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BA107 The Social, Political and Ethical Environment of Business

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Given finite resources, pharmaceutical companies have to choose carefully which ... Would your decisions change if the company is on the verge of bankruptcy? ... – PowerPoint PPT presentation

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Title: BA107 The Social, Political and Ethical Environment of Business


1
BA107The Social, Political and Ethical
Environment of Business
  • July 18, 2005
  • Sanny Liao

2
Agenda
  • Administrative matters
  • Journal Reviews
  • Corporate Social Responsibility
  • Merck and River Blindness
  • Resources for writing research paper

3
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.

4
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

5
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.

6
How did you do overall?
7
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 .

8
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

9
What limits a firms ability to take on social
responsibilities?
  • Sometimes a firms economic interest may be
    contrary to what CSR would dictate

10
Merck and River Blindness
  • Source WHO, Vector Control - Methods for Use by
    Individuals and Communities , 1997

11
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.

12
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?

13
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.

14
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?

15
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
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