That sounds like a tough issue for government to catch. Well done, im glad that they caught the problem and fined them. Unfortunately the seem to profit around 33m before tax so this is barely any impact on their yearly profits. Its hard to decide how much to fine because I think fining them 1/4 their yearly profit is reasonable it would absolutely kill their stockprice and growth and probably severely impact their long term trajectory as a company. What do you guys think a reasonable fine is for this offense?
this post was submitted on 07 Feb 2025
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Yeah it's a tough one. At the very least the default fine should be higher than the cost of making sure they are complying (as in Chelsea staff in charge of ensuring compliance). But if they were trying to comply and showed their process improvements since the incident then the fine might be appropriate.
I'd guess they lost a lot more money from doing a recall and also from the loss of brand status, there would probably be people avoiding them after the incident.
I dont think product recalls reach enough people to do any harm. most people dont even read the news so they wont know about this.
They have to organise the return and refund of all stock in stores and any in transit which while not being super expensive, could easily be more than the fine. $150k really isn't that much for a large company.
The fine has to be big enough to cause enough pain to the shareholders that the board of directors cares.
Let's say we set the fine to an amount that would destroy the company if levied in a single financial year, then actually leviing it over five years. Five years of poor dividend performance.
Or perhaps partial dividend forfeiture for a period of time.
The people who make the kinds of decisions that result in this kind of failure are driven by next quarter's share price, hurt that enough and they'll make the right decisions.
Either way, that particular fine is appallingly small for poisoning the general public with heavy metals.
There is another way to deal with this kind of stuff, fines may be effective. But if you want to ensure that this kid of thing doesn't happen. Look to the health and safety regulations.
Making the board / CEO criminally responsible, will achieve the the thing you want, rather than the decision makers paying out other peoples money (shareholders) which doesn't hurt them directly, make them personally responsible.
If they are found to be negligent, then it follows that they go to jail....watch how quickly this kind of thing changes.
Also make it not beholden to them continuing to work at the company they fucked up at, so if this happened and was only discovered years later, the CEO who has moved on to fuck up at another company can still be held liable.
That's way better.
I'd entirely forgotten we have that kind of option available.
While I agree that it needs to be big enough that they notice, I think we should not go hard on companies genuinely trying to do the right thing. We know accidents happen, and we do not know the details.
Do we even know the level of contamination?
If we are super hard on companies trying to do the right thing, no one will try.
Before choosing the vessel, Chelsea Sugar had been advised that the Rin Treasure had failed a survey report and was not fit to transport bulk sugar. Despite a cleanliness report, the cleaning of the ship's hold was not effective, leading to the sugar's contamination.
Are we sure they were trying to do the right thing? They were told the ship was not fit for transporting bulk sugar.
I think it should be the other way around, the financial impact should make so they don't even entertain the risk of jeopardizing the consumer's safety in future.
My argument was "we don't know the detail so let's give some benefit of the doubt". But I missed that part, if they knew they shouldn't and did it anyway then $150k does not seem big enough.
I'm no expert on bulk shipping, but I suspect it's a case of trying to save time and money on finding another ship that was suitable. Putting their bottom line before safety. I wonder if the fine is actually even bigger than the costs and delays of them finding a new suitable ship.
It could be a case of the planned ship broke down and they needed an alternative. If they swapped to a different ship and it turned out it was contaminated, that's one thing. But being told it's not suitable and using anyway is a whole nother level.
Edit: or did it mean they were told it's not suitable, then they had it cleaned and the cleanliness report said it was fine but it actually wasn't? That's different again.
Yeah I'm not sure, the wording isn't so clear. But still, they knew it was carrying "metal sulphide concentrates (zinc and lead)" on it's previous voyage. A quick google says: "Metal sulfide concentrate is a refined ore that contains high concentrations of valuable metals and has had impurities removed."
Is it really suitable to risk cleaning it then transporting consumable food items in it? Especially one that was carrying lead of all things? As the Food safety deputy director general said:
"New Zealand Sugar Company knew what its responsibilities were to consumers - ensuring the safety and suitability of its products and managing any potential risk to consumers," Arbuckle said.
Also the fact they didn't even detect the extent of the lead contamination until after it had already been used in production.
Samples were taken between 15 and 24 September for testing, but Chelsea Sugar followed its normal process for distribution and sale.
"The test result on 7 October showed high readings of lead contamination, but rather than take immediate action and stop production and distribution, they instead sought more testing which confirmed the same result," Arbuckle said.
"Some of this product was sold between October and early November. We were not informed of the lead contamination until 3 November, which is unacceptable.
I'm not saying they should be made bankrupt, but it should probably have more impact than "the cost of doing business"
So, ignoring we know they did bad:
Is it really suitable to risk cleaning it then transporting consumable food items in it? Especially one that was carrying lead of all things?
I am not an expert. I could not tell you whether the triple rub and dub scrub (or whatever) routine is the industry standard procedure, I guess that's for MPI to determine. So I try not to judge based on how it sounds.
Also the fact they didn’t even detect the extent of the lead contamination until after it had already been used in production.
Again, I'm not an expert. Is the standard process that they do a test for every bag? Every sack? Once for the boat? Is lead testing even a standard test for sugar? If they followed an industry standard process, and that process failed, then that's an MPI problem. In this case it sounds like they did not, but I was trying to give the benefit of the doubt.
I’m not saying they should be made bankrupt, but it should probably have more impact than “the cost of doing business”
Yeah, I don't think I took in the article the first time I read it. This seems like there was a clear violation of what they should be doing, and that's why MPI brought charges. $150k seems very low. I bet the MPI staff time to bring about the charges cost significantly more than that.
It seems neither of us know enough about the industry to speculate, but logically speaking, if they had followed the correct MPI processes and the process itself was at fault a fine wouldn't have been levied against them in the first place.
Like the food safety guy said; they had a responsibility to manage any potential risks to consumers. It's not like they are a new inexperienced business, they've been in the same business for over 100 years. This did happen almost four years ago, I'm fairly confident that they've made enough profit in that time to easily pay this fine without breaking a sweat.
if they had followed the correct MPI processes and the process itself was at fault a fine wouldn’t have been levied against them in the first place.
While true, if the incident was avoidable but understandable (e.g. some human error thing while following an MPI process), then they might only get a small fine. There might be reasons for the fine being small, it would be nice if they explained them in more details (like fine of $5m, 20% discount for no issues in previous 10 years, 20% discount for taking active steps to prevent the issue again, etc).
Like the food safety guy said; they had a responsibility to manage any potential risks to consumers. It’s not like they are a new inexperienced business, they’ve been in the same business for over 100 years. This did happen almost four years ago, I’m fairly confident that they’ve made enough profit in that time to easily pay this fine without breaking a sweat.
Yeah, my benefit of the doubt status is out the window now based on the stuff you've pointed out. It would be nice to know how they came up with that figure.
Why do you think no one will try? If they see one company go out of business because they did the wrong thing won't other companies try not to make the same mistake?
If one company spends millions trying to do the right thing and got driven to bankruptcy by a mistake that could have happened to any large company, the other companies might instead just not do anything except the bare minimum then spend that money on insurance.
Edit: this is now hypothetical as it's been pointed out to me they were not trying to do the right thing.
If a company spends millions and still doesn't get it right then the punishment should encourage the remaining businesses to spend even more and actually get it right. Clearly those millions weren't enough.
Unfortunately under capitalism we aren't allowed to hold people personally responsible for harming others via corporations. The only thing we can do is to hold the shareholders responsible. In other nations it's not uncommon for the CEO or even the board to be arrested and jailed for harming the public.
This might be an agree to disagree situation but if the company runs for 50 years and has one mistake like this, I don't think the intent should be to bankrupt them because they screwed up.
I screw up in my job from time to time and no one is firing me because mistakes happen and we learn from them.
Depends on the mistake. If worked for a company for 50 years and your mistake killed a person you'd most definitely be fired. If you cost the company a significant client or a significant amount of money you'd most definitely be fired.
A corporation mistake could kill a thousand people or ten thousand people so they should be held to an even higher standard.
What if the mistake didn't kill anyone?
Also I disagree that those examples would get you fired. They are examples of times when you might get you fired, but this isn't the US, there would need to be due process. There are plenty of times when losing money wouldn't necessarily get you fired (finance industry comes to mind), and even some circumstances when killing someone wouldn't necessarily get you fired (certain circumstances for commercial drivers come to mind).
The devil is in the detail.
What if the mistake didn’t kill anyone?
Depends on the mistake like I said. I know people who were fired for messing up an important contract. I know people who were fired for deleting a database in production. One time somebody I know got fired because he posted something embarrassing about the CEO of the company.
As an employee your employer can fire you for lots of reasons.
Yeah, my starting point in this post was giving them the benefit of the doubt, because it depends on the detail. But then it seemed I didn't absorb the article properly because it seems the detail does not look good for Chelsea.
When a person commits a crime we call for punishment that would deter future crimes. Same should apply here. If this is just a minor fine then there is no incentive to not do it again.
Using a ship that had been carrying zinc and lead? She’ll be right mate.
But we saved $75!