The 0.4% Failure
You are VP of sales at a medical-device company with $180 million in revenue. Field data show that a glucose sensor in the company's flagship infusion pump fails to alarm in 0.4% of uses over five years; three malfunctions have been reported, no deaths, and the device meets the FDA-approved specification, which does not mention this failure mode. A 900-hospital purchasing alliance is five days from signing a $22 million annual contract. If you disclose, the alliance will likely postpone six months; the company will miss its earnings guidance and 40 people at the plant will be laid off. General counsel says there is no legal duty to volunteer the information because the label is accurate and the failure rate is within the approved tolerance. The CEO tells you, 'The law is the floor. Don't volunteer trouble.' Last year a competitor disclosed a similar defect, took a 30% stock hit, and now markets itself as the transparent option.
1. Does the absence of a legal duty settle the moral question? Use the distinction between law and morality.
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No. Law sets a floor of enforceable duties; morality asks what you owe the people you deal with, and the two diverge exactly where the law is silent. Three arguments. Consent: the alliance is agreeing to buy a device whose known failure mode it has not been told about, and a bargain formed on a material omission is defective in ethics even where device regulation does not require disclosure. Foreseeability: 0.4% of uses is not a remote risk - across a large installed base it is a predictable number of missed alarms in settings where a sedated or sleeping patient cannot compensate for the failure. Role obligation: the professional in possession of material safety information is held above the legal minimum, which is why post-market surveillance and engineering codes exist. 'The law is the floor' actually supports disclosure, since floors are minimums. Legal permissibility tells you what you can defend in court, not what you can defend to a patient's family. The real question is not whether you must disclose but what the buyer needs in order to decide.
2. Compare a shareholder-primacy analysis with a stakeholder analysis of disclosure here.
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Shareholder primacy holds that managers are agents of owners, that the owners' interest is long-run share value, and that a $22 million delay plus 40 layoffs argues against volunteering anything. The premise fails on its own terms. The defect will surface: three malfunctions are already reported and post-market surveillance can find the pattern. A forced disclosure later costs more than a voluntary one now, and the competitor's 30% hit is the price of a badly handled revelation, not of disclosure as such - the competitor now sells on transparency. Stakeholder analysis identifies the parties: patients (bodily risk), hospital purchasing officers (who carry their own duty of care and would be misled), employees (40 jobs now versus the wider workforce if the franchise is damaged), and shareholders. It does not require equal weighting; it requires counting the patients' interest in not being deceived as a real cost rather than an externality. Properly applied, both frameworks converge on disclosing now, one through reputation and the other through who is exposed.
3. What disclosure standard would a virtue-ethics approach support, and how would you apply it in the five days available?
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Virtue ethics asks what an honest, prudent, and just salesperson would do, not what a rule permits. The honest person does not let a buyer rest on a false impression she has helped create; describing a product while suppressing a known failure mode is misrepresentation even when it falls short of fraud. Prudence asks what you will wish you had done when the field data appear in a deposition. Justice asks whether the hospitals are partners or marks. In five days: prepare a one-page field-safety summary giving the 0.4% rate, the three reports, and the conditions under which alarms failed; offer it to the alliance before signature and walk them through it. Tell the CEO and general counsel in writing that you intend to do this and why, so the decision is documented rather than remembered differently later. If instructed not to disclose, escalate to the board's quality or audit committee. The honest person does not need certainty that disclosure is legally compelled; she needs to be unwilling to sell on a misunderstanding.