Professional Documents
Culture Documents
Ethical Business Decisions
Ethical Business Decisions
Ethical Business Decisions
Ethics and
Business
The Ethical Challenges within
the Business Environment
Jim Foley, Director
Turning Pharmaceuticals
• Read the Turing Case
• Reflect on these questions:
– What is your opinion of the decision by Martin Shkreli to increase
the price of Daraprim from $13.50 to $750 per pill?
– Was the decision legal?
– Was the decision ethical?
– To whom is Shkreli and Turing responsible – the company owners
or customers?
1
5/29/2019
Understanding Legal versus Ethical Behavior
• What is legally right is based on local and national laws.
• What is ethically right is based on the ethical approach of a
company and then judged by others (customers, press, legislators)
• Examples:
– Paying the local minimum wage is required by law, paying high than
minimum is an ethical decision
– Putting environmental controls that meet regulatory requirements is the
minimum legal; using a higher standard is an ethical decision
– Wells Fargo setting sales goals is legal. Opening accounts without
permission is illegal.
The Daraprim Pricing Decision
• There are no U.S. regulations on drug prices.
• Therefore the 5,000 percent increase appears to be legal
• So what makes it ethical or not‐ethical?
– The U.S. is one of only a few countries that does not regulate drug prices.
– The World Health Organization lists Daraprim as a life‐saving and critical
drug
– If needed consumers can’t afford the new price, isn’t that their problem not
Turing’s?
– Should supply and demand set prices?
2
5/29/2019
Did Martin Shkreli Act Morally Correct?
• Shkreli justified the price increase to allow Turing to do critical
research and development develop a better version of the drug.
• Other drug companies have increased prices:
– See Exhibit 4: many drugs had significant price increases after ‘deals’
• Most importantly, as CEO, he should abide by the Shareholder
(Stockholder) Theory developed by Milton Friedman:
– Managers primarily have a responsibility to increase profits for a company’s
shareholders or investors
• Did Shkreli act morally correct?
Let’s Hear Directly From Martin
3
5/29/2019
An Opposing View – Stakeholder Theory (Edward Freeman)
• A company owes a responsibility to a wider group of stakeholders than
just shareholders:
– Employees
– Customers
– Suppliers
– Financiers
– Competitors
– Local communities
– Political groups
• As such managers should think of all stakeholders in business decisions
Business Ethics versus Your Personal Ethics
• Business decisions as ethical or non‐ethical have a wider
implication than individual ethical dilemmas
– Individual: Do you buy a birthday gift for a family member that forgot to
give you one?
– Business: Was it ethical for Turing to raise drug prices?
• Ethical business decisions have the potential to impact a much
larger group of people than individual decisions (eg. Pollution)
• Ethical business decisions are taken by management on behalf of
the company, and may not reflect each individual manager
4
5/29/2019
Ethical Principles ‐ Utilitarianism
• Utilitarianism: Judging behavior in terms of the costs and benefits
to society. It suggests choosing actions that result in the greatest
net benefit or that can be implemented at the lowest net cost.
• Need to measure costs and benefits
• But the costs may be on one part of society (the environment) and
benefits another (shareholders)
• What is a segment that is disadvantaged (the poor unable to afford
the drug?)
Ethical Principles – Rights and Justice (Kant & Rawls)
• Rights and Justice: A framework for ethical decision making that
draws on the principles of equal liberty for all, supporting the least
advantaged of a society, and everyone having the same
opportunity to succeed.
– Everyone has the same degree of liberty, and protected from infringement
by others
– There are inequalities in society, efforts are made to improve the position of
the most needy members of society
• Everyone has the same opportunity to qualify for the most
privileged positions in society’s institutions.
5
5/29/2019
Ethical Principles – Common‐Good Approach
• Common‐Good approach: A principle for ethical decision making
that regards all individuals as part of a larger community and that
bases decisions on whether or not the decisions support or diminish
a specific element of the common good of the community.
– Individuals in a society are linked together
– The good of one person supports the good of the community
– Everyone is part of a larger community
• John Rawls “. . . the common good I think of as certain general
conditions that are in an appropriate sense equally to everyone’s
advantage”
Ethical Principles / Frameworks
– Utilitarianism: balance costs and benefits
– Rights and Justice: everyone has equal rights, liberty for all, support the
least advantaged
– Common‐good approach: individuals are part of a wider community
• How can the above be used in the Turing drug price decision?
• Do they support or refute Shkreli’s decision?
6
5/29/2019
Internationally, Do We Impose “Our” Values
https://www.youtube.com/watch?v=k97AIRy5Z5U
Maybe the U.S. Has Moved On .. But Not All Countries
From South Africa Restaurant Chain Nandos, the Double
Breasted Chicken Burger
7
5/29/2019
If You Were To Operate Overseas, Which Framework
• Local or home country?
• Shouldn’t we “respect” or leverage local norms?
• Do the ethical frameworks help with this decision
• Discuss in groups
And the Ethical Programs Keep Coming
8
5/29/2019
And Their Impact
What Is Your Perspective?
• If you are in a position to make a business decision that has ethical
implications, how will you proceed?
• Are you more on the shareholder theory side, or stakeholder?
• Could you support a decision for the business, that is contrary to
your personal beliefs?