Investors in Merck

[2] Suppose that large investors in Merck had decided to sue the company when it funded donation of a drug for river blindness. Basis for the hypothetical suit: Merck's alleged failure to meet its fiduciary duty by conducting business with a view to enhancing corporate profit and shareholder gain. Write a dialogue between a large investor, whose initial position is to support the class action suit, and a Merck executive, whose initial position is that Merck fulfilled its fiduciary duty.

EXECUTIVE: On what grounds can you support this class action suit?

INVESTOR: By donating the drug Mectizan, you are giving away the money we as shareholders have invested in your company. We have entrusted you with our investments to make the right decisions and increase profits. It is your fiduciary duty to act in the best interest of us, the shareholders, and you have breached that agreement.

EXECUTIVE: Merck, in no way, breached their fiduciary duty. The stockholders of the company were constantly informed of the research and development performed every step of the way. When the drug was being developed, the stockholders were also made aware of the target market, and the risks involved in trying to sell a product to members of an underdeveloped community in a struggling third world country.

INVESTOR: I understand that we were kept up to date on the operations of the company, however, the company should have never began to develop the drug knowing that the target market would never be able to afford it. As stockholders we should not have to be concerned that the company we are invested in is going to take such risks. The company's economic objective should be to enhance long-run profitability and increase shareholder gain. By giving away products the company is doing the exact opposite.

EXECUTIVE: Merck is a business, and like any business has the ultimate goal of making the most profit possible. When our researchers stumbled upon the treatment for river blindness we had no way of knowing that we would never find an investor, therefor they continued development. Once we had perfected the drug and saw the impact it had on those suffering from the disease we realized how important it was for us to get it to as many sufferers of river blindness as possible. After exhausting every effort to find an adopter for the drug, we had no choice but to donate.

INVESTOR: Merck absolutely had a choice. Once the company discovered that no investors were willing to buy the drug production should have been immediately stopped. Instead, the company decided that they would not only give away what they had already produced, but made a promise to continue to deliver the product as long as it was needed. So now, not only did we lose all of this money in research, development and production but now we are also paying for continuing production and distribution!