Merck and Corporate Social Responsibility Term Paper

Corporations have many stakeholders, of which the shareholders are just one group. There are also, for example, creditors, employees, suppliers and customers. In the case of pharmaceutical giants, society at large is also a stakeholder of a sort. The products a company like Merck develops improve the health and well-being of the population at large. Government can be said to be the stakeholder that represents this interest.

In the case of Mectizan, this may have been a significant factor in the decision to proceed with development. The development and free distribution of the drug generates goodwill on the part of Merck. That goodwill is an intangible asset. Merck relies on governments for a favorable legislative and structural environment in which to operate. It may be the case that the goodwill generated by the occasional apparent act of altruism allows for the perpetuation of that favorable environment. Therefore, even though the hard numbers may have been unfavorable for the specific investment decision regarding the development of Mectizan, the investment decision may have been viewed by Merck to have a positive return once the intangible goodwill was considered.

Such "socially responsible" actions as Merck's development and giveaway of Mectizan do not set a dangerous precedent for a free market society. Free markets are just that. Corporations are free to engage in whatever activity they choose, and investors are free to make investment decisions based on that. A key concept in free market capitalism is transparency, and public companies like Merck are required to maintain a certain degree of transparency in their activities. This allows investors the opportunity to evaluate the company properly prior to making any investment decision. In this case, any investor in Merck will, if they conduct their due diligence, be aware of decisions such as that concerning Mectizan and can choose not to invest if they are uncomfortable with the company engaging in socially responsible practices.

Free market capitalism is not threatened by this. Rather, it is strengthened by this. The greater the diversity of investment opportunities available, the stronger the market. That some firms choose to engage in socially responsible practices while others in the same industry do not increases investment diversity.

Moreover, social responsibility does have its benefits to capitalist society. A case like this is a great illustration. Disease results in a loss of human capital. Lost lives and work hours cost the economy because they reduce the efficiency and productivity of the populace. Even though river blindness affects developing nations, those nations are important not just for global trade but also as a source of new labor through immigration. By reducing disease, we improve global productivity and potentially domestic productivity as well. This has a positive macroeconomic effect.

Merck's decision to development and give away Mectizan was sound. In the short-sighted Friedman sense, it was a poor decision. But because disease reduction results in improvements to the global economy, one key stakeholder, governments, has a vested interest in such drug giveaways. This in turn generates goodwill for Merck, ensuring that governments provide Merck the operating environment they require to generate profits from their other product developments.

Works Referenced:

The Merck Mectizan Donation Program. (2007). Merck.com. Retrieved May 10, 2008 at http://www.merck.com/cr/enabling_access/developing_world/mectizan/

Mayer, Donald O. Stakeholder Theory. Reference for Business. Retrieved May 10, 2008 at http://www.referenceforbusiness.com/encyclopedia/Sel-Str/Stakeholder-Theory.html

Rodgers, T.J. (2005). Rethinking the SOcial Responsibility of Business. Reason. Retrieved May 10, 2008 at http://www.reason.com/news/show/32239.html