Abstract

Recent research has highlighted the importance of cultivating the ethical climate of a firm with implications for ethical decision making and consumer confidence. However, there are important lessons still to be gleaned from firms responsible for generating ethical failures. Based on a case study of the Sanlu melamine milk powder scandal in China, this article analyzes the key factors that have affected consumer confidence in Sanlu and highlights main reasons for Chinese consumers’ continued distrust of state dairy enterprises. We explore the causes of business distrust in the Sanlu case from the perspective of Chinese product consumers. We further recommend solutions to repair a crisis of consumer confidence and trust in the domestic dairy industry by considering these stakeholders’ perspectives.