Transcript The Ethics of Global Business - andy gustafson

The Ethics of
Global Business
Andy Gustafson
Creighton University
Global Ethics Issues
• 1.Power/Force of Multinationals
• 2. Fair Trade: Lack of Laws and Regulations
in LDCs
• 3. Lack of Infrastructure and Competition
• 4. Colonial-Style Practices
• 5 Workers rights.
• 6. Cultural Variations
• 7. Butterfly Effects of Consumer Demands
• 8. Cultural Transformation of Consumer
Culture Invasion
• 9. Copyright Infringement
#1 Power/Force of Multinationals
• Of the world's largest 150 economic
entities, 95 are corporations (63.3%)
according to a report in Fortune Magazine
by the World Bank (2005).
Multinationals Trump Nation GDPs
• Wal-Mart, BP, Exxon Mobil, and Royal
Dutch/Shell Group all rank in the 25
largest entities in the world, above
countries like Indonesia, Saudi Arabia,
Norway, Denmark, Poland, South Africa,
and Greece.
Country/Corporation
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1US
2 Japan
3Germany
4UK
5France
6Italy
7China
8Spain
9Canada
10India
11,667,515
4,623,398
2,714,418
2,140,898
2,002,582
1,672,302
1,649,329
991,442
979,764
691,876
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GDP/Revenue
$ millions
11Korea,Rep.
12Mexico
13Australia
14Brazil
15Russia
16Netherlands
17Switzerland
18Belgium
19Sweden
20Turkey
21Austria
679,674
676,497
631,256
604,855
582,395
577,260
359,465
349,830
346,404
301,950
290,109
Country/Corporation
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22Wal-Mart
23 BP
24ExxonMobil
25RD/Shell Group
26Indonesia
27SaudiArabia
28Norway
29Denmark
30Poland
31South Africa
32Greece
33General Motors
34Finland
35Ireland
287,989
285,059
270,772
268,690
257,641
250,557
250,168
243,043
241,833
212,777
203,401
193,517
186,597
183,560
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GDP/Revenue
$ millions
36DaimlerChrysler
37Toyota Motor
38Ford Motor
39Portugal
40Thailand
41Hong Kong
42Iran
43General Electric
44Total
45Argentina
46Chevron
47ConocoPhillips
48AXA
176,688
172,616
172,233
168,281
163,491
163,005
162,709
152,866
152,610
151,501
147,967
121,663
121,606
Other Huge Companies
• In top 75:
• Volkswagen, Hitachi, IBM, Honda, HP
• Top 75-100:
• Nissan, Fortis, Berkshire Hathaway, Home
Depot, HSBC, Verizon, Samsung,
Peugeot, Nestle, US Postal Service, China
National Petroleum, Sony
Lack of Consumer Power in Face
of Huge Corporate Power in LDCs
• Very little transparency demanded by
consumers
• Consumers often have no means of
accessing information
• Most companies are foreign owned
• Domestic companies already at
competitive disadvantage
#2 Fair Trade: Lack of Laws and
Regulations in LDCs
• Lack of Domestic Laws
• Lack of transnational laws or guidelines
• Lack of enforcement (of UN guidelines)
•
Example: Pharmaceutical
Companies
Lack of Regulation Worldwide
In 2004, the World Health Organization
established that less than one-sixth of
countries had a well-developed system of
drug regulation, and one-third had little to
no regulatory capacity.
Consequences of Poor Marketing
Information:
It is estimated that up to 50% of
medicines in developing countries are
inappropriately prescribed, dispensed
or sold.
Irrational Drugs
• In 2005, the Indian National Commission
on Macroeconomics and Health labeled 10
out of 25 top selling brands of medicines in
the country as being either “irrational or
non-essential or hazardous.”27
Non-Essential Drugs
Are new Drugs Necessary??
• A breakdown of more than 1,000 new
drugs approved by the US Food and Drug
Administration between 1989 and 2000
revealed that more than three-quarters
had no therapeutic benefit over existing
products.30
Success: China’s Response
• A stark example comes from a leading
industry report that attributed China’s
considerably slowed growth rate in the
sector (from 20.5% in 2005 to 12.3% in
2006) to a government anti-corruption
campaign. The campaign was introduced
during the second quarter of 2006 to set
limits on physician directed promotion, and
according to the report, served to dampen
sales in the region.
$$ Pharmaceuticals $$
• The pharmaceutical industry in 2006 was
worth US$ 643 billion.
• Total pharmaceutical sales from the top 10
companies accounted for more than 40%
of the total market (see table).
Top corporations by global pharma
sales: 2006
Industry growth rate 1999-2006
Pressures on Pharm Companies
It is estimated that:
• 90% of current profitable drugs are over 5 yrs old.
• In 2009 patents on 1/3 of top 35 branded drugs expire
• Exposing an estimated $157 billion worth of sales to
generic erosion.
• Leading pharmaceutical companies will lose between
14% and 41% of their existing revenues as a result.
• The industry’s growth rate is now at 7% compared to
14.5% in 1999 (see table).
Industry Growth Rate
Fast Growth!
• For example, India was one of the fastest
growing markets in 2006, with
pharmaceutical sales increasing 17.5
percent to $7.3 billion.
How to Sell more
1. Increasing the perceived frequency and/or severity of
the indications.
2. Widening the indications to include more people.
3. Increasing the perceived likelihood and magnitude of
benefits.
4. Decreasing the perceived likelihood and magnitude of
harms.
5. Increasing the use of the drug for longer durations.
Pharmaceutical Gifts in Pakistan
• Low cost: pens/pads/diaries/calendars.
• Medium cost: stethoscope/books/briefcases.
• High cost: air conditioners/laptops/desktop
computers/club membership.
• The latest practice is: For writing 200
prescriptions of the company’s high priced drug,
a doctor is rewarded with the down payment on
a brand new car.
Advertising with Incomplete
Information
• 2005 study of Psychobiology of the Paulista Medical
School of the Federal University of São Paulo Brazil
• Analysed 24 Brazilian advertisements for the same
psychoactive drugs as advertised in American and/or
British publications from the same period.
• Observed that “Brazilian advertisements omitted
information on usage restrictions, such as
contraindications, adverse reactions, interactions,
warnings and precautions, and that such information was
present in American and British advertisements.”
Doctors’ Biased Behavior
Evidence shows that biased doctors are
more likely to:
• Prescribe a drug if they had recently
attended a sponsored event by the
manufacturer.
• Prescribe a drug that is not clinically
indicated.
• Have a drug placed on a hospital
formulary.
Health expenditure in developing
countries
*Governments’ Key Recommendations:
1. Implement, improve and monitor legislation in line
with the WHO Resolution on the Rational Use of
Medicines and the WHO Ethical Criteria for Medicinal
Drug Promotion.
2. Support the provision of independent information on
drugs for consumers and health professionals.
3. Implement and enforce a ban on gifts to doctors.
4. Enforce strict sanctions that will deter poor
corporate practice in drug promotion.
5. Take measures to improve the transparency of drug
companies’ marketing activities and seriously address
the conflict of interest encountered in drug companies’
funding of medical education.
**Key Recommendations at the
Company Level:
1. Stop the practice of gifts to doctors
2. Implement rigorous policies on vetting of drug
promotion materials and adherence to existing codes
of conduct
3. Provide transparent and verifiable information
on the precise nature of relationships and associated
funding for all stakeholder groups, including health
professionals, pharmacists, students, journalists,
clinical research organisations and patient groups.
**Industry-Wide Level:
1. Ensure codes of conduct on drug promotion
extend to interactions with health professionals AND
consumers.
2. Invest in innovative partnerships with
government and civil society organisations so
that corporate funding of disease awareness
campaigns, and CME may be channelled via blind
trusts in line with specific health priorities of
consumers at a community or national level.
Bibliography
• Drugs, Doctors and Dinners: How drug
companies influence health in the
developing world
• Managed Care and the Morality of the
Marketplace
(NEJM, 333:50-52, 7/6, 1995)
#3 Lack of Infrastructure and
Competition
#4 Colonial-Style Practices
• Companies convert land from food crops
to cash-crops for export
#5 Workers rights
Jobs in Foreign Countries
• Most of the outsourced jobs
from the US have gone to LDC
(less developed countries) in
recent years.
Goods can be produced at much
lower cost in developing countries
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Higher unemployement
Lower wage rates
Fewer effective unions
Less effective labor laws
Fewer producer constraints
Lower environmental standards
Benefits to the developing
country
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Increased exports
Jobs
Hard currency
Economy improves
Standard of living increases
# 6 Cultural Variations
Cultural Variations
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Bribery vs Gift
Friendship vs Old Boys Network
Proper relationships of women to men
Rights: Right to kidney dialysis, CAT scan
Norms of expectations
#7 Butterfly Effects of Consumer
Demands
• Example 1: Ethanol and the Amazon
Cheaper Fuel = Less Amazon
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1. Desire for alternate fuel (Ethanol)
2. US demand drives Corn price to $7
3. Supply of Corn is strained
4. LDCs convert more land to CornFarming
• 5. An area the size of Rhode Island in
Amazon was converted from rainforest to
corn in 1 year.
Our Demands have long-distance
effects
• Consumer demand for cheap goods =
pressure for cheap labor in LDCs
• Negative Externalities of
– Oil Production
– Toxic Waste Production
#8 Cultural Transformation of
Consumer Culture Invasion
• As markets invade LDCs, there is a
transformation of culture which occurs.
Sometimes this is good. Sometimes it
may not be.
Example 1: Consumer Market
Change: Iran’s Paykan
Ex 2: Cultural Change in China
• After 27-years of market reforms, China has undergone a profound
transformation that has given people more freedom of choice over
their personal lives.
China
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Walmart Effect– good and bad
Internet spread– freedom of information
Entrepreneurial innovation
Increased Competition
Matured market demands regulation (i.e.,
copyright controls)
2 Key Foundations Lacking in
Developing Countries
•1. Transparency
•2. Competition