Chapter 3: Ethics, Stakeholders, Corporate Strategy, and
Value Creation
Sample Discussion Answers
These answers should be treated as supplemental to your own thoughts and analysis and
are by no means comprehensive. Feel encouraged to include your own experiences and
points of disagreement with the chapter should you find any.
1. What, in your view, makes a company “good” or “bad”, particularly if you start
with the idea that ethics is an important part of your evaluation? Why?
Responses will vary depending upon the individual student. This question provides a
great opportunity to explore students’ own perceptions of “business” at large and the
kinds of things that matter to them in evaluating specific companies. You could take a
significant chunk of class to explore both themes. If students have trouble listing more
than one or two companies as “good” companies, that raises some interesting questions
about their overall view of capitalism – perhaps they have an overly-cynical view of
companies? Relating their answers back to the new SRI (Socially Responsible Investing)
2. What is the managerial view of business? What is the stakeholder view? How do
they differ? (Page 70)
The managerial view, or shareholder view, of business sees serving the interests of the
shareholders as the primary objective of the firm. The stakeholder view maintains that it
is vital to consider the needs of everyone who is affected by the firm’s decisions and to
3. What is the separation fallacy? What is the integration thesis (I and II)? Why are
they important to business? (Page 72)
The separation fallacy is the common misconception that business decisions have no
ethical content and that ethical issues have no relevance to business decisions. In a
The view of business and ethics taken by stakeholder theorists could be summarized by
the integration thesis.
The integration thesis (I) maintains that:
This can be paraphrased into the integration thesis II:
1. It makes no sense to talk about business without talking about ethics.
Many academics attempt to better understand the world by creating theories with
4. Who are stakeholders? What important distinctions are made to differentiate
them? (Page 74)
A stakeholder is anyone who has a “stake” in the operations of a company: customers,
suppliers, employees, financiers, and the community at large are all stakeholders. We
5. What are the three levels of the stakeholder framework? Why are they important
and how are they connected? (Page 78)
2. Principles for Stakeholder Cooperation: how the firm does business and cooperates
3. Respect for Societal Standards of Conduct: understanding, engaging, and
respecting different value systems outside the firm; recognizing constraints imposed on
6. Based on the content of this chapter, what does it mean for managers to put
business and ethics together?
Were business and ethics ever separate? Ethics is part of business; to say that business
decisions have no ethical content is really to merely ignore the ethical component. By
Business Enterprise Trust: Merck & Co., Inc. (A)
Teaching Notes
Synopsis
A scientist at Merck finds that a drug the company has developed to treat a parasite that
infects animals may hold the key to treating a similar problem with human beings. The
illness in humans is called “River Blindness”, it afflicts 18 million people (with 85
million at risk), and has horrible effects on its victims – worms that reproduce and spread
through the body of the victim cause tremendous discomfort and itching that lead many
to commit suicide, and it eventually causes blindness. The central problem is that the
populations affected by this disease are all in developing countries, they are poor, and
they are unlikely to be able to pay for a drug. Given Merck’s mission to make medicine
that is for the people, not the profits, how should they respond?
Objective
This case provides a great opportunity to think about the themes presented in Chapter 3,
particularly the nature of business, the purpose of the corporation, and responsibilities to
stakeholders. Merck stands as an example of a company that has a mission which extends
beyond making money, but this case raises a paradox – if the profits don’t (clearly)
follow, to what extent can Merck pursue medical leads and remain a viable business? Is
Questions for Discussion
1. How should Roy Vagelos think about this problem? What are some possible
approaches to take to framing what is going on here?
2. Does Merck have an obligation to do something here? Does its knowledge create
an obligation to act? If so, does that extend to an obligation to spend between
$100-200 million of its resources to help?
3. What should be on Vagelos’ radar screen as he thinks about this decision? What
specific considerations should he at least note before he gets to a decision?
a. Which stakeholders should he think about? What is their interest?
b. What is at stake for Vagelos? How will this decision shape him and his
character?
4. What do you make of Merck’s mission? What, exactly, does it mean? How
important is it to your decision and why?
5. Make a decision: commit to developing the drug now, or decide not to develop it?
6. What does this case tell us about the challenge of putting business and ethics
together?
Suggested Lesson Plan (85 minutes)
1. Question 1 (10 minutes): this provides a good entrée to the conversation. Push
the students to not list individual issues in the case, but to think about larger
conceptual frames to put around the issues – is this an issue about corporate
charity/social responsibility? Is this a marketing problem where we need to
prioritize brand and how this choice will reshape our position in the market? Is it
2. Question 2 (10 minutes): with this question you can tackle the issue of whether
the company really needs to take some kind of action – whether based on general
principles of benevolence (e.g. the story of the good Samaritan and widely held
3. Question 3 (20 minutes): here’s a chance to get students thinking about all the
issues embedded in the case regardless of what they think they should do. Push
4. Question 4 (15 minutes): this is a key puzzle in the case. Merck’s mission is far
from self-evident and its implications for action are also ambiguous. Students will
have to do some work to figure out what it means, how it bears on this decision,
and why (or why not) it has value for the organization. Students who love the
5. Question 5 (20 minutes): let the students dig in here and make their best case. Be
sure to press both sides. Pay attention to the language and logic of both sides. It
6. Question 6 (10 minutes): here’s a chance to get beyond this decision to use this
case to think about how business and ethics go together. If this is just an isolated
Additional Information: In this case Merck develops the drug and creates an incredibly
successful medicine that was initially introduced in the late 1980’s. When no one stepped
forward to help cover the costs or buy the drug, Merck decided to give it away. They
have given it away to all those who have requested it and pledge to do so “forever”. River
Blindness is now on the verge of being eradicated as a serious health problem. There is a
