Merck & Co. Case Study

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 * Adam Smith (to an extent) and Milton Friedman [capitalists] * Thwarts natural market dynamics * Left-wing progressives * Just a façade for corporations to hide inviolable core for profit

Brief History * Colonial * Small, frugal business and trade * Valued thrift and charity * Industrial * 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 * 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) * Society pressured businesses that their responsibilities were too narrow (rise of socialism and factory injustices). * 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) * 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 * 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 * Center for Economic Development concentric circles of responsibilities * 200 CEOS Roundtable Statement * Business activities must make social sense

3 Elements of Social Responsibility 1. Market Actions 2. Mandated Actions 3. Voluntary Actions

Principles of CSR * Corporations are economic institutions run for profit * Must follow multiple bodies of lies * Managers must act ethically * Must correct adverse social impacts * Meet multiple stakeholder interests * Be transparent & accountable

Global Level Systems 1.

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