Business Ethics
Palmeri, C&Rupp, L 2013, May 3, Disney Bangladesh Exit Pressure on Clothes makers Who Stay, Retrieved from http://www.bloomberg.com/news/2013-05-03/disney-bangladesh-exit-puts-pressure-on-those-who-may-stay-1-.html
The work of Palmeri and Rupp (2013) is focused on highlighting the issues faced by the multinational organizations while operating in developing markets. It is highly likely for large organizations to develop their overseas presence. However the economically developing markets a number of issues including environmental, infrastructural, and compliance with health and safety standards according to internationally acceptable norms. The research is about the decisions of multinational corporations including Disney, Wal-Mart, and J.C. Penney initiating a closure of their manufacturing sub-contracts with multiple suppliers present in Bangladesh. However Gap and Children’s Place Retail Stores Inc. (PLCE) are reported as continuing their operations in the country and providing assistance to improve working conditions.
The incidents of carrying risks for health and safety regarding workers in the Bangladesh market have instigated the concerns of large organizations. Two notable incidents are reported as causing 501 casualties during a building collapse as well as the building fire incident causing 112 deaths. These incidents raised international community concerns about the safety standards followed in the country. It is also noted that the country’s economy has gained a growth momentum after governments facilitated international investments.
The corporations are not only informing the consumers of their products that their products were not being manufactured at the incident sites. The contrary view of organizational leaders is based on the principles of providing assistance to the country as well as placing their weights behind the efforts for improving the health and safety standards in the market. It is also argued that while working closely with corporate leaders, pressure groups and other stakeholders it can be an effective approach to mobilize support and as a result the government and local manufactures taking appropriate measures to improve the situation. It is required to understand the implications of these risks on business as well as the communities within the country. The ethical business practices, cost of these initiatives, labor regulation concerns, and recommendations for improvements are described as following.
The identified issues are concerning corporate social reasonability and ethical business practices. It is evident that the country has gained a large portion of internal investment through various corporations after the government announced facilities for businesses. It has not only provided growth and economic development to the country. The employment rate has also risen, however the measures required to sustain the influx of investment were not adequately addressed. The country has a loose regulatory structure in terms of health and safety systems for manufacturing industry. The factories buildings and manufacturing units lack basic necessities to ensure workforce safety and health. It is also observed that the industrial developments are also found in the residential areas as a result the adequacy of safety regulations cannot be ensured.
The issues of ethical consideration are also highlighted in terms of the western businesses liable for providing the products to their customers that are manufactured according to high ethical standards. The presence of large manufacturing facilities of organizations in countries with inadequate infrastructure and health and safety regulations carries multiple risks (Lund & Marriott2011).
It may result into effects on business performance, delayed supply of products, and consumer mistrust in business following ethical practices. The large corporations are emphasizing on the needs to improve country’s regulatory system to comply with the international standards of health and safety of the workforce as well as the workplace environment.The need for adequate safety infrastructure is also highlightedafter the events causing large number of deaths and injuries in the reported events. The businesses following global souring solutions should also consider the ethical issues faced while being present in the developing markets including Bangladesh, Belarus, Ecuador, and Pakistan that are taken off the supplier’s list for not following the health and safety standards.
The economies offering low cost procurement solutions should also adhere to the required standards required by the consumers of International markets. According to Ferrell (2012) the regulatory agencies should ensure that ethical business practices are followed through the industrialized markets. The western players have adopted a route to low cost manufacturing through establishing their presence in emerging markets. There are multiple differences in the cultures, environment, and standards of these markets. The business following a different manufacturing facility is in perusal of reducing cost as well as improving the business performance through offering low cost products to its target markets. It is also observed that sustainability is also compromised through using unethical practices in business.
The business has also adopted various models to adopt features of corporate social reasonability. Initially it was only seen as efforts to adopt environment as a concern, later the labor laws, health and safety, as well as usage of organic materials came into consideration. The issues of sustainable growth are linked with the adoption and degree of accuracy in practicing the ethical considerations. The businesses adopt multiple approaches including the manufacturing in environmentally and labor safe manufacturing facilities. One of the significant factors in adopting such operations is associated with cost of production. The products produced using organicmaterials and implementing health and safety standards costs a business. This cost is transferred to the customers through increased price of products. The businesses like Wal-Mart and J.C. Penney have a large stake in the country as a large number of their products are coming from these countries. They are willing to work on multiple fronts to improve situations causing such accidents (Patwary, O’Hare&Sarker2012). The large giants are joining their hands to develop a comprehensive framework for the country’s government and regulatory agencies to follow in order to ensure that the issues are addressed adequately. The organizations like Gap and PLCE are reported as not willing to neglect the industry in country and they are proposing a close collaboration with suppliers and manufactures to improve health and safety conditions within the country.
The shareholders of business are affected through various implications of ethical issues. The issues are resolved through adopting proven techniques and models. The situation of labor health and safety are also categorized as a response to ethical considerations as well as the requirements of corporate social responsibility. The business involved in global souring through emerging markets cannot abstain from taking reasonability of the actions and practices adopted by original equipment manufacturers (OEM) and subcontractors for manufacturing. The argument is also supported by the fact that the effect of practices followed to manufacture products is transferred to clients.
The changes required in improving similar stations can be implemented through comprehensive coordination with the concerned authorities of the country. It is the duty of the government in the country to make laws regulating the situation of health and safety through manufacturers. The regulatory authorities along with the international notifying agencies can play a vital role in developing infrastructure as well as implementation of practices to bring the country’s industry in line with the global requirements.
It is also important to consider the responsibility of the multinational organizations to seek subcontractors and OEM suppliers that are following ethical practices. The issue can also be resolved through setting up a requirement for supplier evaluation according to the international standards of health and safety. The second approach could be to require a certification from notifying bodies that the ethical practices are followed by the supplier seeking agreement with the multinational corporations. The country’s economic growth and manufacturing facilities can suffer in case the situation is not corrected it should be highlighted in developing a coordinated approach towards mechanism for improvements. The strict implementation of health and safety regulations can also be ensured through regular periodic audits according to the requirements of international organizations.
The industry is engaged in a number of practices to increase their business appeal. These efforts include a variety of initiatives taken in the form of corporate social responsibilities. The corporate social responsibility initiatives are also taken with multiple intentions including improving product and services appeal for target markets. It is also observed that corporate social responsibility initiatives are also taken to increase market value of the products. However there are multiple factors influencing the cost of products and as a result the appropriate mix of price is disturbed. The cost of products is dependent on the direct and indirect costs associated with the manufacturing process. The role of raw materials and ethical practices followed during the manufacturing process creates a leverage point for the business. The businesses advertise these key elements to enhance customer appeal.
The technological developments and globalizations have changed traditional business practices. It is also the case that the adoption of technological solutions especially supplies chain management enhances the business prospects for securing raw materials from international market, manufacturing from emerging markets, and placement of stocks ate various strategic locations. The markets are also different from each other in terms of consumer trends and buying patrons. The customers of one market might not be willing to pay extra cost of product manufactured through ethically improved business standards but other markets can have the potential to pay the cost of better-quality products.
The research of Trudell and Cotti (2012) investigates the relationships of ethical business practices as corporate social responsibility in terms of its impacts on business performance. The business performance of the organization is determined with respect to the number of items sold or revenues generated over a period of time in comparison with the pervious sales. The business targeting the consumers of high ethical standards tend to gain advantages for their corporations. The business deploying ethical business processes should take into account multiple factors influencing their consumers.
It is also required that the business takes a route of thorough investigation prior to take any investment decisions. The businesses seeking support of the ethical business practices such as usage of organic raw materials and adopting manufacturing processes according to labor ethical labor standards should also research about the cost of adopting such practices. The cost required to maintain effective ethical business practices is ultimately transferred to their customers. Therefore the opinion about such developments should also be sought from their customers. However key issues similar to the ones mentioned in the work of Palmeri and Rupp (2013) are of particular importance. The business should not only implement but ensure that all the partners of supply chain follow the similar standards as expected by the final consumers.
The issues related to other less important ethical consideration can be left as electives for corporation’s management to decide. A qualitative and quantitative market research is required to assess the views of consumers. The businesses doing prior research to judge consumer trends should also involve providing information about the additional price projected for ethically manufactured products. The ultimate goal of a business is to provide maximum value to their stakeholders including investors, shareholders, employees, and customers. In case the customers are not willing to pay an extra cost of desired ethical practices deployed by the business it is not a viable recommendation to adopt such advancements. However the business can also gradually shift its target market from to high income groups including the ethically high standard target markets.
The ethical practices adopted by the businesses have brought benefits for numerous organizations. It is also a standard practice to acquire sustainability in business processes through adopting ethical business advancements. The business can attain a high level of sales as well as increased business performance. It is also observed in the research of Trudell and Cotti (2012) that a vigilant adoption of ethical business practices are helpful in creating a sustainable product line. Having said that all these efforts are directed towards the business profitability and increased prestige for the brand. In some cases it is also observed that outcome of all these efforts does not necessarily result into similar advantages. The increased price is rejected in certain cases as the targeted consumer does not value the cost of ethical business practices. It is highly recommended for consumer goods producers as well as industrial business suppliers to conduct appropriate market research prior to incorporate changes in their business processes as well as the product line.
The article highlights the issues of corporate social reasonability and ethical considerations. It also explains the highly ineffective regulatory situation in Bangladesh with respect to the occupational health and safety standards (Levy, 2006). The industry in the country has experienced a gain in growth and foreign investments have provided them the required capital to improve economic situation. In return the multinational organizations benefit from low cost products manufactured through OEM and subcontracted suppliers. However the recent events causing death after building collapse and fire in the manufacturing facilities providing assistance to global businesses has raised concern about the situation in the country. It is observed that key players are either considering aborting their procurement from the market or trying to develop a comprehensive mechanism to improve the situation (Alam, Amin & Rives2012). There are number of countries including Brazil and Valenzuela where similar condition provoked Disney to exclude these countries as manufacturers.
The concerns about health and safety of the workforce as well as framework to ensure that these risks are managed within the industry are highlighted. The organizations are coordinate with the local authorities and businesses to improve such situation. The impact of foreign investment in the country’s economy has played a vital role in developments. The country including other emerging markets should adequately address issues of corporate social responsibility and follow ethical practices in order to create an impact on the western corporations as reliable partners.
The cost of improving the situation may result into additional price for international players and finally their consumers. It is also required that the businesses conduct a thorough market research and cost benefits analysis to assess the impact of improving the situations. The negligible cost can earn increased profits for organizations with multinational presence. The role of international notifying bodies cannot be ignored in efforts to ensure that global standards are followed as industry practices for fire, infrastructure, and employee safety. The approach taken by Disney cannot be appreciated as it will have multiple effects on Bangladesh economy. The approach adopted by GAP, Wal-Mart, and J.C. Penny is appropriate as they are willingto coordinate and improve the situation in the country. The corporations can also take measures at their own to encourage supplier for adopting international standards of health and safety.
Van Voris, B 2013, April 27, Novartis Treated Doctors to Fishing, Hooters Outings, U.S. Says, Retrieved from http://www.bloomberg.com/news/2013-04-26/novartis-paid-for-doctor-fishing-hooters-outings-u-s-says-1-.html
Van Voris (2013) highlights an important issue faced by the United Sates healthcare industry. The research provides significant insight in terms of the healthcare industry’s malpractices. United States case against Novartis, one of the largest pharmaceutical giant is discussed. The business is allegedly involved in malpractices related to pay kickbacks, discounts, and bribery to physicians and pharmacies to promote their products. It is also observed in the article that there are multiple cases against Novartis regarding involvement in unethical practices. The government’s intervention in the case filed according to the False Claims Act in 2011 provides the evidence that authorities are convinced about the alleged violation of Anti-Kickback Statute. The business is also found to be involved in unlawful promotion of their two hypertension drugs. It is also implicated in promoting its diabetes drug Starlix. The law suit is requesting the courts for triple damages and civil penalties applied to the drug manufacturer.
The business is also accused of spreading corruption in prescription drugs dispensing process through its million dollars incentive programs. The business has increased its sales of the drugs through pharmacies and doctors. The incentives given to the pharmacies resulted into increased sales and profits as a result of the alleged kickbacks given to the culprits. The list of allegations and court verdicts against the company are increasing with the passing time. The business is ordered to pay for $2.1 million in a trial regarding the Aredia and Zomets. The jaw of the cancer survivor is reported to be damaged by using these drugs. However the business sources disputes the charges and court verdicts. Novartis had to pay for damages amounting $422.5 million to settle criminal and civil charges. The charges of paying kickbacks and illegal promotion of drugs for unapproved uses are the cause of such fines.These drugs are used for bone strengthening. The alleged payments of discounts and rebates are regarded as the business involvement in kickbacks to pharmacies for persuading customers to switch to the company drugs instead of what is being prescribed for them. It can be a clear indication that the business is practicing against business ethics as well as creating issues regarding the healthcare system.
The most significant development is the imposition on the corporation to sign five years corporate integrity agreements that requires the business to comply with the regulation. Moreover it is an agreement to restructure the promotion activities of the business involving a major consideration to the public healthcare and pharmaceutical code of conduct. The agreement is between the business and Health departments of United States.
Furthermore the identified ethical issues are challenges for the healthcare system within U.S.. It is observed that U.S. healthcare system is governed according to the social security health care benefits system. The system is also capable of providing a nationwide support to the clinics and patients. It is also noted that the business cannot be allowed to cater their markets through kickbacks and discounts of unethical nature. The United Sates is home to numerous pharmaceutical giants. The alleged influence of these corporations on the political and governmental officials is also one of the factors which provide them to utilize the system loose loops. The industry wide practices used to promote products through direct access to sales activities with doctors, physicians, and pharmacies enables the inclusion of kickbacks and bribes for prescribing specific company’s drugs. The doctors and physicians are given multiple advantages for prescribing the drugs. It includes offers of fully board trips for holidays, leisure trips, completely sponsored foreign trips as conferences, and various other benefits. The targets for selling are achieved through medical sales representatives. The companies also develop discount programs for large pharmacies to promote their products and persuade customers to buy drugs other than the prescribed medicine. It can be clearly marked as unchecked influence of the corporations to promote their products.
The theory of ethical business marketing does not allow the corporations to play with the lives of patients. The marketing techniques used by pharmaceutical companies are against the ethics of marketing and promotion. The businesses cannot be allowed to influence healthcare system through such activities. The promotion of drugs should not be made in such connection. It is also required to comply with the legal regulations. The complacence system of the marketing campaigns should also be developed in accordance with the acceptable industry standards. The business is allegedly involved in designing promotional campaigns holding numerous suspicions. The pharmacies cannot be allowed to promote one product over another. The prescribed drugs should be given to the consumers. The program design to allocate discounts is also named as a blanket approach for providing illegal kickbacks in case of promoting the products.
The business approach to facilitate doctors has also raised questions about the integrity of marketing campaigns. The unethical facilitation of physicians is regarded by the business as industry acceptable standards. The company is found to be claiming that they are operating under ethical codes of conduct. The research indicates that the company representative has claimed that the physician speaker program is followed by other players of the industry. Moreover the rebates and discounts in the Myfortic case filed by the government are also a customary practice followed throughout the industry. The kickbacks case is also disputed by the representative stating that the local area laws and regulations do not apply on this type of conduct.
The argument above provides enough grounds for raising concerns regarding the integrity of the industry practices followed by the company competitors can also be questioned. It is a liability of the governments and regulatory authorities to take action against the normal practices followed throughout United Sates to use doctors and physicians for promoting the products. The facilities provided by the companies to the doctors and physicians are also not appropriate. It is clearly marked as a case of mistrust and using ethically inappropriate business practices. It is a matter of legal and regulatory concern. A large organization facing frequent legal cases against its practices should be discussed in detail and coordinated approach is required to ratify the issues throughout industry. Following recommendations can provide a solution for such issues.
The implementation of programs for corporate social responsibility based on the acceptable ethical business requirements is an essential element. According to Friedrichs (2009) the cases of bribery and kickbacks can result in to tremendous business damages as the drugs marketing and sales involves large amounts on stake. The business should coordinate with each other and implement standard ethical code of practices (Kline 2012). The business is required to take balanced approach for the marketing and sales promotional campaign. The trust of patients and consumers of drugs cannot be damaged through such cases. The federal drug regulatory authorities as well as the law markets should also implement strict checks on the business to implement compliance regulations. The regulations for drug marketing and physicians contact with the pharmaceutical companies should also manage through the strict local and federal laws (Sismondo&Doucet2010). The cases against the abusive use of industry provisions should also within the limitations of ethical business practices. The business is required to gain additional support through developing consumer focused approach can complement the industry growth. The work of Wolper (2004) indicates that the anti-kickback statute is a complicated and highly technical regulation. It should be improved in accordance with the industry practices allowing a reliable system development through vigilant planning and acceptance. The business requirements of pharmaceutical industry should also be accommodated through improved regulations. It will not only facilitate the promotion of healthy competition among key players. The enforcement of strict regulations for marketing and promotion should also consider the currently followed practices within the industry.
The stakeholders of the pharmaceutical business can broadly be defined in terms of the business, doctors, physicians, pharmacies, patients, and government drug regulatory authorities. The drug regulatory authorities are concerned about the legal implications of companies involved in unlawful practices. The regulations should be followed throughout business processes and requirements to maintain ethical business competition is also their responsibility.
The large pharmaceutical corporations are present in multiple locations and they are required to abide by the international as well as local laws for drug regulations (Outterson 2013). The fierce competition in the industry is also one of the notable attribute carrying potential for involvement in malpractices. The business dynamics of drug manufacturers widely differ from other industries. It is important to note that development of drugs requires large amount of resources, time, and experiments. The experimentation period is also long. However after experimentation the industry faces a fierce competition as the generic drugs are also introduced shortly after the marketing and sales of original medicine. It is important that the business offering original drugs recover their investments as well as gain profits (Slywotzky, Morrison & Andelman2007). It can only be achieved through careful deployment of marketing and promotional strategy. In certain cases it also instigates the businesses to adopt unlawful means to promote their products. This is one of the primary concerns of shareholders in pharmaceutical industry. Governments can address these issues through changes in the legal and regulatory systems.
According to Dambrin andRobson (2010) doctors are also notable stakeholders of drugs industry. They are provided with required amount of details regarding the drug characteristics. In these trainings and informative sessions it should be ensured that accurate information should be given. The doctors and physicians should also be equipped with latest technology resources to validate the information provided to them in order to recommend usage of certain drugs. It is unethical for practitioners to prefer drugs of low quality over appropriate remedies. The ethical practices should be followed and the prescription drugs should not be recommended for personal gains.
Fugh-Berman (2011) defines that patients are also most affected stakeholders of pharmaceutical industry. The individuals requiring appropriate medication should not rely on the discounted offers from various pharmacies. It is highly likely that a patient trust is lost in the light of cases reported in the research of Trudell andCotti (2012). The patients are victims of the unethical acts for marketing and promotional campaigns of large pharmaceutical corporations. The trust and confidence in drug effectiveness as well as the trust in healthcare system is highly likely to be damaged. The health implications on patients should be given priority in the industry and they should abstain from designing campaigns with unethical motives.
According to Gotzsche (2012) the verdicts against Novartis and other related companies can damage business credibility as well as the governments’ licenses to operate in the country. The drug regulatory authorities should implement compliance regulations according to the true spirit of the legislation. The verdict passed by the Jury against the company is also damaging for their credibility as well as the business performance. The judgment forced the company to sign a large contract to ensure that they will company with the regulations. The impact on business performance can damage their large stake in the pharmaceutical market (Cutler & Ly2011). The company is also vulnerable for experiencing a ban on its operations. The business has a large stake in healthcare and medicine business. The considerations to implement sanctions on the business to bid in the federal healthcare programs can result into loss of financial and goodwill damage for the business. The healthcare medicine and Medicare programs are also governed under federal authorities and it may result into damaging the credibility and prospects of qualifying for the program. As a result the business will lose the opportunity to participate in healthcare programs at federal level. The targeted sales are also affected through such sanctions. The loss of business goodwill and credibility will also have serious implications for shareholders. The patients mistrust and physicians will also abstain from recommending their drugs.
Conclusion:
The sensitive business industries similar to pharmaceuticals are prone to multiple challenges and a variety of implications. The industry is regarded as noble in facilitating healthcare and medical facilities. The standards of services provided in the industry should also comply with the ethical business standards. The issues of corporate social responsibility should also address in their sprit. The usage of ethical considerations in marketing and promotional campaigns should also be promoted. However the business should focus on the value creation through adopting ethical business practices.
The case of Novartis reveals that the business is implicated in multiple law suits and various practices against the regulations. There are cases against the company that are decided against the company. The involvement of penalties, legal fines, and payments to patients as compensation are examples of the ignoring the key requirements based on ethical practices. The business is implicated for its involvement in using unlawful means to promote its products. The severity of the case is heightened in case of bribery and kickback charges. The representatives of the business are denying however the court verdicts are evident that the business is not following legal and regulatory course for marketing its products. The research also indicates that the business is involved in promoting their products thorough alleged involvement with the pharmacies. The kickbacks are given to the pharmacies through discount payments and rebates. All these activities resulted into impactions of legal and regulatory nature.
It is also observed that the business is likely to lose its credibility as well as finical position as it is forced to sign an agreement with the federal healthcare authorities for improving their compline. The agreement might also impact their rights to participate in the federal healthcare programs for medicines. The rights of all stakeholders are damaged through such illegal practices. The business is also suffering at various legal fronts as a result of the adopted unethical practices for promoting their business.
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