Merck and Its CSR
Facts
River Blindness is a disease affecting people in some of the poorest countries in the world, in Africa and Latin America. In 1978, an estimated 340,000 people have gone blind and about 18 million were infected with the disease. Dr. William Campbell discovered a possible use for ivermectin: It can be developed into a cure for River Blindness. He thus sent a memo to Dr. Vagelos requesting funds to develop the new product. The problem is that the product cannot be profitable. The target communities are not among the company’s target markets. Since these communities are in poor countries, the products cannot be sold at a profit in these areas. However, the development of the drug is within the scope of Merck’s mission and can help boost the company’s reputation. Dr. Vagelos need to weigh the issues and the impact of the program on all of Merck’s stakeholders. The matter of sourcing the funds for research and development, and later the manufacture and distribution needs to be answered.
Ethical Issues and Stakeholders
Merck’s dilemma is having a choice of accepting lower profits or earnings and of providing medicine to communities affected with River Blindness. Several stakeholders must be considered: (1) communities affected by River Blindness in Africa and Latin America; (2) Merck’s own officers and employees; (3) investors and stockholders; (4) governments of the countries of affected communities; (5) the US government; (6) potential donors and the general public.
Communities affected by River Blindness in Africa and Latin America
These communities are the target beneficiaries of the new medicine. Should Merck decide not to pursue the program, the number of people affected by the disease will continue to grow. This can adversely affect Merck’s image and reputation. Should Merck decide to pursue the project, there can be risks involved. For one the new medicine still needs to be tested and there are still unknown side effects.
Merck’s own officers and employees
The people at Merck need to be convinced and be committed to the program. Top management must agree to provide financial support the program may need. Merck’s employees also need to support the project as there may the program may need volunteer help. The scientists must also be convinced to accept lesser pay—if not pro bono—for the program. People must accept that growth in profits—thus, correspondingly bonuses and benefits—may not increase.
Investors and stockholders
Growth in profitability may go down. This does not necessarily mean that stock prices should also go down. Investors and stockholders will have to be managed well. They will have to be made aware of what Merck stands for and how important the program is for the company’s reputation.
Governments of the countries of affected communities
Many governments of concerned countries are corrupt. Bribery is among the many ethical issues with regard to dealing with these governments. Some way will have to be devised to circumvent these governments and ensure that the medicines reach the target beneficiaries.
US government
The company will have to lobby the US government for support. Some law may have to be passed so the program could partly be funded by the government. Bribery and misuse of the funds are some of the ethical issues here.
Potential donors and the general public
Merck will need to ensure that the project is sustainable. While doing philanthropic work, it will still need to do well as a business. So, it will need funding support from private donors. The company will need to do an intensive communication campaign to reach out to these audiences.
Traditional, social and new media
These channels are keys in the Merck’s communication campaign. Disclosure and transparency on the part of Merck is a major ethical issue. On the part of media, extortion can be an issue.
Recommendation
The program is an excellent opportunity for Merck to do good and to do well, and to build its reputation. The target communities are not within the vicinity of the company’s operations. They are remote places in Africa and Latin America and certainly not Merck’s target market. The company should invest in the program. The chief problem of the program seems mainly the funding. A combination of alternatives should be pursued: (1) funding from the company; (2) funding from the US and other developed countries’ governments; (3) donations and endowments; and, (4) reduced cost of research, by way of pay cuts of scientists specifically for this project. The first three alternatives are the obvious choices. The fourth one is important in integrating a culture of ethics and social responsibility within the company. Possible problems include negative publicity from side effects and declining stock prices as a result of negative publicity and slower profit growth rate. A communication campaign should be undertaken ahead of time to address these issues. The shareholders and the general public need to be conditioned that Merck is doing a noble task and they should support this effort. In the process, shareholders will accept declines in profitability. The public will also understand there are risks to new medicines but their benefits are more important than these risks.
Merck is one of the oldest and largest pharmaceutical companies in the world. Since 1985, the company’s stock market price has shown a steady rise with a spike in in the early 2000s . See Figure 1 in Appendix. It has been profitable in the 1960s-1970s and even today . The company could afford undertaking the program but may need external help in sustaining the program.
Merck has actually implemented Mectizan Donation Program and seems to have been successful in eradicating the disease in some areas . The company seems to have relied heavily on donations for the funding. While the development of the drug is certainly of great benefit to society, there is nothing said about the scientists accepting cuts in pay or working pro bono for the program. In this regard, the idea of philanthropy is a little bit diminished. In effect, the scientists’ pays were partly augmented by the donations. This does not in any way lessen the merits of the program. Rather, this seems to point out that, while Merck is doing a very noble program, it is still the typical, profit oriented organization. CSR and ethics are not fully integrated into the culture. Because if it were, the decision making process would have automatic. There should not have been any problem in the first place. Encouraging the scientists to do the project at less pay—if not pro bono—could have been a step in that direction.
Appendix
References
Merck & Co, Inc. (2016). Merck Annual Report 2015. Kentworth, NJ, USA: Merck & Co, Inc. Retrieved Jan 14, 2017, from http://s21.q4cdn.com/488056881/files/doc_financials/2015/annual/MRK_2015_Form_10-K_FINAL_r879.pdf
Merck & Co, Inc. (2016). More than 25 Years: The Mectizan Donation Program. Retrieved Jan 15, 2017, from Merck: http://www.merck.com/about/featured-stories/mectizan.html
Merck. (2016). 2015 Annual Report: Stronger. Darmstadt, Germany: Merck KGaA, Group Communications. Retrieved Jan 14, 2017, from http://www.merckgroup.com/company.merck.de/en/images/Q4_2015_Annual_Report_EN_tcm1612_147122.pdf?Version=
NYSE. (2017, Jan 24). Merck & Co, Inc. Retrieved Jan 24, 2017, from NYSE: MRK - 24 Jan, 6:49 PM GMT-5: https://www.google.com/search?q=Merck%20stock%20prices%20through%20the%20years&rct=j
Wright, B. (2016, Jan 29). How Merck Approaches Corporate Social Responsibility. Life Science Leader. Retrieved Jan 14, 2017, from http://www.lifescienceleader.com/doc/how-merck-approaches-corporate-social-responsibility-0001
