Management Essays on Stakeholder Responsibilities in Consumer Protection

Part A

Question 1

Moreover, the concept of workplace diversity is concerned with the harmonious relations of workers hailing from diverse backgrounds in the workplace. Workplace diversity involves the employment of a workforce composed of workers hailing from diverse ethnic, racial, and cultural backgrounds (Lawrence & Weber, 2014). Diversity focuses on the harmonious interaction of workers from different backgrounds to maximize the divergent attributes of each worker for the benefit of an organization. However, diversity in the workplace should be executed in accordance with the national labor laws and any other relevant regulations and policies that restrict the operations of a business. In the United States of America, it is unlawful to hire immigrants who lack the requisite permission to stay and work in the country.  Therefore, the hiring of unauthorized immigrants does not form part of workplace diversity as the action is unlawful. However, legal immigrants at the workplace are similar to other forms of workplace diversity, such as gender diversity, as it ensures that an organization’s workforce hails from different racial and cultural backgrounds (Lawrence & Weber, 2014). Moreover, hiring migrants provides the same advantages with regard to diversity to an organization as other types of diversity, such as racial diversity. Since hiring unauthorized immigrants is illegal, it exposes an organization to sanctions and fines from government agencies and departments, as highlighted by the case study involving Chipotle Mexican Grill Restaurants.

Question 2

The hiring of unauthorized immigrants has its advantages and disadvantages, and numerous stakeholders in the corporate world are affected differently by the hiring of unauthorized employees. The government, which is a major stakeholder in the corporate sector, is negatively affected by the hiring of unauthorized immigrants because the practice goes against the law. Moreover, employing unauthorized immigrants causes the government to lose revenue because these individuals lack social security numbers, which allows them to fail to pay taxes and not face the repercussions of doing so. Employing illegal immigrants also disadvantages local employees because it exposes them to exploitation and denial of their rights. For example, these individuals are usually paid lower wages compared to local employees and lose their jobs without due cause and cannot seek legal means to resolve these issues because of their illegal status. The hiring of unauthorized immigrants also hinders the career development and progression of local employees. While the shareholders of companies that hire unauthorized immigrants enjoy an increase in profits made by companies that hire illegal immigrants due to a reduction in operating expenses, this advantage is short-lived. Such enterprises risk being heavily sanctioned and forced to pay hefty fines that would negatively impact the number of dividends paid to the shareholders of the company.

Part B

Section 1

The pharmaceutical company Merck sought a blockbuster drug that could be sold to a large number of people to generate a massive amount of revenue and income for the company. Merck began the development and testing of the drugs with the intention of making money first and promoting the health of the consumers’ health second. The enterprise developed a drug for controlling chronic, although nonfatal conditions. Merck’s researchers identified the enzyme cyclooxygenase, COX-2, which is associated with pain and inflammation (Couzin, 2004). This discovery proved vital to the plans of Merck as the company could isolate the enzyme COX-2 to create a drug to offer pain relief to patients of osteoarthritis, acute pain, and menstrual ailments.

During the development of the drug, Vioxx, various red flags were raised by various researchers on the negative consequences of the drug. Merck’s scientists involved in the development of the drug were worried about the effect of the drug on the cardiovascular health of humans. They argued that the drug increased the risk of its consumers developing cardiovascular diseases, such as heart attacks and stroke. Dr. Alice Reicin, a Merck scientist, working on the drug, in an internal email, wrote that the possibility of cardiovascular events among consumers of the drug was of great concern (Couzin, 2004). Additionally, a study funded by Merck, VIGOR, highlighted the relationship between the regular intake of Vioxx and an increased risk of cardiovascular diseases.  According to Lawrence & Weber (2014), the Vigor study found that patients who regularly ingested Vioxx had five times as many heart attacks compared to those who ingested naproxen, an alternative drug for the treatment of rheumatoid arthritis. However, instead of halting the sale of the drug, Merck hypothesized that the findings made by the VIGOR study were due to the heart-protective effect of naproxen (Lawrence & Weber, 2014). The result of the study troubled Merck’s leadership with Merck’s research director Dr. Edward Scolnick conceding that the cardiovascular events were real. However, the research director downplayed the severity of the situation by stating that hazards are usually associated with the consumption of any drug (Lawrence & Weber, 2014). According to Lawrence & Weber (2014), the findings of the VIGOR study made the company leadership think of adding a thinner agent specifically designed to prevent blood clots to Vioxx. The thinner agent would have significantly reduced the risk of Vioxx consumers developing cardiovascular diseases. The company, however, decided against the idea of adding a blood-thinning agent to Vioxx to the detriment of the cardiovascular health of Vioxx users. The above facts prove that Merck, acted in a socially irresponsible manner with regard to how it developed, researched, and tested its blockbuster drug Vioxx

The Food and Drug Administration (FDA) Department, which regulates all prescription drugs in the United States to ensure their safety for consumption, failed to play its role. While it highlighted Vioxx’s relation to cardiovascular diseases, instead of the FDA withdrawing the drugs from the market, the department only insisted on Merck adding another warning language regarding the use of Vioxx. Dr. David Graham, who worked for the FDA, conducted a study that confirmed the role Vioxx played in increasing patients’ risk of strokes and heart attacks in California. However, the FDA did not take his study with the requisite weight, and Dr. Graham later said that he was ostracized and subjected to threats by the top leadership of the FDA(Lawrence & Weber, 2014 ). Merck also discounted the findings of Dr. Graham, terming them as less reliable than double-blind clinical studies, yet the management knew that Vioxx increased the risk of cardiovascular diseases in humans. Despite numerous studies and red flags raised with regard to the negative consequences of Vioxx to the cardiovascular health of humans, the company continued with the production and sales of its blockbuster drug. Additionally, the FDA failed to play its role in protecting the public from consuming harmful products. The above findings prove that Merck actions with regard to the development and testing of Vioxx were socially irresponsible.

Section 2

I believe that Merck did not behave socially responsibly with regard to its shareholders and consumers. The company did not take the health interest of its customers into account when they developed and rolled out Vioxx. The top leadership of the company knew beforehand that Vioxx increased the risk of cardiovascular diseases in humans, yet they proceeded to roll out the drug to the consumers. Indeed, the management’s corporate behavior was irresponsible because only guided by the objective of making money no matter the risk or cost. The company, Merck, through its blockbuster drug, ended up ruining the lives of many of its customers. The customers who had used Vioxx for a long period were exposed to cardiovascular diseases, such as heart attacks and strokes.

The company misled its consumers through its Vioxx direct-to-consumer advertising program. Merck created and used an advert involving a former Olympic skating champion, Dorothy Hamill, to inform its customers of the pain suppressing prowess of Vioxx. Indeed, the advertisement was misleading because it highlighted the positive attributes of the drug Vioxx and ignored its negative effects.

Merck also let down its shareholders because it failed to observe social responsibility. The company adopted an unstainable corporate management approach in the development and sale of the drug Vioxx. It disregarded the cardiovascular health concerns of Vioxx and released the drug for sales due to the financial potential it had. This decision proved to be a socially irresponsible approach that, in the long-run, would expose Merck’s shareholders to unnecessary risks (Krumholz, 2007). The socially irresponsible actions of Merck with regard to its shareholders is revealed in the drastic drop in the value of the company’s stock worth. According to Lawrence & Weber (2014), Merck shares hit an eight-year low after its withdrawal of Vioxx from the market, with Merck’s share being valued at $33. It’s the responsibility of a company to ensure that it safeguards the fiscal interests of its shareholders by ensuring that its corporate actions are not only socially responsible but also sustainable (Wilson, 2011). The actions of Merck with regard to Vioxx were not only socially irresponsible but also unsustainable; therefore, the company failed its shareholders. According to Lawrence & Weber (2014), a company’s shareholders are the ones responsible for the liabilities and expenses incurred by a company and therefore, should be properly insulated from fiscal losses through astute corporate management. Merck’s decisions and actions hurt its shareholders as they were exposed to numerous liabilities and legal expenses by the numerous criminal investigations, and thousands of lawsuits were filed against the company upon the withdrawal of Vioxx from the market.

Merck failed to protect the long-term financial interests of its shareholders by releasing Vioxx to the market. Merck’s leadership ignored the long-term consequences of releasing a defective drug on the market and therefore failed to secure the long-term financial interests of its shareholders, as evidenced by the financial problems Merck faced upon its withdrawal of the drug from the market. The worth of Merck’s shares took an unprecedented nosedive making the shareholders experience massive losses. Lastly, Merck’s decision to release Vioxx to the market undermined the fiduciary and good faith the shareholders had placed in the company (Wilson, 2011). Most shareholders invest their money in companies that operate in sustainable corporate practices and uphold their fiduciary with regard to their actions (Cavusgil, 2007). The fact that Merck deceived its shareholders by not revealing the side effects of Vioxx upon its release to the market shows that the company holds in little regard its shareholders’ fiduciary responsibilities.

Section 3

Merck actions with regard to the marketing and advertising of Vioxx were socially irresponsible. Merck followed a two-pronged advertising approach to ensure to market the mentioned drug; direct-to-consumer advertising and advertising to prescribing physicians. Merck first adopted the advertising to prescribing physicians’ model of advertising. The management hired young and attractive sales representatives who made rounds meeting doctors and health physicians to market Vioxx. The sales representatives talked the doctors into prescribing Vioxx to their patients, more so to those needing powerful painkillers. Additionally, the firms also enticed the doctors to embrace Vioxx by issuing free samples of Vioxx and giving gifts such as tickets to events and meals. Merck financed also training events and seminars for doctors during which they were informed of the positive effects of Vioxx, especially its pain-relieving and stomach-protective qualities. Merck trained its sales representatives on how to dodge difficult questions, such as the effect of the drug on humans’ cardiovascular health, posed by doctors. The dodging method that the enterprise used, which was termed as the “Dodge Ball Vioxx,” formed an integral part of the company’s training manual. According to Lawrence & Weber (2014), the marketing model of advertising to prescribing physicians has been criticized by both medicine and nursing scholars. Healthcare experts argue that advertising to prescribing physicians puts unnecessary pressure on doctors to prescribe drugs that may not provide the best option of recovery for patients.

In 1997, after years of political lobbying by pharmaceutical companies in the USA, the FDA finally granted pharmaceutical companies the license to advertise their products directly to consumers. In the same year Merck adopted a direct-to-consumer advertising model. The model involved coming up with advertising programs directly targeting consumers. Merck invested more than half a billion dollars in Vioxx advertisements, and the investment paid off as the company reported a massive increase in the drug’s sales. The company, together with other pharmaceutical firms, argued that their advertisements only helped the consumers to be informed of new medical treatment options and interventions and encouraged people to seek treatment options. Merck came up with a captivating advertisement that starred a hugely celebrated personality, Dorothy Hamill, with a message that highlighted the benefits of Vioxx. However, this advertisement did not highlight the fact that the drug should be used cautiously as it was a risk factor for cardiovascular diseases. The mentioned facts point to the socially irresponsible manner in which Merck approached the marketing and advertisement of Vioxx.

Section 4

Merck and numerous other pharmaceutical companies in the United States of America had huge influence among the political and ruling class and used this influence to inform legislation and policies concerning the pharmaceutical industry. The pharmaceutical industry formed a trade association, Pharmaceutical Research, and Manufacturers of America, a special purpose organization through which the huge pharmaceutical companies of the USA bought political influence by donating huge amounts of money to the political parties and candidates (Krumholz, 2007). The donations ensured that they influenced Washington D.C., therefore, could advance their own interests, such as the ban on importation of drugs from Canada, without many challenges. The influence also ensured that the pharmaceutical legislations made in Washington Dc. were in sync with the requirements and needs of the pharmaceutical companies. Merck invested close to $40 million in political lobbying activities. Additionally, the company hired former elected officials who still had political relevance in the nation, such as Billy Tauzin as its lobbyist.

Merck also had a massive influence in the FDA department, as shown by the way FDA handled the case of Vioxx. The FDA, upon the completion of the VIGOR study, was well informed of the possible relation of Vioxx to an increased risk in cardiovascular diseases. The body, however, did not take any significant or impactful steps to deal with the issue and only informed Merck to add additional information with regard to the drug. Furthermore, the hostile treatment of Dr. David Graham, who did a study exposing Vioxx as a risk factor for both heart attack and stroke by the FDA top leadership, shows that Merck was protected by the top leadership of the FDA. Merck, just like other gigantic pharmaceutical companies, possessed massive political influence and connection, which is used to maintain Vioxx place in the market despite numerous studies proving that Vioxx was a risk factor for cardiovascular diseases. The above facts prove that the relationship between Merck and the American government policymakers and regulators was a socially irresponsible relationship marked by the existence of huge Merck’s influence on government policies with regard to healthcare.

Section 5

Merck’s decision to voluntarily recall Vioxx was a sign of corporate social responsibility. The fact that Merck voluntarily withdrew Vioxx from the market without any external impetus from the FDA showed that the company eventually began to care about ethics and its consumers. Moreover, the urgency with which Merck’s top leadership made the decision to recall the drug once the matter was discussed showed proper corporate management and social responsibility (Cavusgil, 2007). However, the decision came way too late when many consumers had been negatively affected and exposed to cardiovascular diseases due to their ingestion of Vioxx. The fact that the company knew that Vioxx was a risk factor for cardiovascular diseases in the development stage of the drug yet continued to develop and sell it negates the goodwill Merck showed by voluntarily withdrawing the drug from the market. Merck should have withdrawn the drug way earlier to limit the number of its customers exposed to damage or injury from the use of Vioxx.

 

 

 

 

References

Cavusgil, E. (2007). Merck and Vioxx: An examination of an ethical decision-making model. Journal of Business Ethics76(4), 451–461. DOI: 10.1007/s10551-006-9302-3

Couzin, J. (2004). Withdrawal of Vioxx casts a shadow over cox-2 inhibitors. Science, 306(5695), 384-385. Retrieved from www.jstor.org/stable/3839277

Krumholz, H. (2007). What have we learned from Vioxx? BMJ: British Medical Journal, 334(7585), 120-123. Retrieved from www.jstor.org/stable/20506155

Lawrence, A. T., & Weber, J. (2014). Case Study: Merck, the FDA, and the Vioxx Recall. Business and Society: Stakeholders, ethics, public policy (Fourteenth ed.). New York, NY: McGraw-Hill Education.

Lawrence, A. T., & Weber, J. (2014). Business and society: stakeholders, ethics, public policy. (14th ed.). New York, NY: McGraw-Hill Education.

Wilson, D. (2011, November 22). Merck to Pay $950 Million Over Vioxx. Retrieved from https://www.nytimes.com/2011/11/23/business/merck-agrees-to-pay-950-million-in-vioxx-case.html