Please read the case study illustrated below, then provide feedback on this question.
Question: What are the ethical issues and principles involved in this case? Who has acted the most and the least responsibly? Explain
Case Study: Down Corning and the Silicone Breast Implant Controversy
The corporate jet lifted off from Washington's National Airport, en route to Dow Coming Corporation's headquarters in Midland, Michigan. February 19, 1992, had been a grueling day for Keith R. McKennon. Named chairman and chief executive officer of Dow Coming less than two weeks earlier, McKennon had just testified before the Food and Drug Administration's Advisory Committee on the safety of the company's silicone gel breast implants. Although not the only manufacturer of breast implants, Dow Coming had invented the devices in the early 1960s and had been responsible for most of their medical testing. Now, the company was faced with the task of defending the prod¬uct against numerous lawsuits and a rising tide of criticism from the FDA, Congress, the media, and many women's advocacy organizations.
The company's potential liability was large: as many as two million American women had received implants over the past three decades, perhaps 35 percent of them made by Dow Coming. In December 1991, a San Francisco jury had awarded a woman who claimed injuries from her Dow Coming implants an unprecedented $7.3 million in damages. Although the company believed its $250 million in product liability insurance was adequate to meet any possible claims, some felt that the company's liability expo¬sure could be much, much larger.
The hearings had been contentious. Critics had repeated their allegations, heard often in the press in recent weeks, that the implants could leak silicone into the body, causing pain, scarring, and, most seriously, debilitating autoimmune diseases such as rheumatoid arthritis and scleroderma. The silicone prostheses could also interfere with detection of breast cancer by mammography, they charged. In response, McKennon had testified that implants served an important public health need and did not pose an unreasonable risk to users. On the job less than a month, however, McKennon had had little time to sort through the thousands of pages of relevant documents or to talk with the many managers who had been involved with the product's development over the past 30 years.
The breast implant controversy would surely be a litmus test of McKennon's cri¬sis management skills. Recruited from Dow Chemical Corporation, where he had been executive vice president and head of domestic operations, McKennon came to his new position with a reputation as a seasoned troubleshooter. At Dow Chemical (which owned 50 percent of Dow Coming), McKennon had earlier managed his firm's response to charges that its product Agent Orange, a defoliant widely used during the Vietnam War, had caused lingering health problems for veterans. Later, he had managed Dow Chem¬ical's problems with Bendectin, an antinausea drug alleged to cause birth defects. At the time of his appointment as chairman and CEO, McKennon had served on Dow Com¬ing's board of directors for nearly six years.
The unfolding breast implant crisis showed every sign of being just as difficult, and potentially damaging, as any McKennon had confronted in his long career. Would Dow Coming become known as another Johnson & Johnson, renowned for its skillful handling of the Tylenol poisonings in the 1980s? Or would it become another Manville or A. H. Robins, companies that had declared bankruptcy in the wake of major product liability crises? McKennon was well aware that the future of the company, as well as his own reputation, might well hinge on decisions he and his top managers would make within the next weeks and days.
Dow Corning, Inc.
Dow Coming was founded in 1943 as an equal joint venture of Dow Chem¬ical Company and Coming Glass Works (later known as Coming, Inc.) to produce silicones for commercial applications. The term silicone was coined to describe synthetic compounds derived from silicon, an abundant element commonly found in sand. In the 1930s, Coming researchers working on possible applications of silicone in glass making developed a number of resins, fluids, and rubbers that could withstand extremes of hot and cold. In 1940, Coming approached Dow Chemical with a proposal for a joint venture, and by 1942 a small plant in Midland, Michigan (Dow's hometown), had begun production of silicones for military applications. At the close of World War II, Dow Coming moved successfully to develop multiple commercial applications for silicone. Within a decade, the company had introduced more than 600 products and dou¬bled in size three times, making it one of the fastest-growing firms in the booming chem¬ical industry. Its varied product line included specialty lubricants, sealants, and resins as well as a variety of consumer items-ranging from construction caulk, to adhesive labels, to Silly Putty.
Although most uses of silicone were industrial, by the mid-1950s Dow Coming scientists had become interested in possible medical applications and developed several implantable devices. In the early 1960s, Dow Coming engineers developed the first pro¬totype of a breast implant by encapsulating a firm-density silicone gel within a silicone rubber bag. First marketed in 1963, this device-known as the Cronin implant-was used initially almost exclusively in reconstructive surgery performed on breast cancer patients following mastectomies (surgical removal of the breast).
When Dow Coming first developed and marketed breast implants (as well as its other medical products), the company was operating with virtually no government oversight. Unlike pharmaceutical drugs, regulated since 1906 under the Pure Food and Drug Act and its several amendments, medical devices-even those designed for implantation in the body-were for all practical purposes unregulated. Under the Food, Drug, and Cosmetics Act of 1938, the FDA had the authority to inspect sites where medical devices were made and could seize adulterated or misbranded devices. The agency could not require premar¬ket approval for the safety or effectiveness, however, and could remove a product from the market only if it could demonstrate that the manufacturer had broken the law.
Although not required to prove its implants safe by law, Dow Corning-in accord with standard "good manufacturing" practices at the time-attempted to determine the safety of its own medical products before releasing them for sale. In 1964, Dow Corning hired an independent laboratory to undertake several studies of the safety of medical¬grade silicones, including those used in breast implants. No evidence was found that silicones caused cancer, but two studies found that silicone fluid injected in experimen¬tal animals spread widely-becoming lodged in the lymph nodes, liver, spleen, pancreas, and other organs-and created persistent chronic inflammation. The company appeared unconcerned, noting that it did not advocate the direct injection of silicone fluid.
In the early 1970s, Dow Corning's breast implant business for the first time expe¬rienced a serious competitive threat. In 1972, five young men-all scientists or sales¬men at Dow Corning-left the company to work for Heyer-Schulte, a small medical devices company in California, where they used their experience with silicones to develop a competing breast implant. Two years later, the group left Heyer-Schulte to form their own company, McGhan Medical Corporation. Their idea was to modify the basic technology developed over the past decade by Dow Corning to make a softer, more responsive implant that more closely resembled the natural breast. By 1974, both Heyer¬Schulte and McGhan Medical had competing products on the market.
The Heyer-Schulte and McGhan implants quickly gained favor with plastic surgeons, and Dow Corning's market share began to erode. By 1975, Dow Corning estimated its market share had declined to around 35 percent, as plastic surgeons switched allegiance to products offered by the small company start-ups. Dow Corning managers became alarmed.
The Mammary Task Force:
In January 1975, responding to the challenge from its California competitors, Dow Corning dedicated a special cross-functional team, known as the mammary task force, to develop, test, and bring to market a new generation of breast implants. The group's main goal was to reformulate the silicone gel to create a softer, more pliable implant competitive with the new products recently mar-keted by McGhan and Heyer-Schulte. The group of about 20, all men, hoped to have the new implants ready for shipment by June 1975. The company believed it was justi¬fied in bringing the new implant to market quickly, without extensive medical testing, because the new product would be based on materials substantially similar to those used in the older Cronin implants. The safety of the existing line, management maintained, had already been satisfactorily documented on the basis of earlier studies and the his¬tory of their use.
One of the questions that quickly arose in the task force's deliberations, as reported in the minutes of its January 21, 1975, meeting, was: "Will the new gel. . . cause a bleed through which will make these products unacceptable?" (emphasis in original). Dow Corning scientists clearly recognized that a more watery gel (dubbed fiG-gel), while softer to the touch, might also be more likely to permeate its envelope and bleed into surrounding tissue. Two product engineers were assigned to investigate this issue. Three weeks later they reported that their experiments "to date indicate that the bleed with new gel is no greater than what we measure from old gel controls." They also added, however, that they viewed their earlier results as inconclusive, and they remained concerned about "a possible bleed situation."
Biomedical tests were contracted out to an independent laboratory, which proceeded with tests in which the new gel was injected into experimental rabbits. Earlier reports back from the lab on February 26 showed "mild to occasionally moderate acute inflam¬matory reaction" in the test animals around the injected gel, but the pathologist concluded it was probably due to the trauma of insertion, not the product itself. The task force also ordered biomedical testing of migration of gel into the vital organs of monkeys. The lab¬oratory results showed "some migration of the [flo-gel] formulation." However, the task force agreed that the bleed was still not any more or less than standard gel.
Development proceeded so rapidly that, by March 31, 10,000 new flo-gel mam¬maries were ready for packaging. The task force minutes reported that the products were "beautiful, the best we have ever made." Now six weeks ahead of schedule, the com¬pany was able to ship some samples of the new product to the West Coast in time for the California Plastic Surgeons meeting on April 21. However, earlier demonstrations did not go flawlessly. The task force got back the following report: "In Vancouver, and else¬where on the West Coast introduction, it was noted that after the mammaries had been handled for awhile, the surface became oily. Also, some were bleeding on the velvet in the showcase." The task force ordered samples from the West Coast for examination, but no further discussion of this issue appeared in the subsequent minutes.
As the flo-gel implants came on line, the focus of the task force's discussion shifted from production issues to marketing strategy. The task force debated various aggressive marketing approaches, such as rebates, distribution by consignment, price breaks for big users, and free samples for surgeons known to perform breast enlargement operations. Noting that June and July were the peak months of the "mammary season," managers called for a big push to regain some of Dow Coming's eroding market share. The group felt that their market share, which they estimated had eroded to around 35 percent, could be lifted back to the 50 to 60 percent range if they moved aggressively.
By September, Dow Coming was producing 6,000 to 7,000 units per month and aimed to phase out the older models by early 1976. However, many bugs in the produc¬tion process remained to be ironed out. The reject rate at inspection was high, as high as 50 percent on some lots. Among the problems: floating dirt, weak bags, and thin spots in the envelopes. Doctors had returned some unused mammaries, citing breakage and con¬tamination. Overall, however, plastic surgeons liked the product. One task force member later recalled that when plastic surgeons saw and felt the new material, "their eyes got big as saucers." Besides feeling more natural to the touch, the new softer devices were easier to insert and were more suitable for small-incision, low-trauma cosmetic procedures.
A Boom in Busts:
Although breast implants first became available in the 1960s, it was only in the late 1970s and 1980s that the rate of implant surgery took off. The increase was due entirely to a fast rise in the number of so-called cosmetic procedures; by 1990, fully 80 percent of all implant surgeries performed in the United States were to increase the size of normal, healthy breasts rather than for reconstruction following mastectomy. One cause of the rise in cosmetic augmentations, of course, was the availability of the softer, more pliable implants, which could be inserted through smaller incisions with less trauma to the patient in less expensive outpatient procedures. In 1990, 82 percent of all breast augmentation procedures were performed on an outpatient basis. Other, broader trends within the medical profession and the wider culture also played important roles, however.
One factor behind the boom in breast augmentation surgery was the growth of the plastic surgery profession. Although procedures to graft tissue from a healthy part of the body to another that had been damaged or multilated were developed early in the cen¬tury, plastic surgery as a distinct subdiscipline within surgery did not emerge until the 1940s. During World War II, military surgeons struggling to repair the wounds of injured soldiers returning from the front pioneered many valuable reconstructive techniques. Many of these surgeons reentered civilian life to start plastic surgery programs in their home communities. Within a couple of decades, plastic surgery had become the fastest¬growing specialty within American medicine. Between 1960 and 1983, the number of board-certified plastic surgeons quintupled, during a period when most other medical specialities were growing much less quickly (and the U.S. population as a whole grew by just 31 percent). The draw for the newly minted MDs was regular hours, affluent customers, and high incomes, averaging $180,000 per year after all expenses in 1987.
As their numbers soared, plastic surgeons faced an obvious problem-developing a market for their services. Demand for reconstructive surgery was not fast growing, and cosmetic procedures were often elective and typically not fully covered by medical insurance. In 1983, following approval by the Federal Trade Commission, the American Society for Plastic and Reconstructive Surgery (ASPRS), a professional association rep¬resenting 97 percent of all board-certified plastic surgeons, launched a major advertising (or, as the society called it, "practice enhancement") campaign. Other ads were placed by individual surgeons. In one appearing in Los Angeles magazine, a seductive, well-endowed model was shown leaning against a sports car. The tag, line: "Automobile by Ferrari, Body by [a prominent plastic surgeon]."
Plastic surgeons also campaigned to redefine female ftat-chestedness (dubbed micromastia by the medical community) as a medical disease requiring treatment. In July 1982, the ASPRS filed a formal comment with the FDA that argued:
There is a substantial and enlarging body of medical opinion to the effect that these deformities [small breasts] are really a disease which in most patients results in feelings of inadequacy, lack of self-confidence, distortion of body image and a total lack of well-being due to a lack of self-perceived femininity. The enlargement of the under-developed female breast is, therefore, often very necessary to insure an improved quality of life for the patient.
The ASPRS later officially repudiated this view.
By 1990, breast augmentation had become the second most common cosmetic pro¬cedure performed by plastic surgeons, exceeded only by liposuction (fat removal). Since it was a more expensive procedure, however, breast augmentation was the top money maker for plastic surgeons in 1990. That year, ASPRS members collected almost $215 million in fees from women for breast implant surgery.
Another factor contributing to the rise in cosmetic augmentation may have been changing cultural standards of feminine beauty in the 1980s, a decade characterized by
social conservatism and, according to some commentators, by a backlash against femi¬nism and female liberation. In the 1970s, women appearing in the glossy pages of fashion magazines were often tall and lanky, with long, straight hair tied at the nape of the neck, menswear dress-for-success suits, and distinctly boyish figures. The 1980s ideal woman was very different: the typical fashion model by this time was more likely to sport 1940s retro-look fashions, thick, full curls, sweetheart lips-and lots of bosom. In a special 1O0th anniversary edition, published April 1992, Vogue magazine summed up current standards of female beauty in this sentence:
And in women's bodies, the fashion now is a combination of hard, muscular stomach and shapely breasts. Increasingly, women are willing to regard their bodies as photographic images, unpublishable until retouched and perfected at the hands of surgeons.
Ironically, the same issue also ran an ad, placed by trial attorneys, in which "silicone breast implant sufferers" were invited to come forward with legal claims.
A Stream of Sick and Injured:
As the rate of implant surgeries rose in the 1980s, so did the number of women who were sick, injured, and in pain from their breast surgery. Their stories began to be told at medical conferences, in legal briefs, and by women's and consumer's advocacy organizations. As they were, Dow Coming and other implant makers were forced to respond to a growing crisis of confi¬dence in their products.
The most common adverse side effect of implant surgery was a phenomenon known as capsular contracture, a painful hardening of the breast that occurs when the body reacts to the implant by forming a wall of fibrous scar tissue around it. The FDA estimated that severe contracture occurred in about 25 percent of all patients; some hardening may have occurred in up to 70 percent. Implants could also rupture, spilling silicone gel into the body and often necessitating repeat surgery to replace the damaged implants. Dow Coming's data, based on voluntary reporting by surgeons, showed a rupture rate of only I percent. These figures were challenged by researchers who pointed out that ruptures often did not show up on mammograms; some individual doctors reported rupture rate as high as 32 percent. Once the device had broken, silicone could and did travel via the lym¬phatic system throughout the body, lodging in a woman's spleen, liver, and other internal organs. Also worrisome was the tendency of silicone implants to obscure cancerous tumors that otherwise would be revealed by mammography.
More controversial and less well documented were allegations that silicone implants could lead to so-called autoimmune disorders-diseases in which the body's immune system attacks its own connective tissues. According to the FDA, by 1991 around 600 cases of autoimmune disorders, such as rheumatoid arthritis, scleroderma, and lupus erythematosus, had been reported in women with implants. Some scientists speculated that some women were, in effect, allergic to silicone and that their bodies had attacked their own tissues in an attempt to rid itself of the substance. Such reactions were most likely in the presence of ruptures, but even small amounts of gel bleeding through the envelope, or silicone in the envelope itself, could provoke an autoimmune response.
Other physicians believed, however, that the appearance of autoimmune disorders in women with implants was wholly coincidental. In any substantial population-and 2 million women with implants was clearly substantial-a certain number would develop autoimmune disease purely by chance. In an interview published in the Journal of the American Medical Association, one prominent plastic surgeon called the association between autoimmune disorders and breast implants a "crock of baloney. . . . People get immunological diseases and they just happen to have breast implants."
Unfortunately, no long-term controlled studies of the incidence of autoimmune disorders in populations of women with and without implants were initiated or even contemplated until 1991. In fact, no comprehensive registries of women with implants existed. The question about the relationship between implants and autommune disease was, on the basis of existing data, wholly unanswerable. Representative Ted Weiss (Democrat, New York), who reviewed data submitted to the FDA in 1991, later angrily concluded; "For 30 years, more than one million women have been subjects in a mas¬sive, uncontrolled study, without their knowledge or consent."
Victims Seek Redress:
Some women who had suffered from breast implants sued. In 1984, a . Nevada woman was awarded $1.5 million by jurors in a San Francisco court, who concluded that Dow Corning had committed fraud in marketing its implant as safe; the case was later settled for an undisclosed amount while on appeal, and the court records were sealed. In a post-trial ruling, a federal judge who had reviewed the case records called Dow Corning's actions "highly reprehensible." In the wake of this case, Dow Corning changed its package insert to include a warning that mentioned the possibility of capsular contracture, silicone migration following rupture, and immune system sensitivity.
As other cases slowly made their way through the courts, victims began to speak out publicly and to organize. Sybil Goldrich and Kathleen Anneken founded the Com¬mand Trust Network, an advocacy organization that became instrumental in providing information, support, and legal and medical referrals to implant victims. Other women's and public health advocacy groups also played a role in publicizing the risks of breast implants. One of the most active was the Health Research Group (HRG), a Washington, DC-based spin-off of Ralph Nader's Public Citizen. The HRG in 1988 began a sys¬tematic effort to pressure the FDA to ban silicone breast implants. The group petitioned the FDA, testified before Congress and other government agencies, issued regular press releases, and distributed information to consumers. The HRG also initiated an informa¬tion clearinghouse for plaintiffs' attorneys. Another active advocacy organization was the National Women's Health Network, a public-interest group that widely distributed infor¬mation on silicone-related issues.
Devising Regulation for Devices:
The agency in charge of regulating implants-and thus the object of these and other advocacy organizations' pressure-was the Food and Drug Administration. In 1976, the year after Dow Corning's mammary task force developed its new generation of flo-gel implants, Congress passed the Medical Amendments Act to the Food and Drug Act. Enacted in the wake of the
Dalkon Shield controversy, in which thousands of women claimed they had been injured by a poorly designed intrauterine device, the amendments for the first time required that manufacturers of new, implantable medical devices be required to prove their products safe and effective before release to the public. Devices already on the market were ranked by risk, with the riskiest ones, designated Class III, being required to meet the same stan¬dards of safety and effectiveness as new devices.
In January 1989, after an extensive internal debate, the FDA identified silicone breast implants as Class III devices and gave their manufacturers 30 months, until January 1991, to submit safety and effectiveness data to the agency. Four breast implant manufacturers submitted the required documents to the FDA: Dow Coming, INAMED (formerly McGhan Medical), Mentor (formerly Heyer-Schulte), and Bioplasty. Surgitek, a unit of Bristol-Myers Squibb, withdrew from the implant business, saying it was unable to meet the FDA's deadline. On August 12, the head of the FDA Breast Prosthesis task force submitted a review of Dow Coming's studies, stating that they were "so weak that they cannot provide a reasonable assurance of the safety and effectiveness of these devices. "
Finally, on November 13, the FDA convened an advisory panel of professionals to consider the most recent evidence and to take further testimony. The hearings were highly contentious. The panel heard, once again, arguments concerning the dangers of implants. But the hearings also generated intense support for implants from plastic surgeons, satisfied implant recipients, and breast cancer support and advocacy organizations. Among the most vocal defenders of the implants were women who had experienced successful reconstruction following mastectomies, including representatives of such peer support organizations as Y-Me and My Image after Breast Cancer. Several spoke of the positive psychological benefits of reconstruction and warned that if the FDA took implants off the market, some women, knowing that reconstrutive surgery was unavailable, would delay regular checkups for breast cancer, endangering their lives, Other witnesses argued that women should be free to choose implants, so long as they were fully informed of the benefits and risks of the devices.
The advisory panel debate was, by all accounts, heated. In the final analysis, the panel split hairs: It voted that although breast implants "did not pose a major threat to the health of users," the data submitted by manufacturers was "insufficient to prove safety." However, citing "a public health need," the panel recommended that the devices be left on the market.
The regulatory decision, at this point, passed to the FDA commissioner, Dr. David A. Kessler. Appointed just a few months earlier, Kessler had brought a new commitment to regulatory activism to an agency marked by what some viewed as a pattern of weak government oversight during the Reagan administration. Now, the fledgling commis¬sioner had two months, until mid-January, to rule on the panel's recommendation on breast implants.
Unauthorized Leaks Unfolding events, however, forced Kessler's hand sooner. In December, a San Francisco jury returned a verdict in Hopki/ls v. Dow Comi/lg, awarding Mariann Hopkins $7.3 million, by far the largest victory ever for a plaintiff in a breast implant suit. Hopkins' attorney claimed that his client's implants (made by Dow Coming in 1976) had ruptured and spilled silicone gel-causing severe joint aches, muscle pain, fatigue, and weight loss-and told the jury that "this case is about corporate greed and outright fraud." Dow Corning immediately moved to have the legal records in the case-which included hundreds of pages of internal company memos Hopkins' attorney had subpoenaed-sealed.
Somehow, however, the documents from the Hopkins trial ended up in Commis¬sioner Kessler's hands. Their contents evidently alarmed him. On January 6, 1992, Kessler abruptly reversed the FDA's November decision and called for a 45-day moratorium on all sales of silicone gel breast implants, pending further study of their safety, and he recalled the advisory panel to consider "new evidence." Both the plastic surgeons and Dow Corning were furious. The president of the American Society of Plastic and Reconstructive Surgeons took the unusual step of calling a press conference to brand Kessler's action as "unconscionable-an outrage" and called on Kessler to reconstitute the advisory panel, which he called unqualified to judge the safety of the devices. For its part, Dow Corning demanded publicly to know what new evidence Kessler had obtained and restated the company's intention to block any release of "nonscientific" internal memoranda. The chief of Dow Corning's health care business called a press con¬ference to repeat the company's contention that "the cumulative body of credible scien¬tific evidence shows that the implants are safe and effective."
Dow Corning's efforts to block release of the Hopkins documents, however, failed. On January 13, New York Times reporter Philip 1. Hilts, saying only that he had obtained the material from several sources, broke the Hopkins case memos in a page-one article, under the headline "Make Is Depicted as Fighting Tests on Implant Safety." In a sum¬mary of the contents of several hundred internal company memos, Hilts charged that Dow Corning's safety studies were inadequate and that serious questions raised by its own scientific research and by doctors' complaints had not been answered.
More damaging revelations were yet to come. Over the next several weeks, news¬paper readers learned of the following incidents, drawn from the company's internal documents:
• In a 1980 memo, a Dow Corning sales representative had reported to his marketing manager that he had received complaints from a California plastic surgeon who was "downright indignant" because the implant envelopes were "greasy" and had experienced "excessive gel bleed." "The thing that is really galling is that I feel like I have been beaten by my own company instead of the competition. To put a questionable lot of mammaries on the market is inexcusable," the sales representative wrote his manager. "It has to rank right up there with the Pinto gas tank."
• A marketing manager had reported in a memo that he had "assured [a group of doctors], with crossed fingers, that Dow Corning had an active study [of safety issues] under way." (The marketing manager later angrily disputed the interpretation given his remarks by the media, saying in a letter to the Associ¬ated Press that he had meant the term crossed fingers in a "hopeful" rather than a "lying" sense.)
• A Las Vegas plastic surgeon had had an extensive correspondence with the company reporting his dissatisfactions with the product. In one letter, he charged that he felt "like a broken record" and told of an incident in which an implant had ruptured and spilled its contents-which he described as having the "consistency of 50 weight motor oil" -onto the operating room floor.
Whether wholly justified or not, the memos created a strong impression that Dow Corning had been aware of safety concerns about its implants for many years and had failed to act on this knowledge. The press moved in aggressively, attacking Dow Coming for its "moral evasions"; a widely reprinted cartoon depicted a Dow Corning exec¬utive apparently deflating as silicone gel oozed from his body.
A Model Ethical Citizen:
That Dow Coming was being labeled publicly as "a company adrift without a moral compass," as one New York Times columnist put it several days after the internal memos broke in the press, struck many in and around the company as deeply unjust. Ironically, Dow Coming Corporation was widely regarded in the business community as a model for its efforts to institutionalize ethical behavior.
At the center of Dow Corning's efforts was a formal code of conduct and an unusual procedure for monitoring compliance. In 1976, the first full year of sales for its new generation of breast implants, the company's board of directors had appointed a three-person Audit and Social Responsibility Committee and charged it with developing a corporate code of ethical conduct. Top managers were motivated, in part, by a breaking scandal at that time in which several large companies had been accused of ques¬tionable payments to foreign heads of state to secure contracts. With a substantial por¬tion of its operations overseas, Dow Corning wanted its behavior to be above reproach.
In 1977, the company published its first corporate code of conduct, laying out a comprehensive statement of ethical standards. In order to ensure compliance, the com¬pany initiated a series of annual audits, in which top managers would visit various cities around the globe to evaluate corporate performance against code standards. In addition, the company held training programs on the code, and its semiannual employee opinion survey included a second on business ethics.
Yet, for whatever reason, the company's widely admired procedures had failed to flag the safety of breast implants as an ethical concern. A routine 1990 ethics audit of the Arlington, Tennessee, plant that manufactured silicone implants, for example, did not reveal any concerns about the product's safety. When later questioned about the appar¬ent failure of the audit procedure, the chairperson of the conduct committee pointed out that normally product safety issues would come before the relevant management group, not the ethics review.
A Hardball Strategy:
As the controversy widened, Dow Corning's response, in the words of one Wall Street Journal reporter, was to "play hardbalL" On January 14, eight days after the FDA had announced its moratorium on implant sales and one day after the first leaked documents appeared in the press, Dow Corning took a $25 million charge against fourth quarter, 1991, earnings to cover costs of its legal liability, unused inven¬tory, and efforts to prove implants safe. The company also suspended implant production and placed workers at the company's manufacturing facilities on temporary layoff, with full pay and benefits. Investors, apparently alarmed by this turn of events, knocked down the stock price of both Coming, Inc., and Dow Chemical as they contemplated the parent firms' potential liability.
Implant recipients and trial lawyers also were contemplating the liability question. By March, as many as 600 lawsuits had been filed against Dow Corning and other breast implant makers, according to a representative of the Association of Trial Lawyers of America. The National Products Liability Database estimated that Dow Corning had been sued at least 54 times in federal court and possibly more than 100 times in state courts. Dow Coming's attorney disputed these figures, saying that there were far fewer than 200 cases pending against his client.
The unauthorized leaks created tremendous pressure on Dow Coming to release its own documents to the public. The FDA publicly called on the company on January 20 to release the material so that women and their doctors could evaluate the new evi¬dence for themselves, rather than simply relying on news reports. (The agency, although in possession of the documents, could not release them because they were still protected under court order.) The company responded two days later by releasing a group of sci¬entific studies-but not the infamous Pinto memo and other internal materials that the company dubbed unscientific.
Suspension of breast implant sales and release of the scientific studies did not slow down the crisis engulfing the company. On January 29, in an apparent acknowledgment of the severity of the situation, the company hired former attorney general Griffin B. Bell-who had performed a similar role at Exxon Corporation following the Valdez oil spill and at E. F. Hutton following the check-kiting scandal-to investigate its behavior in making implants.
Finally, on February 10, following a top-level intervention by the chairmen of Coming, Inc., and Dow Chemical, both of whom sat on Dow Corning's board, the board of directors executed a stunning management shakeup. Dow Corning demoted chief exec¬utive Lawrence A. Reed to the position of chief operating officer and forced longtime board chairman John S. Ludington to retire. Keith R. McKennon was named chairman and CEO. Simultaneously, the board announced that it would release to the public 15 scientific reports and 94 nonscientific memos or letters from company files, including the Pinto and "crossed fingers" memos, as well as other potentially damaging materials that had not yet been reported by the media. .
Several top executives of Dow Coming met the press the same day to present the company's perspective. One defended the company's decision not to release the docu¬ments earlier, saying:
Our motives are simple. First and foremost, these memos do not answer funda¬mental questions and concerns that women have about breast implants. And by focusing attention on the memos rather than the science that supports the device, we do nothing but further raise the anxiety level of women and physicians and scientists.
He added that "while we are not happy with the memos, we have nothing to hide, and we believe that each memo put in its proper context can be understood and explained." Many of the memos, he said, were best understood as part of the normal give and take that occurs within a technical organization, "one part of a multifaceted dialogue or com¬munication or discussion that goes on," and did not reflect fundamental problems. By pulling various statements out of context, he implied, the press had misrepresented ques¬tions scientists might legitimately raise in the course of their inquiry as final conclusions. The Dow Coming executives closed the press conference by denying categorically that implants could cause autoimmune disease or cancer.
Facing a Crucial Decision:
On February 20, the day after his testimony before the FDA, McKennon received word from Washington. After three hours of tense debate, the FDA advisory panel had voted just after 5:00 P.M. to recommend that implants be taken off the market, except for women needing reconstruction following mastectomies or to correct serious deformities. All implant recipients would be required to enroll in clinical studies. Cosmetic augmentations would be strictly limited to those required by the design of the clinical trials. Commissioner Kessler would have sixty days to rule on the panel's recommendation.
McKennon would have to lay a plan of action before his board soon-he certainly could not wait another two months for the FDA's next move. The breast implant business, he had learned, had not made any money for Dow Coming for the past five years. Even in its heyday, it had contributed no more than I percent of the company's total revenues. Some of his top executives had urged him just to get out of the implant business alto¬gether and let the attorneys mop up the liability problems. Many in the company felt that the huge settlement in the Hopkins case would be greatly reduced on appeal, and the company's $250 million in insurance would be sufficient to cover their liability. McKennon reflected on these issues as he contemplated his next actions. Certainly, he needed to act decisively to stem Dow Corning's financial losses. But, he pondered, did the company not also have, as he had put it to a reporter a few days earlier, an "overriding responsibility. . . to the women who have our implants"? And what of the com¬pany's reputation, so carefully nurtured, for always upholding the highest standards of ethical behavior?