Executive Summary The present paper examines the case of the 2007 Mattel toy scandal – the company faced a great challenge in replacing huge numbers of spoiled and dangerous toys. Alongside the financial loss, the challenge included ethical issues that were successfully handled by Robert Eckert, the CEO of Mattel. The paper considers his ethical leadership framework, examines their compliance with basic guidelines of ethical behavior and the code of ethics in economics. Multiple variants Eckert had at his disposal as well as his final decision and its consequences are analyzed in the form of a case study. The concluding part is followed by the group’s recommendations that would improve the efficiency and constructiveness of Eckert’s approach to solving the ethical problem Eckert faced in 2007. Introduction Mattel Scandal Mattel, a giant toy-producing company that has a global presence had to recall more than eighteen million toys (18m) from the markets around the world in the year 2007. A number of things were not in order, and if left to the consumers, the toys would have led to serious harm. The reasons for the considerable recalls of products were that the toys manufactured on the facilities based in China were dangerous for children’s health due to the lead paint discovered in the toys and the second reason for the recalls was “a design flow” of a number of magnetic toys that were threatening for children’s case due to the possibility of coming “apart from the toy with the risk of being swallowed by children” (Weiss 2008, p. 80). Besides, there appeared not only the threat but some cases of injuries and even death were reported (Weiss 2008). The company had to recall the loose magnet toys so as to replace them with the ones designed using recent technology that utilized fixed magnets. On August 2, 2007, the Today show reported the news that “a ‘global recall’ from Fisher-Price involving approximately one million toys” was performed (Weiss 2008, p. 79). On the whole, Mattel “recalled 21,334,000 articles” of toys during a series of three recalls that took place during one year (Magno 2008, p. 8). As it comes from the recall and replacement statistics, the company faced huge losses because of the scale of damage and the number of previously bought toys. However, the challenge that turned out more problematic was not the financial damage but the set of ethical dilemmas that the company faced: mere replacement had nothing to do with the restoration of the company’s reputation, so decisions in the ethical dimension were inevitable. Though the recalls were conducted and the issue was given publicity since “Mattel ensured consumers were aware of the recalls by placing ads in major newspapers and posting notices on popular web browsers” (Warner 2008, p. 32), it took the company considerable time to gather the data pertaining to the recalls and to notify the agency (Weiss 2008, p. 80). Hence, the problem revealed the necessity of searching for an innovative ethical approach that could help not only keep the company afloat but also help it acquire its former prosperity. Since the leadership team of the company is headed by Mr. Robert Eckert, the implementation of his lea