BA107 The Social, Political and Ethical Environment of Business

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BA107The Social, Political and Ethical
Environment of Business

• July 18, 2005
• Sanny Liao

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Agenda

• Administrative matters
• Journal Reviews
• Corporate Social Responsibility
• Merck and River Blindness
• Resources for writing research paper

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Administrative Matters

• Your journal reviews are graded, dont sweat the
  check (,-s).
• Your next journal review is due on Wednesday.
• If you have not done so already, please email me
  your research paper topic and your preferred
  dates for presentation by the end of the day
  today. If you do not give me a date, I will
  assign you whatever that is available.

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Journal Reviews What you did well

• Most of you chose very good topics
• You analyzed the issues at hand from the
  perspectives of different players
• You dealt with the trade-offs between various
  incentives, or long-term vs. short term goals for
  each player
• You discussed the issues in the context of a
  macro environment
• When possible, you prescribed what you deem as a
  the proper solution given the circumstances, and
  supported your claim with evidence

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Journal Reviews What you can improve on

• Format 1 page, size 12 font, single-spaced.
• Write a complete argument Introduction
  Discussion Conclusion.
• If you discuss multiple views, develop each one
  fully, instead of jamming them with no coherent
  order into one paragraph.
• Put you emphasis on the business aspects of the
  issue involved, dont dwell on government policy
  discussions that have nothing to do with
  businesses.
• Do not spend too much time on profitability
  discussions either, if profitability is not
  directly related to the social, political, or
  ethical environment of doing business for your
  particular case.

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How did you do overall?
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What is Corporate Social Responsibility?

• According to Smith (2003), Corporate Social
  Responsibility (CSR) is the obligation of the
  firm to society or, more specifically, the firms
  stakeholders those affected by corporate
  policies or practices .

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Why should a firm take on social responsibilities?

• The firm has economic, legal, ethical and
  philanthropic responsibilities.
• Internalize externalities such as pollution.
• Government failures at addressing social problems
  diminished scope of government (in the US and
  Europe)
• Increased pervasiveness of big business that
  allow them to take on social issues

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What limits a firms ability to take on social
responsibilities?

• Sometimes a firms economic interest may be
  contrary to what CSR would dictate

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Merck and River Blindness

• Source WHO, Vector Control - Methods for Use by
  Individuals and Communities , 1997

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Mercks Ethical Quandary

• It take 200 million in research and 12 years to
  bring the average drug to market. Given finite
  resources, pharmaceutical companies have to
  choose carefully which projects to pursue.
• During clinical testing of ivermectin, a drug for
  animals, Merck discovered that the drug killed a
  parasite in horses that are very similar to the
  worm that caused river blind-ness in humans.
• Mercks scientists were encouraging the firm to
  invest in further research to determine if the
  drug could be adapted for safe use with humans,
  but Merck knew it would likely never be a
  profitable product because those suffering from
  the disease are from the poorest parts of the
  world, and could not pay for the medication.

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Questions for Discussion

• Who are the stakeholders? On what basis would
  you rank them in importance?
• What are the potential costs and benefits of such
  an investment?
• If Merck decides to invest in the research, how
  would Merck justify its decision to its
  stakeholders and the media?
• If Merck decides not to invest in the research,
  how would Merck justify its decision to its
  stakeholders and the media?
• Does Merck have a social responsibility to invest
  in the research?
• If you were the senior executive of Merck, what
  would you do? Would your decisions change if the
  company is on the verge of bankruptcy? Would you
  decisions change if the drug had only a small
  chance to cure river blindness?

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What actually happened?

• Merck went ahead with the development of the drug
• In 1987, Merck set up the Mectizan Donation
  program to organize the free distribution of the
  drug in collaboration with the WHO, WB, and other
  organizations.
• Merck said it donated 100-120M tablets at a cost
  of 1.50 each in 2001.
• About 30M people in Africa and Latin America a
  year have received treatment and avoided the risk
  of premature blindness.

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Conclusion

• A corporations goal may include more than simple
  profit-maximization.
• Question for thought one often find firms from
  more developed countries taking on a larger
  socially responsible role than firms from less
  developed countries, why do you think that is?

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Resources for writing research paper

• Change you need to follow the APA format for
  citations
• http//www.wisc.edu/writing/Handbook/DocAPA.html
• If English is not your first language, the
  Student Learning Center has a very informative
  website, and holds writing workshops to support
  your academic work
• http//slc.berkeley.edu/nns/nns.htm