Introduction
Corporate responsibility assumes many other names based on context. Whatever the name one gives the concept, corporate responsibility aims to encourage businesses and corporations to assume the responsibility for its actions an enhancing positive impact by way of its activities towards its consumers, communities, employees, stakeholders and the environment. The concept has been the subject of scholarly debate for a while now. From the debate, scholars have postulated three perspectives of the concept of corporate responsibility. These are the social economic, the classic economic perspective and broader social perspective. This paper will review the implications of the three perspectives on the pharmaceutical companies with focus on Johnson and Johnson.
The social economic perspective on corporate social responsibility
According to the proponents of the socioeconomic view of corporate social responsibility, the social responsibility of a corporation's management supersedes maximizing of profits to include improving and protecting the society’s welfare. Businesses are affecting the society twofold; positively and adversely. With every benefit the society reaps from a business, there is a consequent negative effect. When looking at the activities of the pharmaceutical companies one cannot help but wonder where their ‘conscious’ is as far as societal needs are concerned. From the social economic perspective on corporate social responsibility, a corporation should be mindful not to just focus on maximizing profits but also improving and protecting the society’s welfare.
The social economic perspective on corporate social responsibility requires forms and businesses to maximize their profits but within the precincts of the law. This implies that pharmaceutical companies in making their profits should not involve fraud or deception and should not cause harm to others or social injury. In order to evaluate their actions to ensure that they are playing by the provisions of this perspective, the Kew Garden’s Principle offers the necessary guidance. According to the Kew Garden’s Principle, increased need results to an increase in responsibility. The pharmaceutical industries channel a significant amount of their money to advertisements (Keinert, 2008, pp.98 ).
This creates an increased need for their products as more people are aware of the existence of such products and the benefits they offer. The pharmaceutical companies benefit even more from the increased needs. Studies have also shown that the cost of most prescription drugs exceeds the cost of its ingredients by 5,000, 30,0000 and 500,000 percent. These are staggering figures given the demographic and social economic characteristics of the world population. With such high markups, the drugs are out of reach for the poor majority. Pharmaceutical companies are aware of the of the debilitating conditions which the poor countries are forced to live in due to disease. As such, they are responsible to help to the best of their ability (Sun, Stewart & Pollard, 2010, pp.78).
The high prices that their drugs fetch in the market is not a step towards alleviating the situation. The patent laws that give them monopoly for twenty years only serve to make them richer. It is true the patent laws are meant to make them recover the significant investments in research. However, blocking other companies that seek to make cheaper generic drugs through law suits is not responsible. This is true especially because the pharmaceutical companies have the capability to significantly lower the cost these drugs.
In addition, the pharmaceutical companies are the last resort when it comes to fighting some health conditions. For instance, HIV drugs are sold very expensively by the pharmaceutical companies. It is true that these drugs are very effective. However, the economic conditions of third world countries cannot enable them to purchase the drugs. It is for this reason that 78% of those that require the drugs in developing countries are not getting them and that the cost of HIV drugs for children is four times that of the drugs taken by adults (Velasquez, 2012, pp.12). Even though the per capita income is relatively higher in the United States compared to other third world countries, the same countries rely on the pharmaceutical companies in the United States and other developed nations for drugs (Gottschalk, 2011, pp.56).
Even if the pharmaceutical companies manufacture drugs that combat deadly and debilitating diseases, it is arguable that they are not meeting this mandate extensively. As espoused in the case study, only fourteen percent of the revenue from pharmaceutical companies is plowed back into research for new drugs. The biggest chunk of the money is channeled into advertising to attract new customers. Even if you are to consider at the 14% revenue channeled into the research for new drugs, the drugs are patented and as such come at the same exorbitant prices that the common poor cannot afford. The new drugs for HIV and Cancer are still under patent and will continue to be economically inaccessible for the majority that need them.On this premise, I posit that the pharmaceutical companies are not meeting their ethical obligations as far as the social economic perspective is concerned.
The classic economic view of corporate responsibility
The classic economic view of corporate social responsibility holds that as an economic institution, a business is directed towards profit making. The view posits that the only responsibility of a business to the society is to supply goods and services. The view also holds that it is the responsibility of the business to return the highest benefits to its shareholders. This view was endorsed by Milton Friedman, a Nobel Prize winner in economics. According to Friedman, a manager is primarily responsible to operate a business in such a way to meet the needs and interests of its shareholders. He held that the main interests of the shareholders were the maximization of profits (Monks & Minow, 2011, pp.153).
The ethical issues in corporate social responsibility require corporations to act in a manner that is mindful and serves both its own and the interests of shareholders and those of the larger society. These are ethical obligations by which a manager and a corporation are bound (Banerjee, 2007, pp.256). Looking at the case study, it is evident that pharmaceutical companies have come a long way in trying to meet these obligations. The drug companies meet their obligations to the shareholders. This is evidenced by the massive profits that the companies rake in annually. The companies are competitive and roll out massive campaign strategies to popularize their products against those of their competitors. For instance, the companies committed thirty one percent of their revenue into advertising.
This is a bold move by the administration of these companies aimed at penetrating new markets and increasing customer loyalty. It is because of such strategies that pharmaceutical companies make profits that are at times seven times the profits made by other companies in the Fortune 500. One would argue that the amount of revenues channeled to dividends to shareholders is half that which is channeled towards advertisements. While this is true, the long-term strategy of such moves is to create a large market base for their products hence ensuring sustained high profits.
The broader view of corporate social responsibility
The broader view of corporate social responsibility requires organizations and corporations to contribute to the society within the Kew Garden’s Principles. According to these principles, pharmaceutical companies should channel some of their revenue towards societal concerns. With increased needs comes increased sales and turnover which in turn lead to more profits. Over the last few years, pharmaceutical companies have been doing well economically. Even with the effects of the global financial meltdown being felt by manufacturing companies, pharmaceutical companies still made tremendous profits.
As such, these companies should channel considerable amounts of their revenue towards improving the society. However, going by the amount of revenue plowed back into advertising, their resolve for corporate responsibility is in doubt.
For instance, the prevalence of non-communicable diseases are increasing alarmingly. Since these companies are aware of this fact, they should feel responsible to finance campaigns to increase awareness and prevention or reduce the prices of some of the drugs used in the management of such conditions. The fact that more people that need some of these drugs, especially in the developing countries shows that there is still more to be done. Owing to the fact that these companies have the means and capabilities to help in these situations, it is unclear why they should not step up their efforts towards corporate responsibility and do more.
An analysis of Johnson and Johnson Corporate responsibility initiatives
Johnson and Johnson is a among others a pharmaceutical multinational of American origin. The company specializes in pharmaceuticals and medical devices. The company features among the Fortune 500 companies. For the last fifteen years, the company has produced a report of its corporate responsibility initiatives. The company is well rooted in the society with over two hundred and fifty subsidiaries which operate in over fifty seven countries. Its products retail in more than one hundred and seventy five countries globally. In the year 2011, the company reported global pharmaceutical sales of more than sixty five billion dollars. The company had made a profit of thirteen billion three hundred million dollars in the previous year. It is evident that the company’s responsibility to the society is expanse based on Key Garden’s principles. It would be important to know whether the company embraces the concept of corporate social responsibility. The following analysis of its website and report will illuminate on this issue.
According to the credo of the company, its first responsibility is toward the consumers of their products and the employees who work to manufacture and test the products until they are approved. Towards this end, the company strives to produce high quality products. The company also employs various cost cutting measures so that their products are sold at reasonable prices that are economically accessible by the entire population. According to the socioeconomic perspective, corporations can maximize on profits so long as they do so within the precincts of the law and without causing harm to others or the society. The pharmaceutical company is well aware of this. This is evident by its endeavor to produce quality products. Products of low quality, especially pharmaceutical products can cause deaths. They are also prone to resistance by microorganisms. The cost cutting measure has a marginal decrease in the price of the products. Although the marginal decrease is not significant enough to lower the prices significantly, it is a step in the right direction.
The company is also responsible to its stockholders as enshrined in the classic economic perspective of corporate social responsibility. To this end, the company continues to develop strategies that out it in pole position to make sound profits thereby increasing the value of its stockholders money. From the reports of the previous two years, there have been increases in volume of sales in pharmaceutical products. As espoused earlier, the company made more than sixty billion dollars in sales of pharmaceutical products. In the view endorsed by Friedman, a company’s responsibility is to increase the value of the shareholder through the maximization of profits.
As such, the company periodically invests in new equipment, new research, innovative programs and new facilities in order to increase the returns of the stockholders and the value of shareholders. In doing this, the company is careful to comply with the law as desired by the socioeconomic perspective of corporate social responsibility. To this end, the company trains its employees and partners on issues of corruption. Also enshrined in its policy, is the intolerance of corruption. This creates an organizational behavior where due process is encouraged and graft is shunned. Through such measures, the company improves the welfare of the society by abiding by the moral code and ethics. This is in line with the socioeconomic perspective that requires no human or societal injury in the maximization of profits.
Finally, the company is also responsible to the community within which it operates. The broad social perspective of corporate responsibility requires that corporations and businesses acknowledge that they require the communities for their economic survival. The general population forms their customer base and as such, it is the responsibility of such corporations to improve the communities. More precisely, the perspectives requires organizations to give back to the society within the Kew Garden’s Principles. To this end, the company is involved in many charitable activities aimed at improving the welfare of the community (Johnson and Johson responsibility report, 2011, pp.7)
For instance, the company in the spirit of giving back to the society has continued to donate mebendazole towards the treatment of children with intestinal worms in third world countries. Within the last two years, the company doubled the number of doses donated from 36 million to eighty million doses. This is in line with the Kew Garden’s Principles that require that if you know what could happen, and you have the ability to help, then it is your responsibility to help. In collaboration with other organizations, the company started the program dubbed Helping Babies Breathe. Through this program, the company offers skills in safe birth techniques to health are providers. Through such initiatives, the company helps reduce infant mortalities and the death of mothers during delivery. All this shows that Johnson and Johnson is conscious about its corporate responsibility. It is recommended that the company continues its corporate responsibility initiatives and to invest more in the society in order to enhance sustainability.
Conclusion
Corporations operate within the community. They offer products and services in return for money. More precisely, the survival of corporations is dependent on the communities within which they operate. For this reason, it is important for corporations to enhance the sustainability of these communities for continued business and as a way of giving back. This can be done through charitable activities as exemplified by Johnson and Johnson. The pharmaceutical company rakes in billions of dollars in profits annually. Yet, even in all this financial success, the company’s corporate conscious seems to be in the right place. There is more that can be done by other companies in the pharmaceutical industry and other industries too. Johnson and Johnson charts the path for other companies not just in the financial realm but also in the path to corporate responsibility.
References
Banerjee, S. B. (2007). Corporate social responsibility the good, the bad and the ugly. Cheltenham, UK, Edward Elgar.
Gottschalk, P. (2011). Corporate social responsibility, governance and corporate reputation. Hackensack, NJ, World Scientific.
Johnson and Johson responsibility report, 2011. Available at http://www.jnj.com/wps/wcm/ connect/e265d6804bc83ae392f6ffbf30c50c56/2011-responsibilty report.pdf? MOD=AJPERES
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Monks, R. A. G., & Minow, N. (2011). Corporate governance, fifth edition. Chichester, West Sussex, U.K., John Wiley & Sons.
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Velasquez, M.G. 2012. Business Ethics: Concepts & Cases (7th ed.). Pearson Education Inc., Upper Saddle River, N.J. (p212).
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