Case Background Thousands of street children in Latin America, primarily in Guatemala and Honduras, were found dead and

disabled due to addiction to inhaling glue. The glue that mostly available in these areas is toluene-based glue made and distributed by H.B. Fuller S.A. This company is a subsidiary of Kativo Chemical Industries which wholly owned by H.B. Fuller Company of St. Paul Minnesota. Based on this fact, the H.B. Fuller Company of St. Paul Minnesota was alleged to be responsible for the cause of death of homeless children in Latin America. The toluene-based glue is a very strong adhesive and highly water resistant. It is produced merely for the industrial purpose, such as for the shoe manufacturers, leather workers, carpenters, furniture makers, and small shoe repair shops. The toluene is a sweet-smelling chemical which can destroy human nerves. The occasional inhalation can cause nosebleeds and rashes, whereas habitual inhalation can result several disorders such as neurological dysfunction, loss of sight and hearing, leukemia and many other disabilities. If the inhalation is done perpetually, it can cause a death. H.B. Fuller Company had generated 1.243 billion in 1995, increases 13.3% from its last revenues in 1994. Its largest market share is in Central America. The sales from this area contributed 27% of its profit, approximately $450,000 a year from glue sales in Central America. After the allegation, the company had made several actions:

During March 1989, the local H.B. Fuller S.A. persuaded the Honduran government to cancel the new law about the prohibition to import and produce any adhesive product without any mustard-seed oil substancesa common food additive that prevents people from inhaling the glueand to replace it with another law focused on sales distribution of the glue. In November 1989, the government finally responded the negotiation by changing the law with another one that governed only the distribution of glue and providing education for the street children about the dangerous of inhaling glue. In fact, the Honduran government had already banned the sale of toluene-based products to the market, but it was weakly enforced.

The Fuller Company stopped the selling of toluene-based glue in small volumes, started giving monetary support to the social workers to work with the homeless children, and also began informing the distributors about the dangerous of addiction to the glue.

July 16, 1992, the Fuller Companys Board of Directors agreed not to sell the solventbased adhesives in Central American area. Eventhough it had stopped selling the adhesives to the retailers, the company still sold the product to the industrial customers in large tubs and barrels. The aim was to eliminate the products existence in the street but it turned out wrong. The glue was still available because it was sold illegally to the homeless children by the industrial customers.

In 1994, the company decided to use cyclohexane instead of toluene to produce the glue. The cyclohexane is also a high toxic chemical as well as toluene but needs longer time to cause the same effect. The company also raised the price by 30%, so the street children might no longer be able to afford it. But a toxicologist argued that the change in substances would not hinder the children to stop inhaling glue as long as it could still make them high.

After so many taken actions that did not solve the problem, in 1995, the Fuller Company claimed that the responsibility is on H.B. Fuller S.A. not on the parent company, the H.B. Fuller Company of St. Paul Minnesota. Moreover, since the first time, H.B. Fuller Company believed that its product was not the root cause of those deaths of homeless children but it was the economic situation which forced them to misuse the product. Major Issue Honduras and Guatemala at that time are the third countries under poverty which is in Guatemala the number of unemployment rate reach 15 percent and the number of unemployment in Honduras around 20 percent. This condition force these countries have had large deficit of country budget for several years. In addition, impoverished, insecure, and stressful conditions, family life often became unstable and lead to the husbands abandoned their wives, and both abandoned the children, which they were too poor to care for. The countless children that roamed city streets begging for handouts, for the most part, had been abandoned by their families, although a good number were runaways from what they felt was an intolerable home life. Furthermore, the hardness of the street life force they to finding kind of simples way to survive on the street.

Questions and Answers 1. In your judgment, is H. B. Fuller responsible for the addiction of street children to its Resistol products? Do you agree or disagree with the statement that the social conditions in Honduras and Guatemala are ultimately responsible for misuse of H. B. Fullers products and that neither the product nor the company is to blame? Do your agree or disagree that a parent company is not responsible for the activities of its subsidiaries? Explain your answers fully. Answer:
a.

Directly H. B. Fuller does not need to responsible for the addiction of street

children who addicted with Resistol, because a corporation is morally responsible only for those acts and their foreseen injurious effects of their business activities, such as the corporation knowingly and freely performed or brought about which it was morally wrong for the corporation to fail to prevent. In this case H.B. Fuller is not morally responsible since they release its product into market, the product and H.B. fuller already informing and explained not to misused its product. When understanding the circumstances of why H.B. Fullers product was abused, in the other side H.B. Fuller actually helped out the economic problem by providing employment for the region. Understanding that 1the goal of a corporation is to maximize the profits of its shareholders. H.B. Fuller really did not have a social obligation. If, however, in H.B. Fullers mission statement it was stated that the overall objectives of the corporation include a societal contribution, than the company cannot neglect helping its community.
b.

We agree, the social condition is certainly a main cause. Not only does the

social condition factor into the misuse of Fullers products but also does the economic factor relate to the issue. The economic condition is certainly not the only single bearer of cause for the misuse of Fullers products. May be there are some parties are involved in this unfortunate condition that have not been taken account such as retailers, middlemen, and corrupt distributors who most likely made a profit from selling the glue to the children on the streets.

c.

We disagree if a parent company is not responsible for the activities of its

subsidiaries. A parent company is the leader to its subsidiaries what a superior is to its subordinate. Often in corporate life communication is channeled downward, and employees or subsidiaries often act on the basis of their superiors alone. It is important that the subsidiary be established and recognized by the parent, as well as third parties, as an independent corporation managed by a board of directors1. In this case, H.B. Fuller company of St. Paul, Minnesota is the parent company to Kativo Chemical Industries. H.B. Fuller S.A. is at the bottom of the chain, operating as the secondary subsidiary to H.B. Fuller of Minnesota. Actually when a parent company leads a subsidiary in carrying out an act that both of them know is wrong, the subsidiary is morally responsible for that act if it carries it out, too. Is the parent company also morally responsible? Obviously, the parent company is also morally responsible because in leading the subsidiary, the parent company is knowingly and freely bringing about the wrongful act through the instrumentality of the subsidiary or its leading by wrongful example. The fact that a parent company draws on a subsidiary to bring 1http://www.t-tlaw.com/cor-01.htm about the wrongful act does not change the fact that the parent company brought it about.
2. In your judgment, did H.B Fuller conduct itself in morally appropriate manner? Explain

your answer. Answer: H.B. Fuller Company had not been fully in morally appropriate manner. Its actions that were considered not morally right are:
1. The company insisted not to change or innovate its product design,

According to the due care theory, a company is perceived to know better about its products than any other parties. There are three areas that should be covered under the exercise of due care theory: product design, processes and information. Fuller Company had executed its business process (production process and other activities) in a proper procedure. It also provided information about the products and the dangerous of misusing the glue to the public. Nevertheless, Fuller Company did not fully

act in a morally appropriate manner because they insisted not to change the design of its product. The company was not willing to add any additional materials which might prevent people from sniffing or to use other substances which were less harmful where it should have produced the glue with adequate materials to obtain safe product. 2. Its second tier subsidiary tried to persuade the government to cancel a particular law for its own interest, The Honduran law which stated importing and producing any adhesive product without any mustard-seed oil in it was prohibited. If this law was implemented, the H.B. Fuller S.A. operation would be closed down, remembering that Latin America was the market place of its product. Because of the bankruptcy threat, it tried to cancel the execution of the law for its own interest. In fact, this law was made to protect the people live from any abusive behavior of adhesive product.

3. H.B. Fuller Company did not want to take the responsibility and put it merely on its subsidiary H.B. Fuller S.A. As explained before, any action taken by a subsidiary of a company is also the responsibility of the parent company. H.B. Fuller Company as the parent company of H.B. Fuller S.A. has a full control of its own subsidiaries. The company should monitor and prevent any of its subsidiaries actions for not violating any laws and moral standards which can cause material and or immaterial loss to both companies. Therefore, both companies are held to be morally responsibility for the wrong doing. 3. Evaluate the ethics of the activities of the various individuals involved in this case. Although Fuller made every attempt it thought was necessary to prevent its products from causing harm, it could have provided more intervention. First, H.B. Fuller should have put more research into mustard seed oil and its effect on adhesives like the United States chemical companies had done. Research into this solution would involve consulting with the FDA to solidify positive results. This could have very well been an easy solution to Fuller and the Latin American children. Second, Fuller should have

Answer:

decided to discontinue its product earlier than it did. If it did make this decision, then all sales should be eliminated, not just to retailers but to industrial vendors as well. Lastly, the company should have communicated more effectively with its parent company in the US to formulate a sound plan to addressing its ethical dilemma.

Recommendation For HB Fuller Company 1. Make Innovative Product It is stated that in 1994, the company decided to change the chemical formula of its glue make it less attractive to children. The toluene in the glue was replaced with the chemical cyclohexene which smells less sweet and is less volatile than toluene, although like toluene it too produces an intoxicating high and has similar toxic effects on the body. It will be much better for Fuller if they can make glue product that do not contain any dangerous substances. Cyclohexene itself still able to make high and the tremendous health problem effects still remain inside it. In 2001 the banning of toluene and cyclohexane outright in Latin America is now the goal. Chile, Venezuela and Argentina already have laws prohibiting their use1. If Fuller do not want to use mustard seed oil due to the stickness quality, Fuller can try to produce a safe product, this kind of matter will not occur in the future, and it will be much easier to Fuller to re-enter the Latin America market. By producing a safe product, Fullers employees will be more loyal to the company. Because when they produce the product, they will have direct contact with the product that will endanger their health in the future. Thus, the research here is extremely needed in order to avoid the misuse of the product and to maintain the customer and employees loyalty. The research will be costly at first, but after the winning product is produced, all the cost and the wait will be worth. 2. Controlling the Subsidiary Company In 1995, the Fuller company issued a statement that the holding company did not have any relation and responsibility with the subsidiary company did. A holding
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company must also responsible in what subsidiary company does, because it is related with the company reputation. By controlling the subsidiary company, this kind of matter could be avoided before, so the cost in recalling the product could be eliminated.

For the Government 1. Fix the Economic Condition According to ChildHope, there are about 40 million street children in Latin America. It estimates that nearly all of these children use or have used common street drugs, glue and thinner being the most widespread because they are among the cheapest 2. These large numbers of street children is rooted from the poor economic condition in Latin America, especially in Honduras and Guatemala. The hard economic conditions in these two countries make the parents easily abandon the children. They are too busy or too poor- to take care of their children. The parents should fulfill their basic needs like home, food, clothes, education and love. Here is the role of the government. The government should fix the economic condition, like opening more job opportunities. The street children are valuable assets. If the government can educate and train them well, the prosperity of the street children will increase and they can have a better life. By having a better life, they will not depend to drugs anymore as a media to escape from reality. 2. Monitor The Distribution of The Product In 1992, Fuller recalled its product from the market. But in Honduras and Guatemala, the company still sells the product directly to industrial users, eliminating the distributor in order to have better Resistol control off the black market. The government has try to tighten its distribution system, and is no longer selling the glue through retail outlets but many activists say there are many ways to make the product reach the hands of children, like pay the factory worker to pass the glue or even try to steal the jars glue. The government should pay more attention in this matter. By better monitoring the distribution, the government can reduce or minimize any leaks to avoid this matter.
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3. Collaborate with NGO and Fuller Company The government can collaborate with NGO and Fuller to discuss together so all party can have win-win solution to solve this problem. So any decision or law made will not harm one party. Like the company gives the street children a course to improve their positive ability so it can be used in the future to earn money. It could be as part of company CSR and the government could subsidy the company to bear then cost together. Bibliography http://www.unspecial.org/UNS600/UNS_600_T24.html
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