Merck & Co., Inc. Case

CHAPTER 5

Merck & Co., Inc. Case

- In 1975, Merck & Co. healthcare business discovered parasite killing compound for animals when the parasite was ravaging communities in fertile, developing areas (Africa, South America & Yemen). Drove farmers away and stinted economies.

- Nicknamed "river blindness" because the parasites would eventually travel to your eyes and you would go blind.

- Company made an unprecedented move and fronted the $3.9 billion manufacturing and marketing cost for 2.5 billion tablets to be distributed with its humanitarian company culture. Economies have revived and the illness has dropped.

Corporate Social Responsibility = duty of a corporation to create wealth in ways that avoid harm to, protect, or enhanced societal assets - voluntary obligation to society

Proponents:

- Ethical duty to promote social justice

- Social responsibility is practical (concrete benefits)

- No world force driving

Opponents:

- Right-wing conservatives

o Adam Smith (to an extent) and Milton Friedman [capitalists]

o Thwarts natural market dynamics

- Left-wing progressives

o Just a façade for corporations to hide inviolable core for profit

Brief History

- Colonial

o Small, frugal business and trade

o Valued thrift and charity

- Industrial

o New millionaires (not companies) endowed social causes, but looked down upon the poor.

 Andrew Carnegie and Herbert Spencer

* Giving to poor won't benefit society

* Charity is only good when it raises character and superiority of the giver

 Social Darwinism = society sheds its "less fit" to make way for the smarter and better adapted

o Charters (social and behavioral contract of a company) defined that profits were meant for shareholders and the any charitable gifts were "beyond the law" of a charter

- Progressive/Post-Industrial (1880-1920)

o Society pressured businesses that their responsibilities were too narrow (rise of socialism and factory injustices).

o Themes of Broader Responsibility

 Managers are trustees of communities, customers & employees along with shareholders

 Managers have an obligation to balance their stakeholders' claims

 Managers have a service principle: to serve society by making companies profitable & that aggregate success by many managers will resolve social problems

* Henry Ford Factory (underlying social problems under profit)

* General Wood at Sears (shareholders last)

- Modern (1950-now)

o Howard Bowen's "Social Responsibility of the Businessman"

 1. Managers have a duty to consider the social impacts of their decisions

 2. Businesses are reservoirs of skill and energy for improving civic life

 3. Corporations must use power to uphold social contract or lose their legitimacy

 4. It is in enlightened self-interest of business to better society

 5. Voluntary action may head off negative public attitudes and unwanted regulations

o Milton Friedman

 =>Business is most responsible when it makes money efficiently, not when it misapplies its energy on social projects

 Friedmanism = sole objective of business is to accommodate stockholders while obeying the law

- Present Day

o Center for Economic Development concentric circles of responsibilities

o 200 CEOS Roundtable Statement

 Business activities must make social sense

3 Elements of