Corporate Governance & Social Responsibility-

Case of Ethical Issues in Pharmaceutical Companies- Reckitt Benckiser

Introduction

This paper continues to analyse ethical aspects of the business keeping the case study of Reckitt Benckiser in view. Ethics is connected to the human behaviour. It is the set of principles which guides people in their life so that the life is led in a manner that does not harm others and with good conduct.

In the business sector, the ethical issues are resolved through the laws and regulations put forth by the federal or government bodies (Carroll &Buchholtz, 2011). This paper mainly deals with the business ethics. That means, analysing various ethical issues arising on account of conduct of business.

RB is an English company that a merger of a British Reckitt & Colman plc and Holland based Benckiser NV. It is a large Pharma and FMCG company having one of the largest brands such as Dettol, Strepsils, Clearasil, etc.

They have one of the largest R&D centres in Berkshire, which is a home to more than 20,000 patents on their products. Moreover, they have been very active in advertisements and in marketing activities, especially in the developing economies. They are socially very responsible, with Platinum Status in Community CR Indices. They are also in Dow Jones Sustainability World Index (CDProject.net, 2009).

Ethical issues arising in Society due to marketing and advertising

In a business, marketing and advertising plays an important role and through this firms generally make their product to the notice of the consumers. Marketing traction is said to be complete when the buyer and the seller come in contact and buy the product or services by making payment. When buyer approaches the seller, both the parties will have certain expectations from each other.

Seller will be keen to sell the product and for that he will apply certain tactics on the other hand, buyer expects seller to treat him fairly and give value product for his money.  So long as the seller and the buyer are within the preview of expectations and business regulations, no ethical issues arise.

The probable ethical issues that crop up in the business tractions are, marketing should be fair to everyone (Murphy, 2010). Business houses should sell their product to every one irrespective of the race, religion or creed. Leaving out certain groups like, ethnic minority etc. comes under market exclusion and is regarded as unethical and is regulated by the discriminatory laws.

Hiding the product quality or wantonly making the product with lesser useful life and selling the same are another unethical aspect. Here the regulators insist on labelling the product details and obtain certificates from suitable agencies certifying the product quality (Smith &Murpgy, 2012). Fixing the price for the product is another ethical issue. In competitive markets, price wars do take place. But the company fixing the product price less than marginal costs just to keep the competitors and new entrants away is considered as unethical.

In the developing countries, employing certain marketing tactics which the consumers in that country are no aware of is not correct and is considered bad ethically.

Advertisements are made to sell the product and bring to the knowledge of the consumers. Highlighting the negative aspects of the competitors’ products to sell their product is negative advertising and is considered ethically wrong. Deceptive advertising is another aspect where sellers resort to advertise a product which otherwise would have brought pain.

For instance, advertisers resort to humour for advertising such products which will go unnoticed by the public. A pyramid scheme is resorted to which will enrol participants with a promise to other people into the scheme. Under this scheme, no real sale of products or services takes place. Bid rigging, is where the contract would have been settled with one party and for the sake of show, other parties are called for the bid.

Advertising should not be manipulative, exploitative, and corrupt. Persuasion made to buy the product should not use corrupting methods in advertising (Schlegelmilch&Oberseder, 2010).

Legal and ethical issues

Legal factors such as Intellectual property are the original creation or inventions made by persons. It could be a writing work or invention of new process in the manufacturing or a new life saving drug. To protect the creator of the intellectual property, government has certain protection laws like copyright, patents, trademarks and trade secrets.

The creators of great works of literature, music or art are protected under the copyright laws. But generally the creators of great works don’t make much profit. This is because the publishers gets the rights signed by the author and pay very less percentage on sales to the creator which makes living difficult for a writer.

These intellectual property rights on the other hand create a temporary monopoly for inventors. These inventor firms will be in a position to charge higher prices for the products. This aspect creates ethical issues. In a sense that if a lifesaving drug is created and patented and sold at a very high price will not be of use to the general public and people continue to die since the medicine will be out of their reach. Such patents will have no benefits to the society.

The holder of the patent is acting without virtue. Greed has taken over the need. The intellectual property laws do not deal with this. It should be dealt under virtue ethics and a balance between the greed of Intellectual Property owner and the need of the public is to be struck based on the Intellectual Property’s worth (Fina et al, 2011).

In the case of literature, music etc., lot of stealing and copying takes place. This can be avoided and one can take permission from the author and by giving royalty, the works author can be used. Copying the intellectual property for profit, recognition is barred by the patent or copyright laws. The stealing of the intellectual property used for the welfare of the people can be justified under ethics of rights and duty.

Reckitt Benckiser vs. U K Law to protect intellectual property

The inventor of some product will be protected under the U K patent law. The company in the case study can protect their Intellectual Property by getting patent registered under the U K patent law. Under this law, without the permission from the company, no one can copy or manufacture the drug patented by them for the life and generations next as well.

For the use of any company’s Intellectual Property company could have registered under the name of the country or the people who had the knowledge of the plant. Not being aware of any such law, would lead to exploitation from any other company.

Findings and Implications

A company in the pharmaceutical sector such as Reckitt Benckiser, need to have robust corporate governance in the social and legal elements of the PESTEL. This is due to the fact that the Legal protection is very important for the industry that is dependent on product innovation and legal protection of the patented products.

RB should ensure that instances of corporate espionage must be brought to a minimum by not tolerating the corporate espionage by its own people and having effective checks and measures to prevent other Pharma companies from practicing it.

Corporate espionage in pharma industry is similar to the ones used in traditional espionage activities. The traditional activities included gathering knowledge about an organization. It may include the acquisition of intellectual property, such as information on industrial manufacture, ideas, techniques and processes, recipes and formulas.

In addition to that, the current information that the companies want about their competitors are- proprietary or operational information, such as that on customer datasets, pricing, sales, marketing, research and development, policies, prospective bids, planning or marketing strategies or the changing compositions and locations of production to get a competitive edge over the other.

The way forward for the companies should be to have effective self governance measures and to restrict the active monitoring of the competitors. The government agencies monitoring the companies in the free market, such as the Competition Commission in the United Kingdom, must have much more tooth and power to severely penalize the competitive intelligence or the corporate espionage activities to ensure that such things do not happen in the market.

Also, a point that has to be driven in such competition regulatory bodies is that the their laws must not only be focussed on breaking monopolies, but also in concentrating on unethical activities even in perfect competition environment.

The immediate measure that the government must take is to bring about laws and regulations against corporate intelligence as the regulatory bodies will be bounded by the tenets of the deontological ethics as the case of corporate intelligence or corporate espionage.

This also would give prudence for the regulators to impose sanctions on a company, without giving a cause, as they would be bound by Deontological ethics and the ethical justification of the blacklisting of a Pharma firm would be on the grounds of “duty” or obligation” as given by the rule of law.

Conclusion

Manipulation and unethical practices whether it is in the person or the company will provide short lived happiness or gains. Ethical practices or adherence to corporate social responsibility is the long term answer and with it reputation and brand can be built.

This will result in profits and sustained development of the company for the long time frame with the best of the business environment in mind.

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