Should companies like Mylan, the pharmaceutical distributor of the life-saving EpiPen used by millions each year, be concerned about the well-being of its consumers, as well as the greater community, or focus solely on company profits? According to the CBC, the American Medical Association’s president, Dr. Andrew Gurman, stated that, when asked about the EpiPen, “although the product is unchanged since 2009, the cost has skyrocketed more than 400 per cent during that period.” This information makes clear what Mylan prioritizes as a company, but raises another important question regarding business practices: Why do companies value shareholders so much more than other stakeholders?
https://www.boundless.com/accounting/textbooks/boundless-accounting-textbook/introduction-to-accounting-1/overview-of-key-elements-of-the-business-19/business-stakeholders-internal-and-external-117-6595/
Most companies and businesses today follow the traditional approach in which satisfying the financiers and shareholders of a company through profits and increased value are the main objectives. Stakeholder theory, however, states that satisfying the many other entities involved with a company as well, such as the consumers, employees, society, suppliers, etc., and viewing these entities as a whole rather than individually are vital in ensuring that businesses become, and stay, successful. So why do many firms still disregard the importance of the other pieces that make their companies work?
My answer to this question is money. The shareholders and financiers provide the funds and the capital required for the firm to operate, so ensuring that these people are satisfied is viewed as priority. Of course, it is reasonable to want the financial benefactors responsible for the company’s financial well-being to be happy and satisfied, but what many companies end up doing that is ethically questionable is attempt to satisfy the shareholder at the expense of the consumer.
In the case of Mylan, dramatically increasing the price of their product, a life-saving medicine that represents 90% of the market share for epinephrine devices, in order to drive up profits satisfies the financial needs of the company but makes the device much more inaccessible to families and individuals, especially those in the lower-income bracket. Similarly, Turing Pharmaceutical last year was criticized severely for spiking up the price of Daraprim, a commonly used AIDS medicine, from $13.50 a tablet to a staggering $750. The actions undertaken in these two situations reflect Milton Friedman’s approach to business in which company executives have direct responsibilities to their employers and must maximize profits at almost any cost, including sacrificing the satisfaction of the customer.
For myself, the response when faced with the issue of ethics versus profits is balance. Who is to say that the solution to a business problem must exclusively benefit one thing or the other? There are many ways for positive outcomes to be reached in which both the ethical nature and the profitability of a decision aren’t compromised.
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