Theoretical concept of ethics
In the current capitalistic market, the aim of every business being run is to make as much profit as possible and to make the maximum amount of most of their operations. However, it is important that they do not leave the sight of the ethical road in the process of this. Ethics in business are important because an organization is more than merely its financial statements and the long term success is measured by not just how much money a business made but also by how many lives they impacted and improved. Regardless of the size, functions and operations of the organizations, business ethics are the single determining factor when it comes to the long term health of the organization. We all want the business and organizations to be fair, just and ethical in their working. For this, they have to follow the laws and ethics and ensure adherence of fair practices at all times. In this essay, we are going to address the case of ethics in organizational leadership and decision making process and how their implementation or non adherence can impact the organizations and their long term health (Costopoulus, 2016).
The leadership and management of an organization sets into motion the ethical principles and their adherence as an example for the employees. It therefore becomes extremely critical that the leaders make decisions that are ethically sound. Leaders help in building the ethical foundation for the whole organization and guides the entire organization towards a positive and ethically sound work environment. This leads to maintaining a healthy and dependable work environment and motivates the employees at the same time (Handa & Vohra, 2014). The employees trust an organization even more if their work practices are ethical. An ethical organization is respected by the customers, employees, stakeholders and the society alike and is looked up to by all. This essay is an attempt at determining how the ethical orientation of the leadership and decision making of the organization impacts its working and what contributes towards making an organization ethical. We have studied the case of Turing Pharmaceutical and their ethical orientation. We have covered how their leaders and their decision making process impacts the organizational working and their public image (Gamlund, 2012).
Martin Shkreli former CEO of Turing Pharmaceutical was highly criticized for his drug pricing decision. When Turing Pharmaceutical raised the price of their drug Daraprim by an exorbitant 5000% in the year 2015, the organization’s decision was widely condemned by all sections of the society (Sadler, 2012). The drug Daraprim is used to treat toxoplasmosis, which is a parasitic disease which affects people suffering from HIV, pregnant women and anyone having a weak immune system. Martin Shekril and other people who were supporting this decision argued that the money raised by selling the drug at a higher rate will help them in conducting research to further conduct studies to find a more effective cure for toxoplasmosis, but anyone is wise enough to guess that the actual motive of the organization was ruthless profiteering. While some people who are business minded would still stand in favor of this decision, a majority of people will still find this unethical.
Kantianism
There have been various arguments around ethics and their business applications. Ethics are relative and vary according to the personal judgment criteria of the individuals. What may be considered right and ethically correct by one person may be deemed incorrect and unethical by the other. Depending on the perspective of the individuals, the ethics and morals of any decision and situation vary. Therefore, it becomes necessary that proper guidelines are laid before the leaders so that they can get guidance during the decision making and make well informed and though out decisions that are ethically sound too. There are certain theories of ethics that can be used as the groundwork for ethical decision making by the leaders and the employees of any organization. These are just a few of the various theories that have been developed over time by various philosophers to distinguish the right from the wrong for the leaders making the decision making process and little easier for them (Chonko, 2012).
Kantianism is a very popular ethical theory according to which, a leader must at all times act rationally. This theory states that one gets motivated by goodwill and the principles and thoughts behind the actions rather than the results or the consequences of those actions. This principle acts in the way that if the person has the right principles guiding him and is motivated by the right cause, they will automatically act ethically and will also overcome the animal instincts and self centered thoughts. The Kantians act with the right motivations and right principles. Analyzing the case of Turing Pharmaceuticals and Martin Shkreli, we observe that they did not have the right principle, cause and motivation to act. They were being selfish and self centered. They were only thinking about their profits and the money that they would make by increasing the price of the drug by 5000%. The hike in the price would although benefit the organization and bring in massive revenue and profits, the larger segment of the society, that is the public and the patients using that drug, would suffer (Velentzas & Broni, 2011). They were clearly putting the health and well being of the weak and already suffering at stake and this can be rated a coward act of selfishness. Since the medicine was being supplied by only Turing Pharmaceuticals and there was no alternative available for the medicine in the market, they decided to take advantage of this situation and this caused the patients to suffer. According to the Kantianism theory, this was absolutely wrong and they acted in self interest strictly without giving a thought about what they were doing was the right thing to do or not. Turing Pharmaceutical had purchased the patent for the drug only for the ulterior motive of making profit and they were not acting for the goodwill of the people (University, 2016).
Individualism
Another theory of ethics and ethical decision making that is widely used is that of individualism. This is the most common theory to analyze ethical controversies. According to this theory, the needs of the individual are most important and everything else falls secondary to that. The business world usually translates this to profit making and profit maximization. The leaders following this theory believe that anything that is within the constraints of the law can be done to make profits for the organization and if the organization is not maximizing the profits to be made, it will not be fair to their stakeholders. The people following this theory would favor the decision of Turing Pharmaceuticals and their CEO Martin Shkeril. The organization did make huge profits, but that was at the cost of the well being and health of so many people (Faulkner, Hamrick, & Brown, 2016). The individualism theory states that as long as the action and decision being taken is legal, it doesn’t matter how good or bad that is, that must be taken if it brings in monetary benefits to the organization. The Individualists will support the step taken by Martin Shkeril as it brought in lots of money for the organization and also benefitted the stakeholders of the organization. The individualist theory of ethical decision making puts the needs of the individual or the person taking the decision above everything and everyone else. The individualists will justify the actions of the organization and the CEO Martin Shkeril as they were legal and the right thing to do. The organization has certain responsibilities towards their stakeholders as well. They invest their money in the organization and expect to make profit from it. Therefore, it is the responsibility of the organization to act in favour of the stakeholders and take the decision that benefits them and maximizes their profits (UBC, 2011).
Thus we see that the theories and theoretical concepts of ethical decision making help the leaders in decision making. The two theories that we have discussed here are Kantianism and Individualism. According to Kantianism, the decision taken by Turing Pharmaceutical and their CEO Martin Shkeril was absolutely wrong, vested with self interest and selfishness (Sharkey, 2011). The organization must have thought about the impact of the decision and not just the immediate benefit that they made by raising the price. The second theory being discussed is the Individualism theory. This justifies the act of the organization as the organization has certain responsibilities towards their stakeholders and these need to be fulfilled (Melvin, 2005). As long as the decision being taken is legally right, it doesn’t matter what the larger group of people feels or believe, a person can take a decision that benefits him or her and is beneficial for them.
Case study: Turing Pharmaceuticals
Daraprim was already a 62-years old drug and had numerous buyers, when Turing Pharmaceuticals decided to acquire the rights to it in the month of August 2015. The cost of production of a tablet of Daraprim at that time was $1 which did not include the cost of marketing, promotion and distribution. This cost was revealed by the then CEO Martin Shkeril. He went on to announce the decision of increasing the cost of a dose of Daraprim by over 5000%. The price of a dose which would earlier cost $13.50 was revised to $494.94 overnight. The argument he gave in his defense was that the buyers of the drug in The United States were the private insurance companies or the government. The people living in the US are either covered by health insurance or receive the state health care benefits. He said that since this does not impact the people buying the drug directly, the prices can be played with. He was seen on record giving statements like it was necessary to make profits on the sale of this drug as the previous organization manufacturing it was selling it at the cost price only (Centage, 2011). He further stated that the profits from this were intended to fund the research and development of this drug and find an alternative to it that can cure the disease and not just treat it. The reaction to this decision was observed all over the United States. The shares of not just Turing Pharmaceuticals but the entire biotech industry saw a slump soon after Hillary Clinton highlighted the case in public. There was an uproar in the social media, political institutions, medical associations and other media houses (Maheshwari & Maheshwari, 2006).
The studies have acknowledged that the Pharmaceutical industry is unique and there are a few dominant players that have created a monopolistic environment for making money from practices that can be characterized unethical. The concern here is that if a humanitarian industry like pharmaceuticals forgets its moral responsibilities and indulges in unethical practices like the one mentioned above, is it time to revise our legal system or should the organizations be left by themselves to make this decision? The individualistic concept of ethical practice can justify the step taken by Turing Pharmaceuticals. They were only focused on making profits and maximizing it to give the maximum returns to their shareholders (Bergen, 2015).
Impact on organizational working and public image
This brings us to the discussion that are the organizations ethically aligned? Can they be left on their own to make the decisions with an ethical and moral perspective and not operate with the sole purpose of profit maximization. The case analysis clearly states that it is not. The organizations when left on their own will only result in unregulated and unethical practices and will take every opportunity that they get, ethical or not, to make money. The values of the management in this case were highly questionable and so was their decision making. The healthcare industry is governed by the same ethical norms that other industries do and they have the added responsibility of serving the people with their products that can be life-saving at times. The ethics versus profitability decision making is a dilemma that is intense and when the decision impacts the people already suffering, it becomes even more intense. It all boils down to the ethics and value system of the organization and their leaders (Butts, 2013).
To tackle such a situation and prevent the same from arising in the future, the organizations need to have the code of ethics clearly defined and their values communicated all over the organization from the leaders to the employees as well as the workers and service staff (Gilman, 2005). These must align with the vision and mission of the organization and their core values and beliefs. The language used for this communication must be simple and the code of ethics must not be overly complicated or worded in a confusing fashion. The employees must be guided by their leaders during the decision-making process and must be provided with real life examples for them to emulate and follow. The consequences of breaking the code of conduct should also be mentioned and explained to the employees and the management. There must be an open system of communication for pointing out unethical practices and an Ombudsperson must be appointed to take care of this. The safety of the person reporting the breach of code of ethical conduct must also be ensured to promote an ethical work culture (Saremi & Nezhad, 2014). The employees must be allowed to question and clarify on the decisions of the management and give suggestions and feedback. It is also important that the code of conduct and the organizational policies be updated regularly to keep them on track with the latest legal and political environment.
Leadership role and ethical decision making
The decisions of business leaders influence more than just their organization and the employees, they have the power to impact the numerous customers and the entire industry as well. It therefore becomes important that the ethical conduct is kept in mind all the time by these decision makers and organizational leaders. All the business decisions taken can be justified some way or the other using the theories of business ethics like Individualism, Utilitarianism, Kantian Theory, etc. however, it is also important that the decision is not altruistic and self-consuming. A business has some responsibility towards the people that are serving as well and this cannot be fulfilled merely by being focused on profit maximization. The ethical values based on compassion and consequence cannot help a business in succeeding financially, but it will ensure that the business is healthy in the long term. The organization must determine certain virtues that they want to abide by and this should be the focal point of their entire decision-making process (OECD, 1998). This gives the organization a food for thoughts and helps them see their decision and policies in a different light. The leaders are also able to question their actions and decisions and are able to view them with the perspective of the values that they abide by. Some business leaders also believe in moral and religious principles and work according to them. It can be testified by examples and previous case studies that any decision taken while taking into consideration any or all of these and not merely having the single aim of profit maximization in mind will definitely be an ethical one. A thoughtful decision is the one that is ethical and beneficial to the business at the same time (Baijumon, 2011).
Conclusion:
In this essay, we have discussed how the ethical working can impact the organization and how the decision making process of the leaders of an organization is influenced by the ethics and principles. We have studied the case of Turing Pharmaceutical and their ethical orientation. We have also covered how their leaders and their decision making process impacts the organizational working and their public image. Turing Pharmaceutical raised the price of their drug Daraprim by an exorbitant 5000% in the year 2015, the organization’s decision was widely condemned by all sections of the society. The drug Daraprim is used to treat toxoplasmosis, which is a parasitic disease which affects people suffering from HIV, pregnant women and anyone having a weak immune system. Martin Shekril the CEO of the organization tried to justify the decision by claiming that the money raised was being used for further research and development work, but everyone knew the motive of this price hike was profit maximization and generating revenue for the organization. In the next section, we have studied two theoretical concepts of ethical decision making and measured up the decision of Martin Shekril against each of them. The two theories that we have discussed in this essay are Kantianism and Individualism. According to Kantianism, the decision taken by Turing Pharmaceutical and their CEO Martin Shkeril was absolutely wrong, vested with self interest and selfishness. The organization should have thought about the impact of the decision and not just the immediate benefit that they made by raising the price. The second theory being discussed is the Individualism theory. This justifies the act of the organization as the organization has certain responsibilities towards their stakeholders and these should to be fulfilled at all times. The last section of the essay discusses the impact that the ethical decision making and their theories and concepts have on the practical decision making of the organization. The concepts of ethical business conduct can be easily implemented if the organization has clearly defined set of ethics and rules that the leaders have to abide by at the time of their decision making process.
References:
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