Merck and Corporate Social Responsibility

Paper Summary:

The paper discusses how Merck proceeded with the investment in Mectizan despite its poor prospects for profit that according to Milton Friedman, resulted in Merck not fulfilling its fiduciary duty to its shareholders. The paper explains Milton Friedman's theory but points out its limitations and assumptions regarding profits and shareholders. The paper shows how in the short-sighted Friedman sense, it was a poor decision but Merck considered the far-sighted generation of goodwill and its effects. The paper therefore shows how Merck's decision violated its fiduciary duty to its shareholders, but did not violate its overall corporate responsibility, nor did it set an unusual or dangerous precedent for a free market society

From the Paper:

"Merck's decision to proceed with the development of Mectizan violated its fiduciary duty to its shareholders, but did not violate its overall corporate responsibility. Merck has stakeholders other than its shareholders who benefited from this decision. Moreover, Merck's decision fell within the normal course of business for the industry, so it did not set an unusual nor dangerous precedent for a free market society.
"Milton Friedman argues that the sole responsibility of business is to increase profits. The theory is that the profits are then distributed to shareholders, who in turn can do whatever they please with these distributions. Charity is an act that should be undertaken by the shareholders and may be encouraged by the government through its taxation and legal structure."

Sample of Sources Used:

• The Merck Mectizan Donation Program. (2007). Merck.com. Retrieved May 10, 2008 from http://www.merck.com/cr/enabling_access/developing_world/mectizan/
• Mayer, Donald O. Stakeholder Theory. Reference for Business. Retrieved May 10, 2008 from 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 from http://www.reason.com/news/show/32239.html

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