INFORMATION AND COMMUNICATIONS UNIVERSITY

SCHOOL OF HUMANITIES

DEPARTMENT OF BUSINESS

NAME : DEBORAH N. MWASE

SIN : 1409129528

PROGRAM : BACHELORS OF BUSINESS ADMINISTRATION

SUBJECT : BUSINESS ETHICS

ASSIGNMENT : 1

SEMESTER : 4

DATE OF SUBMISSION : 15 NOVEMBER 2017

EMAIL : deborahmwase@gmail.com

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Business Ethics and Cooperate Social Responsibility

Assignment Question 1

You are the chief executive officer of Nigel Pharmaceuticals and not everyone agrees that ethics

is a relevant or necessary subject for business dealings or education, some have even reached an

extent of arguing that business ethics is an oxymoron, or a contradiction in terms .in your quest

to enhance Business ethics and cooperate social responsibility, you decide to embark on a

number of approaches to the study of ethics.

a) What approaches are you going to use?

b) With examples for each one, what ethical issues and ethical dilemma are you facing at

Nigel Pharmaceuticals?

In any economy, particularly a capitalist free market, the goal of business is to sell a product to

satisfy demand. The company’s objective is to maximize profit, without breaking the laws of the

land. This profit motive is generally accepted as a characteristic of the free market and rarely

raises ethical questions. However, there are industries where social good may take precedent

over profit. The pharmaceutical industry presents one instance.

Much as some have even reached an extent of arguing that business ethics (Moon, Chris et al.

(2001) and corporate social responsibility (CSR) as it is popularly known, is a contradiction in a

business organisation, whose bottom line is to make profit, it is, however, important to note at

this juncture that ethics and social responsibility are necessarily applicable in enhancing, not only

the corporate image but also cement relationship with the community, upon which trust will be

established and ultimately foster community confidence in the product that the business is

offering for sale.

As the adage says, ‘people buy people (relational) before they buy your product (the tangibles)’-

so customer relations precedes a sale, leading to customer loyalty, which assures the company of

long term customer retention.

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This paper discusses the relevance of upholding ethics in relation to business dealings, with a

proposed look at particularly a Pharmaceuticals industry, of which Nigel Pharmaceutical is used

as a case study.

Key Words: Pharmaceutical, Ethics, Social Responsibility

Pharmaceutical is an activity related to the manufacture, preparation dispensing, or sale of drugs

used in medicine. It is derived from the Latin word ‘Pharmaceuticus’ meaning, ‘somebody who

prepares drugs’ or ‘pharmakon’ for ‘drug’ (17th Century).

Ethic is a code of morality; a system of moral principles governing the appropriate conducts for a

person, or group. It is also said to be the study of moral standards and how they affect conduct.

Social Responsibility or corporate social responsibility, as it is widely known, is the belief in

company`s accountability. By ‘belief’, this entails that a company should take into account the

social, ethical, and environmental effects of its staff and the community around it.

As regards the need to study ethics in relation to approaches in Nigel Pharmaceuticals, it is worth

noting that the pharmaceutical industry is a unique and significant component of the international

economy. It faces ethical issues distinct from other industries.

A pressing ethical issue for pharmaceutical companies, which sets the platform to an appropriate

approach, is that it ought to hold to a higher standard than those in other industries due to their

role in serving the public morally.

To qualify the above assertion, though the most significant aim of any business is earning a

profit, a pharmaceutical`s company’s (such as Nigel) single most important concern is to serve

the community with the sense of integrity so as to encourage a consumer purchasing a

‘lifesaving’ drug; and as such, it has a moral duty to invest in treatment research, a societal good,

even if it loses money in the process. This drives the discussion to specificity of the approach to

use as far as enhancing ethical conduct and social responsibility is concerned (particularly that

there has been dissenting or unorthodox views about the relevance of application of ethics in the

as noted in Nigel Pharmaceuticals company (Crow, 2015).

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The specific approach, that any chief executive officer, Nigel Pharmaceuticals, inclusive, would

use include, though not limited to: Identifying and renewing Company Values; Secure visible

commitment from senior managers; Engage the board of directors; Develop an ethics code or

Code of business conduct; Build ethics into Mission and Vision statements; Integrate ethics into

All aspects of company communications and encourage "ethical autonomy" among employees

(Gandel, 2015).

Every organization needs a set of ethics policies and procedures to describe how the ethical

values are to be implemented. These policies and procedures are the means by which the

organization communicates expectations and requirements to its employees. Once ethics policies

and procedures are in place, the organization should develop measurements for determining if its

ethical standards are being maintained and if those standards are yielding the desired results.

Companies without a clear set of values may find themselves at a disadvantage when developing

ethics programmes. Ethics programmes are most effective when perceived by employees to be

"values-driven" rather than simply compliance-driven, and values-based programmes are most

effective in reducing unethical behaviour (similar to what is almost happening at Nigel),

strengthening employee commitment, and making employees more willing to deliver bad news

to managers. Many companies conduct regular company-wide initiatives that involve employees

at all levels of responsibility in renewing company values and updating them when appropriate.

Most ethics professionals agree that it is crucial to enlist senior management support if an ethics

programme is to be successful. Senior managers should participate in training sessions, make

ethics a regular element in speeches and presentations, and align their own behaviour with

company standards. If employees view an ethics programme as merely an effort to protect the

reputation of top management, the programme may prove more harmful than no programme at

all.

Engage directors in the ethics process by instituting a board ethics committee or by placing

ethics on the board agenda as a regular item for discussion. There is need to consider special

training to enable directors to carry out their ethical responsibilities confidently. Many

companies have instituted board ethics committees and training in recent years, a move

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motivated in part by the Caremark decision (1996), which established the precedent that directors

may be held liable for corporate ethical transgressions.

Comprehensive codes are aligned with company values and all applicable laws, address the full

range of ethical dilemmas employees are likely to face, and are updated regularly as new

challenges emerge. It is important to be clear and specific about what is required of employees,

where flexibility is allowed in decision making, and which ethical issues are non-negotiable.

Unclear rules and unclear expectations of employees are the single most prominent obstacle to

ethical behaviour.

Many companies build ethical values and goals into their mission and/or vision statements. This

helps senior managers and employees understand that values and ethical standards are integral to

all company operations and planning, and not simply an "add-on" to be considered after

important decisions have been made. This would be enforced in Nigel.

There would be need to influence or leverage existing company infrastructure to demonstrate to

employees that ethics is an integral part of all operations and decision making. There would also

be urgency to integrate ethics and compliance training materials into multiple delivery sources

including new employee orientations, management courses, sales training, business meetings,

business plans, and other aspects of day-to-day activities.

Effective programmes require an adequate and sustained level of financial and human resources.

Some ethics officers have found it useful to make a list of other companies’ ethical lapses, and

the costs incurred as a result, when making the internal business case for adequate resources for

an ethics programme, and as such, Nigel would secure adequate funding and staff to accomplish

the envisioned approach.

Finally, it is worth noting with caution, that no matter how lengthy or detailed, no ethics code

can cover every ethical challenge a company and its employees will face. This is especially true

as business operations expand globally and as technology enlarges the scope for potential lapses.

Employees with a solid understanding not only of their company’s ethics code but of the values

that support that code are better able to make appropriate decisions, even when confronting a

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new and complex challenge, and hence the need to encourage ethical autonomy among

employees shall be prioritised at Nigel Pharmaceuticals.

It can be concluded that, in many industries, a consumer will simply not participate in the market

if his demand is lower than the market price. However in the case of vital medication, demand is

so inflexible the supplier could charge an exorbitant price and demand would remain steady.

Essentially, businesses that could include pharmaceutical suppliers can put a price on human life

– and that price can be high.

However, from ethical and social responsibility perspective, pharmaceutical firms, such as Nigel

have a moral obligation to provide fairly priced drugs lest they use their consumers as a means to

a profit rather than prioritizing fair access to medication, and hence the significance to sensitise

the workers on their moral obligation to serve ‘the near-vulnerable’ human life.

b) With examples for each one, what ethical issues and ethical dilemma are you facing at

Nigel Pharmaceuticals?

Companies in the pharmaceutical industry are dependent upon the profits generated by the sales

of their products to satisfy investors and fund the research and development of new products.

Only one out of large (e.g. of every 15,000 substances that are researched will eventually become

a medicine (Katen, 2006: 6). This end result will occur after about 15 years and colossal sums of

money in associated costs (ibid, p.6).

The risk associated with the industry is high and often times may lead to questionable ethical

behaviour in the area of marketing as firms attempt to gain advantage over their rivals and

meaningful penetration for their product.

After acknowledging the pharmaceutical industry possesses unique elements that give a few

dominant companies control over drug creation and distribution, it is soon recognized there are

inherent ethical problems with the structure of the industry, and this has had an effect on

pharmaceuticals, of which Nigel, is included.

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The most pressing concern is whether, for humanitarian purposes, pharmaceutical companies

have a moral responsibility to supply affordable drugs and to invest in developing new

treatments. The current system provides incentives for research by exchanging patent protection

for introducing new drugs to market, but there are few enticements to keep prices low. Public

and investor relations can motivate companies to reduce prices and they are required by law to

provide drugs to national dispensing organisation (e.g. such as National Medical stores, in

Zambia) at discounted rates.

As it may well be known, the pharmaceutical industry worldwide spends billions each year on

marketing. Of this amount, 90% is directed at physicians in the form of free meals, gifts, drug

samples, and sponsorship of continuing education programmes (BMJ, 2006, Specialty Journals,

October). In a survey published by the Journal of Medical Ethics, 90% of respondents felt it was

ethical to accept free drug samples and one in three doctors surveyed agreed that free drug

samples influence their prescribing of drugs (ibid).

Large sums of money in the hands of marketers and a receptive audience that has direct influence

over the buyer market can often result in questionable ethical behaviour on both sides. The fact

that there hasn’t been ‘pressure’ from medical centres to prohibit physicians from accepting all

industry gifts on-site or at off-site facilities, there has been evidence, in recent years of an

erosion of the public trust in the profession of medicine and even in the value of science (Pizzo,

MD, 2006).

Part of that is related to the market forces that have increasingly converted medicine from a

profession to a business, but a significant factor has also been the perception that physicians and

scientists may be accepting gifts and gratuities from industry at the very time that the cost of

drugs is “skyrocketing” ( Stanford University, 2006).

Issues regarding questionable behaviour are not limited to medical practitioners and their

interaction with marketers, and it is from this scenario that some employees in Nigel

Pharmaceuticals are questioning the relevance of upholding the code of ethics when other

companies have taken a laid- back kind of approach (Alonso-Zaldivar, 2006:18).

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Due to scarcity of human capital in the medical research field, National Institute of Health

worldwide, have garnered attention due to the disclosure that it may relax certain ethics rules in

order to retain scientists (Willman, 2006: A14).

If this becomes the practice, then there is a probability that the researchers may be found deeply

involved, similar to the allegations invested by Willman (2006) a clinical trial was manipulated

by a researcher to give a drug a better chance of succeeding (Oransky,2006:13).

The above move poses a dilemma to Nigel that believes in enhancing ethics and social

responsibility, because allowing employees to receive compensation from pharmaceutical firms

only serves to raise questions regarding the integrity of the agency’s decision making process.

Rather than relaxing ethics rules, the agency (and others like it) should be searching for ways to

improve adherence to higher ethical standards. One solution might involve increasing the

compensation of scientists as a method to increase employee retention. Individual firms that

choose to compensate employees as part of their business practice need to re-evaluate this

business strategy as it relates to marketing their products and perceptions by their customers.

It is morally acceptable that Participants in the pharmaceutical industry have an ethical and moral

responsibility to the patients who should benefit from the drugs they develop and market.

Marketers, worldwide, have been provided with a general framework for acceptable marketing

practices and behaviour.

Two key tenets of the code are that marketers will i) be honest in serving consumers, clients,

employees, suppliers, distributors, and the public, and ii) not knowingly participate in a conflict

of interest without prior notice to all parties involved.

Honesty can take different forms – it could mean removing a drug from the market voluntarily

after negative side effects are discovered or it could mean dealing fairly with suppliers and

distributors. From the marketer’s perspective, a problem arises when a conflict of interest is

created without the knowledge of the end user of the product. This occurs when the doctor’s

decision to prescribe a drug is based on factors other than the potential benefit to the patient.

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Patients must be able to trust that when a physician prescribes a particular drug it is because it is

the most suitable drug to treat the ailment. If the decision to prescribe a drug was influenced by

non-medical reasons, then both the marketer and the physician are guilty of engaging in

unethical practices.

In summary the collection of dilemmas that Nigel face include: Interference with the scientific

publication process (for example by hiding data or by “ghostwriting” scientific articles

supposedly written by famous researchers); Interference with the clinical trials process;

Lobbying more generally: pharmaceuticals spend an enormous amount of information trying to

sway public policy; making inaccurate or inflated claims about the effectiveness or safety of their

products and inadequate attention to quality control (Mullins, p.45).

All of these are ethically problematic, and involve behaviour that is beyond the bounds of the

rules of a capitalist market.

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References

BMJ (2006).Drug Law Week 7, Specialty Journals.

Crow, David. (2015) Pharmaceuticals: A Harsh Dose of Reality.” FT.com. Financial Times

Gandel, Stephen. (2015). Valeant: A Timeline of the Big Pharma Scandal, Fortune

Gurciullo, Brianna. (2015) Pharmaceutical Industry, under Scrutiny for Prices, Has History of

Big Political Wins. Center for Responsive Politics

Katen, K. (2006). Do Well by Do Leadership Excellence, 23(10), 6-7.

Moon, Chris et al. (2001). Business Ethics. London: The Economist: Pp. 119-132

Oransky, Ivan (2006, October 7). Transparency Needed in Drug Researchers’ Finances [Third

Edition]. Boston Globe, p. A.13.

Stanford University, New Stanford Medical Center policy: limiting drug company access and

gifts. (2006). State & Local Health Law Weekly3

Willman, David (2006). Questions & Answers / National institutes of health ethics rules; Drug Companies' Consulting Fees at Issue: Los Angeles Times, p. A.14.

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Assignment Question 2

Discuss the relationship between business ethics and corporate social responsibility and the

difference in the two concepts; thereafter explain how the two concepts are applied in

organizations.

One of the core beliefs of any business (Zook, 2004) (as an ethical entity run on ethical

principles) is that business has a social responsibility (embedded in ethics) as well as an

economic mission.

This proposition is not new - Peter Drucker argued that companies have a social dimension as

well as an economic purpose in his second book, The Future of Industrial Man (1942).

During the late 1960's and 1970's, corporate social responsibility emerged as a top management

concern only to seemingly "wither on the vine" during the 1980's.

Today, it is back on the agenda of many CEO's. This time it is also on the agenda of

governments, both national and local, as well as NGO's, consumer groups, investors, and other

actors in civil society.

As a matter of fact, both concepts; Corporate Social Responsibility and ethics are premised on

moral conduct as their basis. This assertion is qualified by the definitions of an ethic, which is a

system of moral principles governing the appropriate conducts for a person, or group; the

understanding of moral standards and how they affect conduct (Palazzi & Starcher 1998).

On the other hand, corporate social responsibility is the belief in company`s accountability or

culpability by taking into account the social, ethical, and environmental effects of its staff and

the community around it. In a nutshell, both translate into caring for fellow human being- which

is ethical by nature.

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This paper seeks to discuss the relationship between business ethics and corporate social

responsibility and the difference in the two concepts; thereafter explain how the two concepts are

applied in organizations. It does this by ‘comparing’ and ‘contrasting’ the two concepts` core

business approach.

Ethics concern an individual’s moral judgements about right and wrong. Decisions taken within

an organisation may be made by individuals or groups, but whoever makes them will be

influenced by the culture of the company. The decision to behave ethically is a moral one;

employees must decide what they think is the right course of action. This may involve rejecting

the route that would lead to the biggest short-term profit.

Ethical behaviour and corporate social responsibility can bring significant benefits to a business.

For example, they may Attract customers to the firm’s products, which means boosting sales and

profits; Make employees want to stay with the business, reduce labour turnover and therefore

increase productivity; Attract more employees wanting to work for the business, reduce

recruitment costs and enable the company to get the most talented employees; and attract

investors and keep the company’s share price high, thereby protecting the business from

takeover.

Social responsibility, on the other hand, is fundamentally a philosophy or a vision about the

relationship of business and society, one requiring leadership to implement and sustain it over

time. It is most effectively treated as an investment, not a cost, much like quality management. It

is a process of continuous improvement, not a fad, which begins small and grows and expands

over time. It has been referred to as "caring capitalism" in contrast to "financial capitalism"

(Zook, 2004) or "cowboy capitalism" and other more aggressive forms of free enterprise.

It is inextricably linked to profitability, as there can be no social responsibility without profits.

One of the most socially responsible things most companies can do is to be profitable. Profits are

essential not only to reward investors but also to provide sustainable jobs, pay fair wages, pay

taxes, develop new products, invest in services, and contribute to the prosperity of the

communities in which business operates.

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Knowing that the company they deal with has stated their morals and made a promise to work in

an ethical and responsible manner allows investors’ peace of mind that their money is being used

in a way that arranges with their own moral standing.

When working for a company with strong business ethics, employees are comfortable in the

knowledge that they are not by their own action allowing unethical practices to continue.

Customers are at ease buying products or services from a company they know to source their

materials and labour in an ethical and responsible way (William & Freeman, 1993).

A company which sets out to work within its own ethical guidelines is also less at risk of being

fined for poor behaviour, and less likely to find themselves in breach of one of a large number of

laws concerning required behaviour (Green, et al, 1994).

Reputation is one of a company’s most important assets, and one of the most difficult to rebuild

should it be lost.  Maintaining the promises it has made is crucial to maintaining that reputation

(Friedman, 1994).

Businesses not following any kind of ethical code or carrying out their social responsibility leads

to wider consequences. Unethical behaviour may damage a firm’s reputation and make it less

appealing to stakeholders. This means that profits could fall as a result.

The natural world can be affected by a lack of business ethics. For example, a business which

does not show care for where it disposes its waste products, or fails to take a long-term view

when buying up land for development, is damaging the world in which every human being lives,

and damaging the future prospects of all companies.

The concept of corporate social responsibility embraces multiple stakeholders or partners

(employees, customers, suppliers, the environment, local authorities, governments and others) in

addition to shareholders and other investors.

Corporations can no longer be isolated economic actors operating in detachment from society

and working solely for shareholders. Rather, they are inextricably linked to the social, ecological

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and human fabric and they are therefore responsible in varying degrees to all stakeholders

(Murray & Richardson, 2002).

To understand how these two concepts are applied in the business environment, it is important to

appreciate that the overall health of businesses affects that of the other parts of society, just as the

health of one organ or part of the human body can affect one's overall health. It is increasingly

evident that corporate environmental and social responsibility is now on the agenda of business

leaders as well as other opinion leaders in society.

These theories attempt to derive what might be called "intermediate level" principles to mediate

between the highly abstract principles of philosophical ethics and the concrete ethical dilemmas

that arise in the business environment. Philosophical ethics must provide human beings with

guidance in all aspects of their lives.

A normative theory of business ethics attempts to focus this general theory exclusively upon

those aspects of human life that involve business relationships. By thus limiting its range of

application and translating the language of philosophical ethics into the everyday language of the

business world, such a theory is specifically designed to provide human beings with ethical

guidance while they are functioning in their capacity as business people.

Both Ethics and corporate social responsibility are, therefore, important to businesses for many

reasons other than the ones listed above. Businesses can increase sales or increase their

reputation.

References

Carrol, B. Archie, (1996) Business and Society: Ethics and Stakeholder Management

Dennis P. Quinn & Thomas M. Jones, (1995). An Agent Morality View of Business Policy, 20

Acad. Mgt. Rev. 22, 22.

Dunfee, Thomas W., (1995). Business Ethics Quarterly devoted to the social contract theory.

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Green, Ronald M., (1994). The Ethical Manager.

Jones, Thomas M. Corporate Social Responsibility: Revisited, Redefined, 22 Cal. Bus. Rev. 59,

59 (1980),

Joseph W. Weiss, Business Ethics: A Managerial, Stakeholder Approach (1994).

Murray, Elspeth. & Peter Richardson. (1992). Fast Forward, Oxford Press Inc.

Norman E. Bowie & R. Edward Freeman, (1992). Ethics and Agency Theory: An Introduction, in

Ethics and Agency Theory 3, 3-4 (Norman E. Bowie & R. Edward Freeman eds.).

Palazzi, Marcello, & George Starcher (1998). Corporate Social Responsibility and Business

Success, Paris: European Bahá'í Business Forum

William M. Evan & R. Edward Freeman, (1993). A Stakeholder Theory of the Modern

Corporation: Kantian Capitalism, in Ethical Theory and Business 75, 77 (Tom L. Beauchamp &

Norman E. Bowie eds., 4th ed.).

Zook, Chris. (2004). Beyond the Core. Harvard Business School Press.

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