Ethics
Lauren is faced with a choice between letting a substandard product go through, which would require her to lie, and reporting, it above her supervisors' heads, which would damage her relationship with those supervisors. As there is no outcome that does not result in harm, this represents a true ethical dilemma (McConnell, 2014). This is basically the prisoner's dilemma. Yet, there are some subtle differences between this and the prisoner's dilemma that allow this issue to be resolved.
The basic ethical issue here is that the company has a contractual obligation to its customer. Moreover, depending on the nature of the defect, passing this product could put human lives at risk. But more clearly, the two immediate supervisors are asking Lauren to commit fraud. Unlike in the Prisoner's dilemma, she hasn't yet committed a crime, so there is still time to avoid negative consequences entirely. Lauren has to file the report honestly, and let the chips fall where they may. If the supervisors pass along the product that she rejected, she has a duty of care to the shareholders to inform senior management.
Stakeholder Analysis
There are a number of different stakeholders in this scenario. Lauren, the two bosses, the senior management, and the client are all stakeholders, but so too are the customers who will end up using the product. They are perhaps the most at risk, depending on the nature of this defect. There are shareholders for both companies, regulators and employees for these companies, all of whom will be affected. The most important stakeholders, however, are the ones who are either directly affected or have the potential to be directly affected. That means Lauren, the client and the end users who might suffer injury from this defect. The two bosses are not as important as stakeholders go because the outcomes that they face are not the result of Lauren's choice, but their choices. If senior management comes down on them, then that is because they violated company policy. Senior management is on the next tier of stakeholder, just below. But...
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