The Pfinances of a For-Profit World
The drug company, Pfizer, just settled with the U.S. government for $2.3 billion on charges of fraud. Pfizer essentially admitted that they were promoting the use of Bextra for ailments which the drug wasn’t designed to address. In the language of early America – they were peddling snake oil, “Good for what ails you!”
What’s interesting about this case is not that a pharmaceutical company was caught doing something unethical for the sake of greed, it is the notion that one company is so incredibly profitable that can afford to pay 2 billion dollars to settle a lawsuit and still survive another day to bilk others. Pfizer announced profits of $2.8 billion about this time last year. That’s not revenue, that’s pure profit, even after paying a sports-hero salary to their CEO. I repent of all my belly-aching in the last blog about the volume of money running through humanitarian aid organizations. Pfizer made in sheer profit just a little less than the US contributed in 2007 for global humanitarian aid.
Somebody please help me. I am miserable at math and never did very well at macro economics. But it seems to me that there is something terribly wrong with an economic system that allows this to happen. That a single company could earn enough profit to rival the amount of money that the richest country on planet earth provides for the world’s poor seems unfathomable. What’s more, when we penalize this company for the shear avarice, fraud and trickery which helped to produce this profit, they have enough money to consider it simply the cost of doing business.
Is it not simple common sense that power corrupts and that money is a form of power? When we allow such gross amounts of cash to be concentrated in the hands of so few, why would we not expect them to use that concentrated power to gain more, by hook or by crook?
David Batstone in his book, Saving the Corporate Soul, suggests that corporate power should be distributed beyond the scope of the company executives and the share holders – those who stand to benefit most when ethics are placed second to profit. He suggests that other stakeholders (the employees at every level, the communities in which the company exists, and the environment) ought to have some kind of serious influence on decisions. I am sure there are some companies who have done things like this. Certainly employee-owned companies have a measure of this power sharing (though employees can also be excessively motivated by greed – which is why unions are not exempt from a profiteering mindset).
Call me an economic idiot, or even a communist, but is there not enough altruism in our human nature to create a not-for-profit world … or at least something close to it? Why build a system fueled by the power of greed without also creating serious limitations on how much money and control any one individual or set of individuals can accumulate? It’s like paying drug addicts with cocaine for the work they do. There’s got to be a better way.
Disclaimer: These blogs are the words of the writers and do not represent InterVarsity or Urbana. The same is true of any comments which may be posted about any blog entries. Submitted comments may or may not be posted within the blog, at the bloggers' discretion.
I agree that shareholders are rarely the best arbiters of ethical behavior to corporations -- especially in the short term... though I think and hope that in the long-run, ethical behavior, and even socially responsible behavior, is the most profitable. (think McDonald's, their intentional go-goodism, and continued leadership of the fast food sector... or Google.org)
I think other commitments in addition to just profit are necessary (e.g., quality -- compare Toyota's mission statement to Ford's)... but I don't think a world without such competition could have come close to bringing us the quality of life we now have. I do agree though, that perhaps not-for-profit orgs can and should take dives into for-profit territory and compete to provide better products (blue cross /blue shield, AAA) and perhaps this sector should expand.. and employee-owned corporations are a possible answer, as well.
As a Christian, to be honest, it's hard for me to make sense of the secular business world trying to elevate the role of ethics and corporate responsibility beyond good PR and better business. Maybe for a VERY large corporation it might be in their best interests to encourage a healthy, functioning, poverty-free society... but I really have troble imagining MBA students taking their ethics vows with any seriousness.
I'm excited about having you come share with my students!
Pfizer turned 2.8 billion in profits last year. They are a drug company that is reliant upon their profits to make their own investments in drug research that can change billions of lives in the future. In 2002 they invested 5.1 billion in research, in 2003 they invested 7.1 billion in research. Pfizer Brazil has been ranked as one of the "100 Best Companies in Corporate Citizenship 2009" by the Gestýo and RH (Management and HR) magazine based on four criteria: social responsibility, environmental management, ethics and relationship with stakeholders. Pfizer China was listed No.21 in Philanthropy Times "2009 Corporation Charity Chart" in late April, 2009. Since 2000 they have given away over half a billion worth of pharmaceutical drugs to South Africa to fight HIV related conditions.
Before we go attacking companies because we saw their profit margin and criticizing their excellence (excellence because they are succeeding in capitalism, what else should they do...not try to make money?) and alienating those whose day job is in the world of business...let's stop and think. Do a bit of research.
Posts like these have some good points, but they hurt the already strained relationships between Christians and those in the business community whom we are trying to reach. I have heard several Christian businessmen and women say they feel criminalized for being good at what they do. We need to value their gifts as those who are good at making money and help them to make informed decisions about where to move that money. But being asked to help them make those decisions would require hard intellectual work to hold such a position of influence. Unfortunately I don't know many Christians that could pull off such a task.
I'm asking that we hold our tongues and think a second longer. It will pay off in the long run. We don't want these messages, like the blog post I am responding to, falling into the hands off those who can paint Urbana/I.V. with a negative brush strokes. We have too many people to reach for Jesus to spout off on such things. In Christ-Jim
Pfizer's philanthropy is to be lauded. Though this does not excuse their criminal activity. Ploughing profits into research is commendable ... especially if it is research which does not necessarily hold promise for making more money (in Pfizers case this might be research into the healing/health benefits of natural foods). May many more businesses see their profits as an investment into human flourishing, especially for the "least of these."
One of my best friends is an extremely successful financial planner who lives the tension you describe. To what extent does the quest to aquire more become dangerous. Paul's words to Timothy (6:6-10, 17-19) or James' words to the churches (James 5:1-6) should set us on our guard in the materialistic society in which most of us in the West live. Even those of us who work with non-profits!
I think my question is still a fair one. Are there other things besides profit which can be the chief motivational engine for excellence in the marketplace?
Too often (again I think the criminal ruling against Pfizer is valid here) in our eagerness to expand market share or increase profits we set the ethic of love aside. Power is a trust - whether financial, political, relational, etc. When it is used to protect the weak and insure the good of all, then it is being used as I believe God intended. When it is leveraged for the benefit of the power-holder I believe power has been degraded and has become less than it was intended.
There is good thinking going on in this regard with several for-profit companies. One company I visited, for instance, hires sex workers in the slums of Kolkata. The former sex workers in this company are exhuberant. "What are we in the business of?" someone will shout. "FREEDOM!" comes the response. They know that their success will mean more freedom for more women. They all are paid the same amount regardless of whether they sew challenging seams or simply sweep up the scraps, they are motivated to work with excellence not to climb a salary ladder, but for the sake of the freedom of their former brothel mates.
Grameen Bank and authors like Prahalad are helping us to re-imagine capitalism. This was the point of my post. My apologies if the result was discouraging those who work for companies like Pfizer from using their skills to improve life for the "least of these."
I think the only way to make any chage in current evil system is to use the power given to us as consumers. Each of us as a consumer has a purchasing power. Just as we all have voting rights to voice up, I think we should gather/unite to voice up using our purchasing power to these corporations... Along with that of course should transparency in what these corporations do reagrding the money that they are making. I think we as consumers should ask them to be more transparent, and more christians and other people with thoughts pay more attention to these issues.
Regarding the ethical nature of the market:
It's unfair to say that the free market runs on greed. It bothers me that free market advocates concede on this point, and it bothers me that Christians believe it, because it relinquishes the basic foundation of society to evil forces, which is an insult to God’s nature and the created order.
If the fall created scarcity, then the market is God’s gift to man to help him cope.
Survival is virtually impossible unless we form inter-dependent relationships based on trust and mutual cooperation. Sure, self-preservation and self-elevation are part of the market system because they are part of human nature. But isn't it just as fair to say that the free market runs on peaceful cooperation, respect for one another’s rights, and mutual service. The market in many ways mirrors the gospel in a wonderful paradoxical way. The only way to get ahead is to spend your life serving other people’s needs. We spend most of our lives serving other people, trusting that others will repay our efforts by providing us with what we need.
That’s not greed. That’s a reflection of the redemptive power of the gospel.
1) They make drugs that save peoples lives
I see no ethical reason, Christian or otherwise, to resent the amount of money they make producing life-saving drugs. Their success in no way prevents others from also being successful. This is important, because the perception, you can credit Marx for this, is that wealth is generated at the expense of the poor. By and large, the exact opposite is true. Pfizer has accumulated wealth because they are improving people’s lives and helping them live longer. People are not starving because Pfizer executives are eating all the food. The profits that Pfizer makes are by and large reinvested into producing more life-saving drugs, which, by any measurement, is a pretty good use of scarce resources.
2) They lobby the government to use force to prevent competitors from making drugs that save people's lives.
In a free market, your consumption is limited by your contribution to society. When you use violence to prevent someone else from contributing, your contribution becomes more valuable in relative terms, and you are able to consume more. Often, ill-gotten gains don’t take the form of reinvestment, they take the form of “excessive” CEO compensation packages. It’s wrong, and to the extent that Pfizer and the government willfully engage in this kind of behavior: the Lord deal with them, be it ever so severely.
To use specific examples, Pfizer benefits from patent laws. These laws basically state that Pfizer’s metaphysical property rights take precedence over everyone else’s physical property rights. If one were to attempt to duplicate a patented drug, the state would use violence to prevent you from contributing your services (generic drugs) to society. It’s debatable whether patents result in more innovation. However, no one debates the cost: higher prices for drugs that yield greater profits to the manufacturers. This was an informed decision, based on utilitarian reasoning, to circumvent the market for the perceived good of the community. If we are unhappy with the results, then we must blame the circumvention, not the free market.
Additionally, Pfizer benefits from onerous restrictions that prevent competitors from coming to the market with cheap legitimate generic alternatives. In order to sell a generic drug it must first be approved by the FDA, which requires human trials that take years to complete and cost millions of dollars. Since the generic and the name brand are chemically identical compounds, this is totally redundant. The FDA has already approved the drug as safe and effective. Pfizer is already selling the drug under the name brand, presumably without consequence. Why force the generic to run the trials again? This is corporate protectionism that benefits both Pfizer and the FDA. The FDA, however, is the one abusing their authority to use violence.
Desiring to know what’s wrong with the system is admirable. You’ll never get there, however, if you assume that America’s present system is a free market. We consider ourselves a free market because we compare ourselves to the rest of the world, but freedom can’t be graded on a curve.