2011

The Keystone Corporation Business Ethics and Corporate Social Responsibility

Table of Contents Issue One: Corporate Social Responsibility ............................................................................................. 1 Analysis: ........................................................................................................................................... ........ 1 Apply to the Stockholder Theory .......................................................................................................... 1 Apply to the Stakeholder Model ........................................................................................................... 2 Recommendation to Address the Issue: .................................................................................................... 2 Issue Two: Employee Responsibility ......................................................................................................... 3 Analysis: ........................................................................................................................................... ........ 3 Apply to the theory of Relationships at Workplace .............................................................................. 3 Recommendation to Address the Issue: .................................................................................................... 5 Issue Three: Product Safety ....................................................................................................................... 6 Analysis: ........................................................................................................................................... ........ 6 Apply to the theory of Responsibility for Products .............................................................................. 6 Recommendation to Address the Issue: .................................................................................................... 7 Issue Four: The Ethic of Promotion .......................................................................................................... 7 Analysis: ...........................................................................................................................................

........ 7 Apply to the theory of Deception and Fairness..................................................................................... 7 Apply to the theory of Manipulation..................................................................................................... 7 Arguments ......................................................................................................................................... .... 8 Objections ......................................................................................................................................... .... 8 Recommendation to Address the Issue: .................................................................................................... 8 Issue Five: Discrimination and Sexual Harassment ................................................................................ 9 Analysis: ........................................................................................................................................... ........ 9 Discrimination against Female (Boys Club Issues) ......................................................................... 9 Sexual Harassment ................................................................................................................................ 9 Arguments ......................................................................................................................................... .... 9 Objections ....................................................................................................................................... 10 Recommendation to Address the Issue: ............................................................................................... 10

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Issue One: Corporate Social Responsibility Justification: Keystone disguises the fact that Trizon causes drug-induced psychosis from most of its employees as well as to the society. This is wrong because Keystone failed to conduct the corporate social responsibility. The reason for Keystone in hiding this is that Trizon accounts for one third of Keystones revenue. Once this information release, not only the reputation of Keystone will negatively affected, but the company will go down the drain. Keystones management has been trying to keep all this under the table because they do not want the business getting serious financial impact. However, Keystone failed to consider of that many other parties are suffering from this issue. It is moral wrong to let consumers as well as all affected parties to continually suffering from this issue. Analysis: Apply to the Stockholder Theory

According to the Stockholders Model, the corporate social responsibility is to the stockholders and the proper role of business is to maximize profits within the law. Therefore, it seems like Keystone did nothing wrong since hiding the negative effects of Trizon allowing the company to continually be profitable, and more importantly, to keep the business successful. Argument

Deontological Mr. Stanton and people in the management are employees of the business owners. They have a direct responsibility to their employers to conduct business in accordance with their interests. Keystone is a private property; therefore, owners have the right to decide what to do and whether to pursue the public or private ends.

Utilitarian Since the efficiency that Keystone has will lead to optimal distribution of costs and benefits within the society, the society benefits overall. This can be demonstrated by several areas. Firstly, disregard the fact that Trizon causes a higher percentage of suicides rate, it did cure many people with depression disease. And the percentage of suicides Trizon causes is relatively very small compare to the number of people who recovered from Trizon. Secondly, Trizon brings high profits to Keystone, and thus, allows higher returns on investment for the company. Thirdly, the success of Keystone enables more economic activities in the society. This is positively benefiting the society since it creates more jobs and more business opportunities in the pharmaceutical industry.

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Deontological Property rights are not absolute; they are subject to ethical limitations. Thus, Keystone cannot use property in a way that infringes on the rights of others such as the right for its customers as well as the rest of the employees to know the side effect of Trizon is suicide ideation probability. Further, corporate property is not as same as private property. Corporation is a legal creation for the specific social goal of financial investment in exchange for limited legal liability. The relationship between the owner of Keystone and the management team is not one of employer and employee, but one of a corporate manager and a client.

Utilitarian However, the pursuit of profit of Keystone does not necessary lead to consumer satisfaction and optimal distribution of costs and benefits in the society. Negative externalities will be caused if more suicides committed amongst the society. As well, the family of suicide victims will be affected. They will be suffering in the sorrow of losing the love one. The worst case might be getting into the disease of depression. All these consequences are the causes of market failure. Law and regulation, therefore, should help in achieving the optimal market efficiency by internalizing externalities, regulating harmful personal choices, and establishing mechanisms for appraising public goods. As a result, the moral responsibility is on the legislature, not Keystone.

Apply to the Stakeholder Model

Applying to the stakeholder model, rather than emphasize the responsibility of the stockholder, Keystone should also consider all affected parties such as its customers, employees, and the community. Keystones customers are suffering from the side effect of Trizon since they have thought of suicide more often after using Trizon. Employees who notice the side effect of Trizon are suffering mentally since they face the dilemma of whether to whistle the issue or not. Any wrongful behavior that Keystone performed will have impact on the community. Once Keystones dishonest behaviors being discovered, the reputation of the community will be affected negatively. Recommendation to Address the Issue: In conclusion, from the managerial perspective, Keystone should release all information of Trizon including the side effect and the statistical data of all studies the company had conducted. In order to prevent the company from going down the drain, some extra actions are needed. For example, Keystone can address the side effect of Trizon by changing the formula of the drug. Then inform the public of the efforts that the company had put into in addressing the side effect issue. This can help the company in retrieving reputation from the society. Another option for

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Keystone to address this issue is to discontinue Trizon and recall all products, and develop a new product to replace Trizon.

Issue Two: Employee Responsibility Justification: Some of Keystones employees as well as the management keep quiet about the serious problems of Trizon from the public. It is wrong because it will cause many serious social problems in the future. Mr. Stanton keeps doing everything possible to convince the health and safety regulators, several physicians, and some employees not to present the negative information about Trizon to the public. Dr. Sarah, on the other hand, is mentally suffering as she is getting into dilemma. Sarah knows that it is moral wrong by covering the side effect of Trizon. Therefore, she has been trying to persuade Mr. Stanton and the management of Keystone to uncover the fact. However, after failed to do so, she did not try to do something else to solve the problem. Due to the responsibility that employee has to employer, it might be right for Mr. Stanton, Dr. Sarah and the management to not disclosure the issue. However, employees also have responsibilities to other parties such as their coworkers, families, and the society. Analysis: Apply to the theory of Relationships at Workplace Broader (stakeholder) view

Looking into the broader view, the responsibilities an employee has are not only to the employer, but to other related parties as well such as the professional community, coworkers, family, and the society. An individual should always responsible to these parties no matter if there is an employment responsibility to follow or not. All the responsibilities an individual has must be

balanced. Therefore, Mr. Stanton, Dr. Sarah and other people in the management have to consider all responsibilities they have other than the responsibility to their employerKeystone. If they do not disclose the side effects of Trizon, it might cause harms to the pharmaceutical community since drug-induced psychosis is a serious issue in the industry. Moreover, it can cause harms to their families because their families might feel sad once they know one of the family members is conducting moral wrongdoings. The worst case of these mental suffering is getting into depression. Lastly, they have the responsibility to the society. Not presenting the information to the public might cause more victims since patients will continue using the drug. Also, suicide incident will cause human loss in the society; and victims family will surround in grief. These will slow down the market efficiency and thus, has negative impact to the society. Narrow (classical stockholder) view

In the narrow view, the responsibilities of an individual at a workplace derive only from the employment relationship between the individual and the employer. According to Friedmans

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Stockholder Model, the only responsibility of an employee is to conduct business in accordance with the wishes of the employer since employees are agents of the employer. Deontological Argument Employees are often in a weak position in relation to their superiors. In order to protect the property rights against possible harm (such as getting fire) at the hands of other employees (superiors), employees must have strong fiduciary duties towards employers, and it is override other ethical considerations. This is extremely true in the position of Dr. Sarah. Even though Dr. Sarah disagrees with the managements decision of covering the side effects of Trizon, when Mr. Stanton states that the company will go down the drain if the public notice this issue, she has no further action to solve the issue. Obviously, Dr. Sarah realizes that further action might cause her to lose the job. Utilitarian Argument From the utilitarian point of view, employees (especially management team) play an important role within the economic system, ensuring its functioning to the benefit of the whole society. In order to keep the benefits flowing, the role-specific responsibilities of the employees override other ethical considerations. Mr. Stanton and the management of Keystone, therefore, did not do anything wrong by not presenting the negative effects of Trizon to the public. They commit all fiduciary duties which they owe to Keystone such as loyalty, trust, obedience, and confidentiality. They are trying to keep the company continually profitable, and protecting the company from getting financial harm. And they see this as the most important responsibility for themselves which paramount other responsibilities they have to other parties. Mr. Stanton, the management, and Dr. Sarah are acting differently because they are in different positions in Keystone. And the responsibilities for different positions (such as non-managerial and managerial position) are different. Non-managerial employees Argument As a non-managerial

employee, Dr. Sarah is required to do specific tasks of conducting researches only, other business activities such as making decision of whether disclose the research finding to the public or not is outside of her job tasks. All she needs to do is to obey Keystone and the management and leave other duties at the door. Managerial employees Argument As managerial employees, Mr. Stanton and the management team have the expertise that Keystone lacks. Also, they have the legal authorities to act on behalf of Keystone. Because lack of expertise, Keystone is in the vulnerable position and must be protected by its managerial employees. As a result, with greater power and authority, Mr. Stanton and the Page 4 of 10

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management team should stay in the position of not revealing any negative information of Trizon and protecting Keystone from suffering any foreseeable financial harm. Objections for Classical View o Nonmanagerial employees The authority which Keystone has to its employees only exists within the employment relationship. The responsibility of Dr. Sarah to obey must be limited to directives of jobrelated, reasonable, legal, and ethical. However, producing and selling a drug that induces psychosis and suicide ideation is illegal. The health and safety regulators and the courts both consider that there is no serious problem with Trizon is because they do not know the research result and statistical data of Trizon. Further, Dr. Sarah is violating her own ethical integrity as she believes hiding the research study result is not right taking into account that she has been trying to convince Mr. Stanton and the management to reveal the data. o Managerial employees Taking into account that Keystone has no expertise knowledge and in vulnerable position, it is reasonable enough for Mr. Stanton and the management to protect Keystone. However, other than the position of safe-guarder, Mr. Stanton is also in the position of a research professional since he is the supervisor of the research team in Keystone. Therefore, he has the responsibility to consider whether his behaviors have violated the professional standard in the research field. In addition, not only Keystone in the vulnerable position, but the public as well since the public is lack of professional knowledge that Mr. Stanton has. As a professional, Mr. Stanton also owes the duties to the public. Recommendation to Address the Issue: From the managerial perspective, Mr. Stanton should accept Dr. Sarahs advice and persuade the management team or the CEO of Keystone to reveal this issue to the public. He should also suggest an appropriate plan for the company about how to retrieve the reputation from the public once the information about Trizon has released. The plan can be recall all Trizon or reformulate another

drug to replace Trizon. In the case if Mr. Stanton fails to convince the owner of Keystone, he should become a whistleblower. That is to inform the public or the health and safety regulation about the harmful issue of Trizon. Whistle-blowing should only be considered when there is no other option because it against the employees relationship to the employer. It might also put Mr. Stanton in the risk of getting fire, and thus, raising the issue of his responsibility to himself and his family. In the situation when Mr. Stanton fails to convince the owner of Keystone and no further action is done from him, Dr. Sarah should keep trying in persuading Keystone. If Sarah also fails to convince Keystone, she might consider being the whistleblower.

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Issue Three: Product Safety Justification: From a study in 1982 in Keystone, the result in the internal document shows that there is a connection between a drug-induced psychosis and Trizon. A plan to place a disclaimer on the drug package, warning that mania and psychosis could be precipitated in susceptible patients by antidepressant therapy had been drafted but then cancelled. It was moral wrong for Keystone to cancel the plan because it was trying to hide the negative effects of Trizon from the public. Analysis: Apply to the theory of Responsibility for Products Caveat emptor

Caveat emptor is based in contractual law that understands marketing as a simple model of contractual exchange between a buyer and seller. It accounts only for term of contractual obligations. As a result, there are number of problems with this approach since it fails to live up the standards of an ethically legitimate transaction. Keystone assumes informed consent from consumers when selling Trizon. However, consumers do not sufficiently understand the drug and its effects. In the consumers point of view, Keystone has been in business for a long time, and it has several promises to the public such as pursue the highest standards in all areas of business, be transparent, and use its resources to strengthen communities and important health challenges. In the will of getting cure, they have no choice but to purchase a medicine from a company with a higher credibility. When consumers purchase Trizon, they assume that by bringing Trizon to the market, Keystone implicitly promises that Trizon is safe under normal use. If consumers had known any side effects of Trizon, they would certainly not buy the product.

Strict Product Liability

The side effects that Trizon has are foreseeable to cause serious health problems to consumers. Because Keystone is already notices all the effects that Trizon has, it has nothing to do with negligence. Thus, any harm Trizon brings to its consumers will result into Strict Product Liability. That is, Keystone is fully responsible for all injuries and need to bear all financial costs. Moreover, in the view point of Absolute Liability, passing costs for injuries to business (Keystone) is more appropriate than assigning costs to the injured party (consumers) or society at large. Under the theory of Absolute Liability, Keystone also violated the rule of Equal Standing by not placing the disclaimer on Trizons package. That assists Keystone to stand out from competitions in the market which is unfair to its competitors since it does not provide equal opportunity for consumers to compare different products before making purchase decisions.

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Recommendation to Address the Issue: From a managerial perspective, Keystone should place the planned disclaimer on the package of Trizon and place a message to persuade consumers to take the drugs under doctors advice. This enables Keystone to compete fairly. As well, allows consumers to have an equal opportunity to know all side effects of Trizon before purchasing it.

Issue Four: The Ethic of Promotion Justification: The marketing department of Keystone failed to reveal the potential side effects of Trizon on the ads which leads to a misleading impression favoring desired choice from consumers. This is wrong because it is an implicit way of deception against consumers. Also, Keystone is attempting to do promotions toward children who can be categorized as vulnerable consumers. And targeting to vulnerable consumers is morally wrong. Analysis: Apply to the theory of Deception and Fairness

Deception is unfair to competitors. When consumers get deceived, competitors of Keystone are denied a chance to compete in the market fairly. The fact is that Trizon has a higher suicide rate (12.5 per 1,000 users) than non-SSRI antidepressants (3.8 per 1,000 users). Moreover, research results in 1988 shows that the chemical central to Trizon leads to activation in 38% of the trail cases whereas drugs in other chemicals produce (competitors) only 4% activation and mostly result sedation. It is foreseeable that consumers will never choose Trizon over other antidepressant drugs if they had known the fact. On the consumers side, they get hurt by such deception because the wrong purchasing decision they made might cause serious harm to themselves. The deception Keystone has towards its

customers is an illegal conduct. Apply to the theory of Manipulation

The marketing campaign of Trizon is targeting to people who are susceptible because they are patients of depression who need some specific medical treatments, and this group of people is in the general vulnerability category. The Binaton campaign appeals to fears and anxieties of a particularly vulnerable groupchildren. Different people have different ethical positions on manipulation which imply different standards of deception. In order to make a proper decision, analyzing different position is necessary. Autonomy (Deontology)

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The standard for Autonomy position is that manipulating is always wrong, unless person is incapable of autonomy; becomes wrong with intent. As Keystone manipulating its customers, customers are treated as means to Keystones ends. Keystone should always respect its customers. Consumers, as individual, should be acting freely as a rational agent with their own ends. Although children are incapable of autonomy in this case, Keystone is violating the respects for the autonomy of most of its consumers to be agents with their own ends. Consequences (Utilitarian) On the other hand, the standard for consequences position is that manipulation is wrong only if consequences are bad; becomes wrong with acts, not intent. Manipulation is ethically illegitimate if it leads to a decrease in overall happiness. Keystones behaviors erode the trust and respect between the company and consumers. Without knowing the true, consumers will continue using Trizon, and the more Trizon is taken by consumers, the more potential suicide cases will happen. Overall happiness in the society, therefore, will be decreased by the increasing suicide cases. Once consumers notice that they are manipulating by Keystone, they will get mad; this will also drive down the overall happiness. Arguments

Keystone might argue that the autonomy of consumers behavior is not violated because advertising is not the only driver for a product to success in the market. Studies show that more than half of new products fail in the introduction stage in the marketplace. If advertising has such powerful control, these failures would never happen. Objections

However, in some situations, advertising does create non-autonomous desires on the consumer which is possible that consumer autonomy is violated due to that reason. In Keystones case, consumers are patients who are weak in making the autonomous decision since they do not have sufficient knowledge about medications. They only have the willingness to be recovered from depression and become happy again. Since the advertising of Trizon states that it will bring back consumers happiness and help them getting away from depression, consumers will put into actions in purchasing Trizon. These purchasing decisions are not because of the drug (product) itself, but the willingness to be recovered. Further, for the advertising of Binaton, it creates nonautonomous desires in children. Children are in the learning stage, they will imitate peers as well as adults. Also, they are lack of ability in identifying the true meaning of right and wrong. Therefore, it is foreseeable that Binatons ad will bring up childrens desires of being the same as the little boy on the ad; thus, they will ask their parents to buy them Binaton. Recommendation to Address the Issue: From managerial perspective, Keystone should list in Trizons ads that the thoughts of suicide, or suicide ideation, are the possible side effects of the drug. This will give consumers a better understanding of what potential risks they might have by taking Trizon. It is fair to consumers

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only in the situation when they know what they are buying. It is also fair to competitors as the equal opportunity is provided. For the marketing campaign of Binaton, Keystone should target parents instead of children. To do so, the company can change the leading actor in the advertising to an adult from a little boy. Boy can be only a supporting role in the ads and not a leading role.

Issue Five: Discrimination and Sexual Harassment Justification: Keystones Mexico branch has committed the discrimination against female employee, Diane Ross. The leader of the branch, James Dirckam, despises Diane Rosss management position and always referring her as his cute little assistant in front of the clients. As well, the branch is committed sexual harassment since it requires female employees working as receptionist at the front of the office and wear colorful and slightly sexy uniforms that is not necessary for the job. After Diane has objections about the branchs policy, the office head, James, gave Diane an unfair performance evaluation of beginning of a negative attitude about the company and its policies. The above behaviors of Keystones Mexico branch are wrong since it breaches the Employment Equity Act. Analysis: Discrimination against Female (Boys Club Issues)

Obviously, Keystones Mexico branch has the boys club issue since James despises Dianes management position and does not give Diane respects in front of clients. Moreover, James requires all female employees working as receptionist only. All these behaviors tell that James is discriminating against female and forming his own club for male employees and clients.

Sexual Harassment

Sexual harassment occurs when there is a hostile or offensive environment for members of one sex is every bit the arbitrary barrier to sexual equality at the workplace. The requirement of sexy uniform can be seen as an offensive working environment. As a result, James has committed sexual harassment to female employees in the Mexico branch. Arguments

It is normal for men to have a Boys club as women can also have their Girls club. As well, clients and partners in Mexico do not understand women in authority; their attitudes will not change easily. In order to keep the good relationship with them, undermining female with important authority is necessary. Requiring female to wear sexy uniform gets complements from the business clients, which means clients is very happy with what the company is doing. And satisfying customers needs and making them happy is one of the missions of the company. Page 9 of 10

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Men and women have different position and perceive sexual experience differently; what normal for man might be offending women. James thinks that it is normal to have boys club and it is normal to undermine Dianes authority to keep clients and partners happy. However, whats normal in James point of view is not normal in Diane and the rest of the female employees point of view; they actually feel offended. The complements of clients and partners are only important to the company when they are job related. Wearing sexy uniform is not job-related tasks as it has nothing to do with job performance and efficiency. It might actually drive down the efficiency since female employees are mentally suffering from the offended treatments. Recommendation to Address the Issue: From the managerial perspective, Keystone should reset the office policy in Mexico branch. The clause of Equal Opportunity should be included which will prevent the discrimination against gender, race, or ethnic background. That is to allow all female employees to equally compete for any job position with the office (not only working as receptionist). The requirement of wearing sexy uniform should also cancel since it has nothing to do with the jobrelated tasks and it is inconsistent with professional environment of the office. As a person who assigned by head office of Keystone with important management position, Diane should be introduced in front of clients and business partners with her proper authority and be respected among the office.