300. If the divers are trying to support families, $300 for two weeks is quite meager. By increasing the price that Red Lobster is willing to pay for wholesale lobster, the divers will benefit considerably due to a higher salary. Another advantage to a higher salary would mean that more individuals would be inclined to become divers, creating a higher turnout of lobster each day. However, disadvantages to this option would be that the net worth of the company would decline due to the increase in price that the company would have to pay for lobster. This in turn would create problems with the shareholders, since the value of the company would be decreasing. I would advise Gerry to not implement this option for a number of reasons. For instance, increasing the salary of the divers is not going to fix the decompression sickness that is affecting the divers--in fact, it may actually amplify the situation. With the incentive of a higher wage, divers may be further inclined to go on more dives, and in turn create additional deaths. Also, this option does not have any positive affect on the company. Red Lobster would be losing money, and would not be gaining anything in return. Therefore, Gerry should investigate one final option with which to choose from.

The last option that Gerry has to take into consideration is for the Company to give funding to Sub Ocean Safety to help provide better protection for divers, and also help with the environmental issues that are occurring as a result of the excessive lobster intake. By implementing the number of dives allowed per day, the amount of lobster caught each day, and the better