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Case Study of Sackler Family on Business Ethics

Question :

This assessment will cover - 

  1. Is there is a possibility to describe the Slacker Family as an ethical organisation.
  2. How can an organisation protect it from unethical practises?
Answer :

INTRODUCTION

Success can mean a lot of things. Achieving goals, accumulating wealth, exploring new avenues etc can be termed as success for some, but for others success would mean building better relationships, cognitive development, gaining more knowledge etc.

To define success for an organisation, one must look at all the goals which the organisation collectively wishes to achieve. Every organisation aims at developing and growing, not just financially but also in terms of human resource, people development and multiple other fronts (Ghillyer, 2012).

Ethics play a crucial role in the society as well as in the life of an individual. Since organisations are a part of this society and made up of individuals, ethics affect the success of an organisation too.

The Sackler Family which is a household name in many areas of the globe, known for its great fortune, earned through various means. One of the major means of income of this family is their pharmaceutical enterprises like Purdue Pharma. The members of this family have always invested great amount of money for philanthropic works. But this cannot hide the fact that the way they earned this money is unethical.

Their pharmaceutical company was involved in including opioids in their products which affected people in the worst form. Use of opioids has affected many people across the globe. People got addicted to the product which affected their income positively and helped them in getting more profit. But on the other hand, people who had to suffer a great deal because of their unethical behaviour cannot be ignored (Becker, 2012).

The following report will discuss the perspective of success from the different point of views and will highlight the impact of ethics on same. It will be explored that how the company’s business gets affected if it is following the code of conduct and what different image is created if no value to the core values are given by the business operators.

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ANALYSIS

Achievement of success in business context is determined by a range of factors among which every element has their own significance. It is important that the view of various elements is considered before declaring any business successful. It can be one which is generating maximum revenues but not fulfilling its corporate social responsibility or the other enterprise which is earning comparatively low but is fulfilling all its business ethics. In order to understand this in more detail there is discussion of different perspectives on the ethics and growth of the business.

In making a business profitable, there are several factors that play significant role which includes expert management teams, dedicated and productive employees, consistent consumer demand and careful watch over the bottom-line staff (Tsalikis and Fritzsche, 2013). According to researches done in this field, the companies which hold better ethical values are more successful as compared to the ones which work in an unethical fashion. Although it is not the first variable considered in analysing the profits of a company, business ethics are an essentially necessary catalyst to the success of a company.

The way to success for companies in today’s economic scenario is more demanding than ever and the capability of evolving with the rapid changes is indemnifying in order to resist on the market. The managers struggle consistently not just with rising complex problems, caused by cut-throat competition in the market but also from the increasing customer’s demand. In this competitive time the desire of choosing an easy solution for resolving everyday problems is very high, although generally the easiest solutions bring short-term profit it can affect the long-term profit or even the survival of the company.

This could be more elaborated with help of the case law of Sackler Family. The Sacklers are an American and British family that rose to power as the founders of the pharmaceutical company Purdue Pharma. In 1996, Purdue Pharma introduced OxyContin, a time-release version of oxycodone prescribed for severe and chronic pain. By 2015, the Sackler family was listed in Forbes as one of the wealthiest families in America.

The Sackler family were under international scrutiny and the subject of a massive lawsuit. The lawsuit involves more than 500 cities, counties, and tribes from all across the US. Eight members of the Sackler family were accused of deceiving doctors and patients and downplaying the dangers of OxyContin, which has led to the over-prescription and misuse of the drug.

The Sackler case enlightens massive scrutiny on closely tied livelihood of arts institutions with a mini circle of philanthropic donors, to rethink and revamp their ethical boundaries. Directing moral dilemmas and rebalancing act in a challenging political environment takes more than courage as leading cultural institutions (Fassin, 2012). Thus, their malpractices leading towards unethical behaviour has demeaned the company and caused it huge losses including loss of reputation. Henceforth, being ethical creates and environment of trust and friendliness within the organisation and maintains the demeanour of its stakeholders.   

Therefore, it can be concluded that there are some main principles that a company should take into consideration in order to have long-term benefits. These principles are in a way connected, thus if a company does not respect one principle this will compromise the other ones too. The big risk of the unethical behaviour is that the consequences are interconnected, and one consequence leads to another and in the end, this could damage the revenues of the company. Success from the perspective of shareholders and how this is affected by unethical behaviour

Shareholders play both major roles in a company's functioning. They play a major role in electing directors who appoint and supervise senior officers, including the chief executive officer (CEO) and the chief financial officer (CFO). Stock markets are also affected by the shareholders. Many investors operate keeping in mind the output generated by the organization along with consistent and better stock values.  

Therefore, company’s management is under utter pressure to meet and beat sales and profit projections. The free cash flow generated by companies often results in creation of a certain pressure from shareholders to return some of the cash in other forms such as dividends or buybacks.

Companies would be nothing without shareholders and investors, and as such, operating with business ethics in mind is most important when interacting with these crucial players. It is common for the profitability of publicly traded companies to decline rapidly when they encounter situations where information regarding unethical behaviour is discovered. When investor confidence is lost, it can be a struggle for a company to regain the trust of the public, its investors and its valuable shareholders; profitability may take years to build up again. Companies that lay the framework for business ethics in all facets of operation are more likely to become and remain profitable than those that conduct business in an unethical manner  (Pearson, 2017).

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Ethical problem associated with shareholders arises from the nature of the agency relationship between shareholders and managers. The capitalist system is driven by an implicit assumption that people are driven by their legitimate self-interest. Agency theory, the theoretical foundation of much of academic accounting, assumes that managers are self-interested and are not burdened by ethical considerations; therefore, the central problem for shareholders is to put controls in place to ensure that managers do not expropriate excessively the shareholders’ wealth for themselves. To protect the legitimate interests of shareholders from the self-interest of its managers, who may have different objectives from shareholders (e.g., in their willingness to take risks) and who generally have better information about the business than its shareholders, the owners put in place management accounting, control, and financial reporting systems (Audi, 2012). These define management objectives in terms of contractually measurable performance criteria, such as an increase in stock price, meeting budgets, and so on. They also reward managers in the form of bonuses for achieving these performance targets.

Unethical practices like fraud, presenting forged documents etc put the stockholders at a certain risk along with bringing wrongdoers under scrutiny of legal authorities.   While there is a substantial overlap between ethical standards and legal compliance, not all unethical behaviour is illegal. The habit of giving a "golden parachute" to members of affected companies provides an easy way out to the people responsible for that companies’ downfall. Subsequently, the shareholders watch the cost of their shares drop.  (Giacalone and Promislo, 2013).

To achieve the confidence of the public is very important to maintain sustainability in the market for any business. Public i.e. the customer in the given case study are most important factor to be considered while determining the success of the company. It is required that they are satisfied and happy with the service of Purdue. It was involved in delivering the treatments of opioid addiction and on the same hand is using opioid itself for producing its different products. It leads to great dissatisfaction among the user of its offerings and hence affected its brand loyalty to a great extent. People start doubting the prime objective of the company of the case study that weather it is public welfare or just to make profit. This has great influence on the perspective of the customer which is developed due to the unethical behaviour of the firm. They do not support the brand and even if they do use the products and service of this company, they do not consider it to be successful. It becomes difficult for the customers to trust the brand and hence they doubt on purchasing the brand products of such companies. In case of sacker family, it was one which do not give preference to the welfare of the society and believes in maximising revenues (Werhane, 2019). The overall impact of such practices on business reputation is that in the eyes of people it becomes a commercial shop which is running against the ethics even if it successful on terms of revenue generated by same.

CONCLUSION

From the analysis of the case study of Sackler Family it is identified that even if the business is doing good in terms of revenue but if it is not considering the ethics of the society then it can not be considered successful. It is found out that how depending upon the self-interest every stakeholder (people, board, revenues, shareholders) has their own definition of a commercial practice considered as growing and having recognition in the market. The overall work further concluded that such organisations who are giving equal weightage to both success and maintaining ethics has more demand in the market and is highly demanded by the customers. Although the reports at some places also reflects that parties like shareholders and investors has their interest in the maximisation of profit and only continue with a business option if it can give good returns on investment. They are not much concern for what could be the consequences of

RECOMMENDATIONS

There are range of ethics related issues discussed in the above report. It is found that how non fulfilment of the morals can lead to loss of company image in the market no matter the profitability is not getting affected due to any external or internal factor of the business. It is suggested to the organisation that it should also give equal weightage to the maintenance of ethics while operating the business operations. It would help them in raising their brand image in front of the customers and in industries too. It can work on its research and development team through which replacement of such salts from the medicines should be made which are not fit for health or may lead to any sort of addiction. Equal balance in between the interest of the different stakeholders and duty towards the ethics should be maintained so that long term survival with effective brand name can be kept.

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