Read a short case and answer the question

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Merck and River Blindness case

Headquartered in New Jersey, Merck & Co. is one of the largest pharmaceutical

companies in the world. In 1978, Merck was about to lose patent protection on its two

best-selling prescription drugs. These medications had provided a significant part of

Merck’s $2 billion in annual sales. Because of imminent loss, Merck decided to pour

millions into research to develop new medications. During just three years in the

1970s, the company invested over $1 billion in research and was rewarded with the

discovery of four powerful medications. Profits, however, were never all that Merck

cared about. In 1950, George W. Merck, then chairman of the company his father

founded, said, “We try never to forget that medicine is for people. It is not for the

profits. The profits follow, and if we have remembered that, they have never failed to

appear. The better we have remembered that, the larger they have been.” This

philosophy was at the core of Merck & Co.’s value system.

1. Think about the definition of stakeholders—any parties with a stake in the

organization’s actions or performance. Who are the stakeholders in this situation?

How many can you list? On what basis would you rank them in importance?

2. What are the potential costs and benefits of such an investment?

3. If a safe and effective drug could be developed, the prospect of Merck’s

recouping its investment was almost zero. Could Merck justify such an investment

to shareholders and the financial community? What criteria would be

needed to help them make such a decision?

4. If Merck decided not to conduct further research, how would it justify such a

decision to its scientists? How might the decision to develop the drug, or not to

develop the drug, affect employee loyalty?

5. How would the media treat a decision to develop the drug? Not to develop the

drug? How might either decision affect Merck’s reputation?

6. Think about the decision in terms of the CSR pyramid. Did Merck have an

ethical obligation to proceed with development of the drug? Would it matter if

the drug had only a small chance to cure river blindness? Does it depend on how

close the company was to achieving a cure, or how sure they were that they could

achieve it? Or does this decision become a question of philanthropy only?

7. How does Merck’s value system fit into this decision?

8. If you were the senior executive of Merck, what would you do?