Ethical and Responsible Business Management

A: Report to Senior Managers

Introduction into the Report

This report is designed to provide insights into ethical and responsible business management drawing from the opioid crisis that led to your company being fined $572m. Despite opioid pain relievers being very profitable products for your company, they have a negative impact on some key stakeholders resulting in an ethical dilemma that must be addressed in order to comply with business ethics and responsible management concepts. According to Institute for New Economic Thinking (2019), opioid drugs are known to addict and even kill about 90 persons every day. In the same vein, a report by BBC (2018) reveals that opioid drugs killed almost 48,000 people in 2017. Still, CNN (2019) reveals that about 1.7 million people in the United States have suffered from substance use disorders related to prescription of opioid pain relievers. For those who are seeking in place to delve deeper into all these issues for their studies, business dissertation help can provide the most valuable support. From these accounts, it is evident that you have failed to act in compliance with the terms of your code of business conduct and in particular, “we are responsible to patients, doctors and nurses, to mothers and fathers and to all others who use our products and services, to our employees, to the communities in which we live and work and to the world community as well and to our stockholders” (Johnson & Johnson 2018). Your business conduct has created an ethical dilemma given that it is making profits while negatively affecting the health and wellbeing of consumers and the society at large. According to Mellahi et al. (2010), ethical business practice should do what is just and fair and avoid harm thus solving problems in the society. However, your product, opioid, which was mean to relieve pain has harmed your customers, which shows you have failed in conducting ethical business. According to McMurrian and Matulich (2016), a business should not solely be meant for profits but should also meet the legal, ethical, and discretionary expectations that the society has for it. This report identifies the ethical issues in your sale of opioid pain relievers, identifies the stakeholders affected by your business practice, and makes recommendations on how you can manage your business in a more ethical and responsible way.

Ethical Issues

A deceitful marketing strategy

Johnson & Johnson’s opioid marketing strategy created an imaginary problem (that chronic pain was under-treated) and proposed increased opioid prescription as the solution (The Guardian 2019). This concept was aimed at increasing revenue raised from sale of opioid rather than solving a problem in the society. In addition, Johnson & Johnson sent sales representatives to doctors with misleading messages, disseminated misleading coupons, pamphlets, and other printed materials for doctors and patients while misleadingly advertising opioid over the internet (The Guardian 2019). Following this misleading advertisement, opioid prescription escalated to about 250m prescriptions in 2012 with the worst effect recorded in Oklahoma state which has a population of less than 4m people yet about 18m opioid prescriptions were made in this state (The Guardian 2019).

Falsifying research findings

The Guardian (2019) reveals that Johnson & Johnson used a cunning, cynical, and deceitful scheme to influence researchers, doctors, politicians, and federal regulators. The company created the perception that opioid was the ultimate solution to pain and the drug was not addictive while actual research indicates that for most of the ailments, opioid was not necessary and it is actually addictive (The Guardian 2019). To convince doctors into prescribing so many opioid drugs, Johnson & Johnson made false claims for the safety of opioid drugs through falsifying scientific papers and asserting that there was less than 1% risk of addiction from narcotic painkillers (The Guardian 2019). In addition, the company funded academic studies that hewed their way and doctor training that emphasized that opioid was the ultimate treatment for pain (The Guardian 2019).

Key stakeholders affected by Johnson & Johnson’s unethical business practice

In falsifying research findings to support prescription of opioid drugs and using a deceitful marketing strategy, Johnson & Johnson only considered the needs of its shareholders, aiming at making more profits for them. From this perspective, it can be concluded that Johnson & Johnson existed to solely make profits for its shareholders. As such, it neglected the expectations of the other stakeholders including patients, their caregivers, the government, and the society at large. From Carroll’s Pyramid model, an ethical and responsible business should not only strive to make a profit but also to obey the law, engage in ethical practices, and be a good corporate citizen (Carroll 2015). From the ethical dimension, a company should formalize moral norms in the form of ethical codes and sets of good practice to ensure it meets the expectations of doing no harm (Shabana et al. 2017). Although Johnson & Johnson engaged in unethical and irresponsible business practice, it has a code of business conduct stating that its core values are integrity, disclosure, ethics, good judgment, and reputation (Johnson & Johnson 2019). These values are intended to ensure that the company avoids situations where its interests would conflict with its responsibilities and clearly, the Johnson & Johnson failed to follow its values in this specific case thus harming the very people it is supposed to protect and improve their health and wellbeing.

This case is a clear explanation of how unethical and irresponsible business practice can add to the cost of care. As earlier mentioned, the escalated prescription of opioid drugs led to the death of at least 10 people every day and left more than 1.7 million people in the United States suffering from substance use disorders related to prescription of opioid pain relievers. These people had to seek extra medical care which increased individual and the country’s expenditure on health. Unethical business practice will cost your business: first, unethical and irresponsible business practice will degrade the reputation of your business (Bloche 2016). For example, how many people among the 1.7 million affected by opioid drugs will be willing to repurchase your products? Unethical business tarnishes a company’s reputation resulting in loss of customers. For example, a study conducted by Uzma E & Asif (2016), found out that Toyota was ignorant of the safety of people thus lots its customers to its competitors. Second, unethical and irresponsible business practice results in a mismatch between employees and the organization (Asgary and Li 2016). For example, in this case, Johnson & Johnson encourages and funded deceptive research and even collaborated with external organizations to falsify research findings thus risked facing moral opposition by employees whose values do not comport those displayed by the company. Such employees are more likely to experience constant clash with workplace expectations resulting in lower job satisfaction and higher turnover intentions. As an unethical organization, Johnson & Johnson is more likely to select and retain dishonest employees as well as create them and as a result, the company will not be able to work in line with its code of conduct (Asgary and Li 2016). Third, unethical business practice results in loss of revenue (Ikuabe 2016). For example, Johnson & Johnson was fined $572m for unethical business practice (The Guradian 2019). On the contrary, ethical and responsible business practice provides an organization a competitive advantage and allows a firm to emerge as a role model for others to follow (Ikuabe 2016). Thus, through ethical and responsible business practice, Johnson & Johnson is more likely to make its processes socially acceptable thus promoting its sustainability.

Recommendations emerging for the analysis

Ethical business practice is important for Johnson & Johnson as customers and prospects look into a company’s reputation and the impact it has had on the society in the decision making process (Ikuabe 2016). In particular, consumers look at the achievements of a company as well as its conduct and values before making a purchase decision (Kain et al. 2014). This implies that it is essential for Johnson & Johnson to build its image and maintain its consistency in all its practices. To attain this:

Johnson & Johnson should live up to its values which it summarizes as putting the needs and wellbeing of the people it serves first (Johnson & Johnson 2019). In the analyzed case, the company only considered the needs of its shareholders thus neglecting the needs and wellbeing of the very people it exists to serve. This shows that the company is not committed to complying with its code of business conduct thus it is recommendable that compliance be emphasized at every level of the organization.

Johnson & Johnson should review its performance against its values to establish how effective it is at keeping its promises to shareholders

Johnson & Johnson should put equal emphasis to the other three dimensions of social and ethical responsibility (legal, ethical, philanthropy) other than focusing on economic alone

The company should select and retain ethical persons so as to cultivate a culture of ethical and responsible business practice.

Johnson & Johnson should acknowledge that its primary role to the society it to improve health and wellbeing and therefore ensure that its products and services serve this purpose regardless the effect of profitability

To avoid deceitful and cynical advertising, Johnson & Johnson should ensure that the advertising messages are factual and aim at informing people or educating them

Johnson & Johnson should also train its sales representatives to ensure their actions reflect the core values of the organization

B: Theoretical Framework

Utilitarianism

From the utilitarian perspective, decisions are made based on the greatest amount of benefit acquired for the greatest number of individuals (Mandal et al. 2016). This means that individual agents are allowed to have the moral preferences and to act in the interest of others but only when the action generates greater gain than loss (Van Staveren 2007). Even though this approach could harm some people, the net outcome is maximum benefit. The utilitarianism theory is seen as a consequentialist approach given that the morality of an action or decision is determined by the outcome.

Analyzing Johnson & Johnson’s case using the utilitarian approach shows that the adopted deceitful schemes were unethical. This is so because by so doing, the company only sought to gain more profit for the shareholders while neglecting the needs and wellbeing of the people it exists to serve. As a result, the overall harm overweighed the total benefit; even though opioid drugs became the most profitable, many patients died, others developed substance use disorders, the company’s image was damaged, and revenue was lost in paying of fines. With such a negative outcome, Johnson & Johnson’s scheme was unethical. In addition, Johnson & Johnson might have been happy with the profits acquired from the escalated sale of opioid drugs as a result of deceitfully marketing the drugs but this is not universally acceptable. Further, Johnson & Johnson does not follow the principle of consistency: if it were right for every company to use deceit in marketing its products, consumers’ needs and wellbeing would never be considered even in development thus lowering the quality of life for the consumers. Thus, Johnson and Johnson is the only stakeholder that had pleasure following the deceitful marketing practice while all the other stakeholders endured pain. Nonetheless, the company eventually underwent the pain of paying fines for the unethical behavior.

Deontology

Unlike utilitarianism, Kantian deontology refers to ethics of duty whereby the morality of an action depends on the nature of the action. This means that no matter the consequences, harm is unacceptable (Van Staveren). On the other hand, Wight (2015) holds that the deontology approach to ethics implies that morality is a duty that should be followed. This implies that deontological ethics is concerned with doing what should be done, how it should be done, and what is right or wrong (Mandal et al. 2016). Deontology resides in reason, which means that reason is the source of moral rules that are then expressed through human will (Mandal et al. 2016). The decisions of deontology might be appropriate for an individual but does not necessarily yield good outcome for the society making them unethical.

From the ethics of deontology, Johnson and Johnson was wrong to deceitfully market opioid drugs; although using deceit to market the drugs was appropriate for the company in terms of increasing revenue, the decision did not produce a good outcome for the society making it unethical business practice. From this perspective, Johnson and Johnson ought to have followed its values of promoting the health and wellbeing of those its exists to serve rather than overlooking them for organizational interests. Additionally, Johnson and Johnson should have funded academic research to investigate whether opioid drugs are addictive or not and use these facts in the marketing message so that doctors and patients can make informed decisions.

Qualities for ethical leadership and the creation of ethical organizations

Through this assignment, I have learnt that an ethical leader is selfless in that he/she is not led by personal interests but the needs and wellbeing of others in the society. This is in line with Wight (2017) who states that responsible management and ethical leadership is centered around the idea of value-based, which implies that responsible management and ethical practice encompasses a sense of responsibility to others, moral decision making, and shared ideals of societal wellbeing. From the exercise I have also learnt that a responsible leader (seeking to satisfy the needs and improve the wellbeing of others) should be able to develop a maintain a working relationship with others in order to correctly respond to their needs. This concurs with Kapur (2018) who holds that responsible leaders cultivate responsible relationships with stakeholders in order to achieve mutually shared goals based on the business vision. Further, I have learnt that responsible managers live up to their promises and deliver every word they promise their stakeholders. In the same vein, Boda and Zsolnai (2016) note that ethics codes and codes of conduct should be used as tools for promoting ethical business practice and responsible management. Still, Menzel (2014) indicates that codes and values are written to guide behavior therefore failure to follow then results in unacceptable consequences. From this, responsible business managers should strive to make sure business values are reflected in all activities completed at all levels within the organization.

Through the assignment, I have also learnt that ethical leadership respects others. Through respecting others, ethical and responsible leaders are able to understand the needs of their stakeholders and organize business activities in a way that brings value to all stakeholders (Kapur 2018). Further ethical leadership values equity. From the deontology approach to ethics, I have learnt that leaders make decisions based of the morals of the society such that the needs of the entire society are met in the long run. In the same vein, Menzel (2014) write that responsible business managers consider the needs of individuals and seek to ensure they are met regardless the level occupied by each individual. To ensure the needs of all individuals are met, responsible managers build a community whereby they influence they team to achieve a common objective (Wight 2017). The common objective in this case has an ethical dimension in that it seeks to ensure the action produces positive outcome for all.

Further, I have learnt that ethical leadership is found on honesty. In the case, Johnson and Johnson was not honest and instead used deceit while manipulating research findings to promote its unethical business practice. Had the company remained honest, it would not have misled its customers and the negative consequences would not have been produced. In agreement, Kapur (2018) state that honesty, righteousness, and truthfulness are the principles upon which success and achievement of goals are found. By creating a problem that was not there, Johnson and Johnson sold opioid drugs to solve an imaginary problems resulting in detrimental effects. Thus, responsible managers should always be truthful in their dealings which will help them form and maintain proper relationships and connections for mutual benefits.

In creating ethical organizations, I feel it would be paramount to consider what every individual considers moral and then based on these findings and the business vision develop code of conduct and values to guide business practice. Such codes should be written to guide behavior thus ensuring that all individuals within the organizations act towards a common goal (Boda and Zsolnai 2016). Codes should be designed for all staff within an organization and according to Kapur (2018), engaging employees in developing ethics codes and codes of conduct goes a long way in ensuring they comply with the requirements. The codes should be written and explained in a simple and clear way to ensure the offers directions towards a common direction regardless the demographics of employees (Menzel 2014). Further, an organization should remain active in enforcing the codes or else the organization will engage in unethical business practice despite having values and codes of conduct as it was the case with Johnson and Johnson. According to Wight (2017), codes of ethics do not take away an individual’s moral autonomy thus employee engagement is pivotal to ensuring employees comply with the set values and codes. In the same vein, Kapur (2018) write that when organizational values contrast with those of a person, the employee is more likely to follow his/her values and overlook those of the organization or in some cases quit his/her job. This further underscores the need to ensure that employees are involved in creating organizational values and codes. Therefore, organizations should engage their employees in developing their codes of ethic and in defining organizational values.

Conclusion

This report aimed at providing Johnson and Johnson’s senior managers with insights on ethical and responsible business management. The report identifies two ethical issues in management namely deceitful marketing and falsifying research findings to promote the sale of opioid drugs. The report indicates that this unethical business practice benefited the organization for a short run but in the long run costed its revenue as reputation. Other stakeholders were adversely affected including patients who lost their lives, those that developed substance abuse disorders and their families and the government which experienced heavy expenditure on health. The utilitarian and deontology theories of ethics confirm that Johnson and Johnson’s approach to business were unethical. The report also establishes that ethical leadership is honest, selfless, values relationships, and respects others. In creating ethical organizations, the report establishes that developing core values and codes of conduct is integral to success. The report also reveals that engaging employees in defining the core values and developing codes of conduct promote compliance.

References

• Asgary, N. and Li, G., 2016. Corporate social responsibility: Its economic impact and link to the bullwhip effect. Journal of Business Ethics, 135(4), pp.665-681.
• Bloche, M.G., 2016. Scandal as a sentinel event—Recognizing hidden Cost–quality trade-offs. New England Journal of Medicine, 374(11), pp.1001-1003.
• Boda, Z. and Zsolnai, L., 2016. The failure of business ethics.Society and Business Review, 11(1), pp.93-104.
• Carroll, A.B., 2015. Corporate social responsibility.Organizational dynamics, 44(2), pp.87-96.
• CNN 2019. The changing face of the US opioid epidemic: Middle-aged black adults see rise in death. [Online] Available at https://edition.cnn.com/2019/10/31/health/opioid-deaths-african-americans-study/index.html [Accessed 23 December 2019]
• Ikuabe, M.O., 2015. Unethical Practices and Construction Project Cost Performance in Nigeria. In The Nigerian Institute of Quantity Surveyors: 2nd Research Conference–ReCon2 1st to 3rd September 2015 (p. 623).
• Institute for New Economic Thinking 2019. Worse than big tobacco: How big pharma fuels the opioid epidemic. [Online] Available at https://www.ineteconomics.org/perspectives/blog/worse-than-big-tobacco-how-big-pharma-fuels-the-opioid-epidemic [Accessed 23 December 2019]
• Johnson & Johnson 2018. Code of business conduct. [Online] Available at https://www.jnj.com/sites/default/files/pdf/code-of-business-conduct-english-us.pdf [Accessed 23 December 2019]
• Kain, P. and Sharma, S., 2014. Business ethics as competitive advantage for companies in the globalized era.Journal of Management Sciences and Technology, 3(1), pp.39-46.
• Kapur, R., 2018. Factors Influencing the Students Academic Performance in Secondary Schools in India.
• Mandal, J., Ponnambath, D.K. and Parija, S.C., 2016. Utilitarian and deontological ethics in medicine. Tropical parasitology, 6(1), p.5.
• McMurrian, R.C. and Matulich, E., 2016. Building customer value and profitability with business ethics. Journal of Business & Economics Research (JBER), 14(3), pp.83-90.
• Mellahi, K., Morrell, K. and Wood, G., 2010. The ethical business: Challenges and controversies. Macmillan International Higher Education.
• Menzel, D.C., 2014. Ethics management for public administrators: Building organizations of integrity. Routledge.
• Shabana, K.M., Buchholtz, A.K. and Carroll, A.B., 2017. The institutionalization of corporate s
• The Guardian 2019. Capitalism gone wrong: how big pharma created America’s opioid carnage. [Online] Available at https://www.theguardian.com/us-news/2019/jul/24/opioids-crisis-big-pharma-drugs-carnage [Accessed 23 December 2019]
• The Guardian 2019. Johnson & Johnson to pay $572m for fueling Oklahoma opioid crisis, judge rules. [Online] Available at https://www.theguardian.com/us-news/2019/aug/26/johnson-and-johnson-opioid-crisis-ruling-responsibility-oklahoma-latest [Accessed 23 December 2019]
• Uzma E & Asif A.K 2016. Impact of Unethical Practices on Business environment: A case study on TOYOTA, International Journal of Marketing &Financial Management, Vol.4,(Issue 5, Jul-2016), pp 11–17.

Continue your journey with our comprehensive guide to Essentials of Financial Management.