William Wilson, senior vice president of research, development,
and medical (R, D & M) at Pharmakon Drug Company,
received both his Ph.D. in biochemistry and his M.D. from the
University of Oklahoma. Upon completion of his residency,
Dr. Wilson joined the faculty at Harvard Medical School. He
left Harvard after five years to join the research group at
Merck & Co. Three years later, he went to Burroughs-
Wellcome as director of R, D & M, and, after eight years, Dr.
Wilson joined Pharmakon in his current position.
William Wilson has always been highly respected as a scientist,
a manager, and an individual. He has also been an outstanding
leader in the scientific community, particularly in the
effort to attract more minorities into the field.
Pharmakon concentrates its research efforts in the areas
of antivirals (with a focus on HIV), cardiovascular, respiratory,
muscle relaxants, gastrointestinal, the central nervous
system, and consumer health care (that is, nonprescription or
over-the-counter medicines). Dr. Wilson is on the board of
directors of Pharmakon and the company’s executive committee.
He reports directly to the chairman of the board and
CEO, Mr. Jarred Swenstrum.
Declining Growth
During the previous eight years, Pharmakon experienced
tremendous growth: 253 percent overall with yearly growth
ranging from 12 percent to 25 percent. During this period,
Pharmakon’s R, D & M budget grew from $79 million to
$403 million, and the number of employees rose from 12,192
to 3,273 (see Table 1). During the previous two years, however,
growth in revenue and earnings had slowed considerably.
Moreover, in the current year, Pharmakon’s revenues of
$3.55 billion and earnings before taxes of $1.12 billion were
up only 2 percent from the previous year. Furthermore, both
revenues and earnings are projected to be flat or declining for
the next five years.
The cessation of this period’s tremendous growth and
the likelihood of future decline have been brought about
principally by two causes. First, a number of Pharmakon’s
most important patents have expired and competition from
generics has begun and could continue to erode its products’
market shares. Second, as new types of health-care
delivery organizations evolve, pharmaceutical companies’
revenues and earnings will in all likelihood be adversely
affected.
Pharmakon Drug Company
The business ethics cases that follow are based on the kinds of
situations that companies regularly face in conducting business.
You should first read each case carefully and in its
entirety before attempting to analyze it. Second, you should
identify the most important ethical issues arising from the situation.
Often it is helpful to prioritize these issues. Third, you
should identify the viable options for aIDressing these issues
and the ethical implications of the identified options. This
might include examining the options from the perspectives of
the various ethical theories as well as the affected stakeholders.
Fourth, you should reach a definite resolution of the ethical
issues by choosing what you think is the best option. You
should have a well-articulated rationale for your resolution.
Finally, develop a strategy for implementing your resolution.
Table 1 Pharmakon Employment
30 INTRODUCTION TO LAW AND ETHICS PART 1
Figure 1
Pharmakon Affirmative
Action Program
Thomson LearningTM
Problem and Proposed Solutions
In response, the board of directors has decided that the company
must emphasize two conflicting goals: increase the
number of new drugs brought to market and cut back on the
workforce in anticipation of rising labor and marketing costs
and declining revenues. Accordingly, Dr. Wilson has been
instructed to cut costs significantly and to reduce his workforce
by 15 percent over the next six months.
Dr. Wilson called a meeting with his management team to
discuss the workforce reduction. One of his managers,
Leashia Harmon, argued that the layoffs should be made “so
that recent gains in minority hiring are not wiped out.” The
percentage of minority employees had increased from 2.7
percent eight years ago to 8.3 percent in the previous year
(see Table 1). The minority population in communities in
which Pharmakon has major facilities has remained over the
years at approximately 23 percent. About 20 percent of the
R, D & M workforce have a Ph.D. in a physical science or in
pharmacology, and another 3 percent have an M.D.
Dr. Harmon, a Ph.D. in pharmacology and head of clinical
studies, is the only minority on Dr. Wilson’s sevenmember
management team. Dr. Harmon argued that R, D
& M has worked long and hard to increase minority employment
and has been a leader in promoting Pharmakon’s affirmative
action plan (see Figure 1). Therefore, she asserted, all
layoffs should reflect this commitment, even if it meant disproportionate
layoffs of nonminorities.
Dr. Anson Peake, another member of Dr. Wilson’s management
team and director of new products, argued that
Pharmakon’s R, D & M division has never discharged a
worker except for cause and should adhere as closely as possible
to that policy by terminating individuals solely based on
merit. Dr. Rachel Waugh, director of product development,
pointed out that the enormous growth in employment
over the last eight years—almost a trebling of the workforce—
had made the company’s employee performance
evaluation system less than reliable. Consequently, she
contended that because laying off 15 percent of her group
would be extremely difficult and subjective, she preferred
to follow a system of seniority.
Dr. Wilson immediately recognized that any system of
reducing the workforce would be difficult to implement.
Moreover, he was concerned about fairness to employees
and maintaining the best qualified group to carry out the
area’s mission. He was very troubled by a merit or seniority
system if it could not maintain the minority gains. In
fact, he had even thought about the possibility of using this
difficult situation to increase the percentage of minorities to
bring it more in line with the minority percentage of the
communities in which Pharmakon had major facilities.
POLICY
It is the policy of Pharmakon Drug Co. to provide equal employment opportunities without
regard to race, color, religion, sex, national origin, sexual preference, disability, and veteran status.
The Company will also take affirmative action to employ and advance individual applicants
from all segments of our society. This policy relates to all phases of employment, including, but
not limited to, recruiting, hiring, placement, promotion, demotion, layoff, recall, termination,
compensation, and training. In communities where Pharmakon has facilities, it is our policy to
be a leader in providing equal employment for all of its citizens.
RESPONSIBILITY FOR IMPLEMENTATION
The head of each division is ultimately responsible for initiating, administering, and controlling
activities within all areas of responsibility necessary to ensure full implementation of this policy.
The managers of each location or area are responsible for the implementation of this policy.
All other members of management are respo