that afflicts some 14 1 illion impor aks of rivers in tropical region a tiny parasitic worm t 5 passed from, which breeds in river waters. The tiny ‘ow as long as 2 feet curled up in. n diameter. Inside the nodules, the pring called microfilaria that ms sometimes commit s and blind the victim. altered when it developed an immu- ble to treat the parasite in hu- re such lengthy hospital ute victims who live in isolated he rivers, abandoning ecause other lands Merck and Com- company’s best- ill the parasite that causes river blindness. low-cost, safe, and simple ll and his research team petitioned s only used on animals. alized that even if the company succeeded in develop- = drug, the victims of the disease would be too poor to afford 4 large-scale clinical testing required to develop a version s could cost over $100 million. It was unlikely the company or that 2 viable market could develop in the poverty-stricken markets and sold for use on animale, th of Ivermectin to vetes ereby underminin, the company had world- Percent of sales was in decline due to D: = ictive and costly, of company research mes nie lr ee quickly copy and market drugs Medicare and Medicaid had recently puthyanded name drugs that were Merck's major source of income. In the face of these ns in the drug industry, Merck managers were reluctant to under- fale expensive projects that showed little economic promise, such as the development df a drug for river blindness. Yet without the drug, millions would be condemned to lives of intense suffering and partial or total blindness After many earnest discussions among Vagelos and his management team, the came to the conclusion that the potential human benefits of a drug for river blindness rere ificant to ignore. Many of the managers felt, in fact, that the company s morally obligated to proceed despite the costs and the slim chance of economic reward. In late 1980, Vagelos and his fellow managers approved a budget that pro- jed the sizable funding needed to develop a human version of Ivermectin. ‘After 7 years, Merck succeeded in developing a human version of Ivermectin, which it named “Mectizan.” A single pill of Mectizan taken once a year could eradi- cate from the human body all traces of the parasite that caused river blindness and prevent new infections. Unfortunately, exactly as the company had earlier suspected, no one stepped forward to buy the miraculous new pill. Over the next several years, Merck officials pleaded with the World Health Organization (WHO), the U.S. government, and the governments of nations afflicted with the disease, asking that someone—anyone—come forward to buy the drug to protect the $5 million people who were at risk for the disease. None responded to the company’s pleas. Merck de- cided, therefore, that it would give Mectizan away for free to potential victims.’ How- ever, this plan proved difficult to implement because, as the company had earlier feared, there were no established distribution channels to get the drug to the people who desperately needed it. Working with the WHO, therefore, the company financed an international committee to provide the infrastructure to distribute thé drug safely to people in the Third World and to ensure it would not be diverted into the black market to be sold for use on animals. By 2004, the committee, working with govern- ment and private voluntary organizations in Africa, Latin America, and the Middle East, was providing the drug for free to 40 million people a year, effectively transforming their lives and at long last relieving the intense sufferings and potential blindness of the disease. The company had also expanded the program to include the treatment of elephantiasis, a parasitic disease that often coexists with river blindness and that Merck researchers, working with the WHO, discovered in the 1990s could also be treated effectively with Mectizan. Over 20 million people received Mectizan for free in 2004 to prevent elephantiasis. When asked why the company invested so much money and effort into research- ing, developing, manufacturing, and distributing a drug that makes no money, Dr. Roy Vagelos replied that, once the company suspected that one of its animal drugs might cure a severe human disease that was ravaging people, the only ethical choice was to develop it. Moreover, people in the Third World “will remember” that Merck helped them, he commented, and will respond favorably to the company in the future. Over the years, the company had learned that such actions have strategically important long-term advantages. “When I first went to Japan 15 years ago, Iwas told by Japanese business people that it was Merck that brought streptomycin tc after World War II to eliminate tuberculosis which was eating up their soc did that. We didn’t make any money. But it's no accident that Merck is American pharmaceutical company in Japan today.”5 Having looked at how Merck and Company dealt with its di river blindness, let us now turn to the dits sometimes quip that business ethic inherent conflict between ethicsests somewhat different perspective—a pery Zompany py taking. "Phe management ofthis compar nies ae ingremropang a product that dey knew had ile chance of da ee ey fee they had a ethical obligation t0 make i 2 re people Ini case, at Feast rg and very sucess potential benefits avaible over, the comments of Vagelos at the end of business chose ethies ve" Tere may be no inherent conflict between eth the case suggest that in OO it, On the contrary, the comments of Vagelos sug- that ae pa opportniis fr profit Riot all companies operat lil echically. Many—perhaps even mo felopment project that will probab case of Merek and Company SURE that many compa! tens of millions 0} ever being profital Merck, and Merck itself has not always operated vet--companies will not invest in a research and de- y be unprofitable. Every day newspapers announce the rames of companies that choose profits over ethics or that profited through un- ethical behavior—Enron, Worldcom, Global Crossing, mee , a iD ae lor, Adelphia, Arthur Andersen, Louisiana-Pacific, and Qwest—are Dut a Tew 0. these. In 204 even Merck was accused of failing to disclose the heare problems associated with its drug Viowx. Although companies often engage In unethical behavior, however, ha- Tey nethical behavior is not necessarily a good long-term business strategy for a company. For example, ask yourself whether, as a customer, you af more likely to buy front a business that you know is honest and trustworthy or one that has earned a rep- tiation for being dishonest and crooked. Ask yourself whether, as an employee, you are more likely to loyally serve a company whose actions toward you are fair and respectful or one that habitually treats you and other workers unjustly and disrespect fally. Clearly, when companies are competing against each other for customers and for 1s, the company with a reputation for ethical behavior has an advantage over one with a reputation for being unethical. This book takes the view that ethical behavior is the best long-term business strat- egy fora company—a view that has become increasingly accepted during the last few year This does not mean that occasions never arise when doing what is ethical will prove costly to a company. Such occasions are common in the life of a company, and we will see many examples in this book. Nor does it mean that ethical behavior is aiays rewarded or that unethical behavior is always punished. On the contrary, un- cd reba gooey os es, Th nge business strategy means merely that, over th long run and for the most par, ethical behavior can gi ae petkive advantages over companies tharare nase Tee significant com- Company suggests his view ed «Bt afer cae, ee, eeample of Merck and ployee, respond to companies that behave unethially suppote ic Te ‘what more can be said for or against th fens tical term busines strategy fora company, at The more basic problem is, of course, gers of a company e wy have a duty to- sina profitable Manner? Indeed, brojct = lost money, wouldn't it Money unethically? Teese coming that| reasons be given for the claim that Merck had no such obligation? Which view ts supported by the strongest reasons? / i Although ethics may be the best policy, the ethical course of action is not always clear. The purpose of this book is to help the reader deal with this lack of clarity. Al- though many ethical issues remain difficult and obscure even after a great deal of study, nevertheless gaining a better understanding of ethics will help the manager deal with ethical uncertainties in a more adequate and informed manner. ‘This text aims to clarify the ethical issues that managers of modern business or- ganizations must face. This does not mean that it is designed to give moral advice to people in business nor that it is aimed at persuading people to act in certain moral ways. The main purpose of the text is to provide a deeper knowledge of the nature of ethical principles and concepts and an understanding of how these apply to the ethical problems encountered in business. This type of knowledge and understanding should help managers more clearly see their way through the ethical uncertainties that con- front them in their business lives—uncertainties such as those faced by the managers sF000 of Merck. The first two chapters introduce the reader to methods of moral reasoning and fundamental moral principles that can be used to analyze moral issues in business. The following chapters apply these principles and methods to the kinds of moral dilemmas that confront people in business. We begin in this chapter by discussing four prelimi- nary topics: (a) the nature of business ethics and some of the issues it raises, (b) moral reasoning, (c) the legitimacy of business ethics, and (d) moral responsibility. Once these notions have been clarified, we devote the next chapter to a discussion of some basic theories of ethics and how they relate to business.