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The Challenge of Ethics and Integrity in Business

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High standards of business and personal ethics and integrity are inevitably challenged, sooner or later, to handle difficult decisions prompted by a ‘survival-of-the-fittest’ doctrine.

By: Michael Kaiser

Do you remember the Enron Corporation and other similar energy scandals? And the financial ones that precipitated the 2008 “Great Recession”? And the automotive and the health care industries ones? In all cases, one factor stood out: the lack of intertwining ethics and personal integrity from senior executives, who either ended up in jail or were removed from their positions. Alas, for all the laudable concepts of business ethics, we can expect that established corporate codes of conduct will be violated sooner or later. Not surprisingly, many executives who rigorously adhere to the highest standards of ethics and integrity encounter the total opposite in many of their transactions.

And how can we not mention the famous 1970’s Watergate Scandal (even if you were not born then), one of the worst and most blatant ones in US political history. For the perpetrators, the words Ethics or Integrity had been erased from their lexicon.

How does an ethical business executive deal when confronted with quite the opposite?
Some years ago, during one of my visits to a client known to my former employer’s executives for his business ethics in a country where business and political corruption where one and the same, I asked him how he managed to confront and survive in such a difficult environment without becoming “one of the others”; he looked at me, somehow surprised at my question, and replied:
“Well, first of all, this is the reason why I choose to deal with your company and similar ones outside my country”, which he expanded with another reason: “Recently, when I complained to a local company executive about his commercial subterfuges, he replied that I should ‘not try to play being God in the Devil’s den’, and therefore I select foreign companies with an ethical reputation”. Some answer, rather shocking but one that described the rift that exists between rigorous ethical business codes and those operating under the more common or acceptable “survival-of-the fittest” rationale.

The challenge: Leadership and ethics
The above mentioned experience, and the retort my client received, merits revisiting James MacGregor Burns, who in his book “Leadership”, (1978), cites the sociologist Max Weber:

“In a famous distinction Max Weber contrasted the “ethic of responsibility” with the “ethic of ultimate ends”. The latter measured persons’ behavior by the extent of their adherence to good or high purposes; the former measured actions by persons’ capacity to take a calculating, prudential, rationalistic approach, making choices in terms of not one supreme value or value hierarchy alone but many values, attitudes, and interests, seeing the implication of choice for the means of attaining it … the relation of one goal to another, the direct and indirect effects of different goals for different persons and interests, all in a context of specificity and immediacy, and with an eye to actual consequences rather than lofty intent.”

Ethics, integrity or “survival-of-the fittest”?
The role of advanced IT communication, media reports or instrumentation and financial controls, forced (to some extent) a standard code of business conduct across the globe, reflected in the fact that no matter their geographic location, or their membership with EU, ASEAN or NAFTA, when a day does not go by without car manufacturers, pharmaceutical companies and food companies announcing a recall of one or more products; in some cases, a quality or contamination recall could actually usher the end of a company.

More often than not, the opposite takes place and reinforces consumer confidence. A couple of years ago a massive recall by an international car manufacturer led to a significant market share loss, but because the company executives freely admitted that manufacturing errors led to the crisis and were being corrected, the company has regained its sales leadership. Was that a case of corporate ethics in synch with executive integrity, or just a plain “survival-of-the-fittest” action?  When a pharmaceutical company is ordered by the FDA or EMEA to withdraw a medication with significant side-effects for the patient, is that to be perceived as a case of institutional ethics versus a “survival-of-the-fittest” strategy for the affected company?

Just implementing an ISO 9000 Quality Management control does not address the essence of human behavior on the issues of positive or negative tendencies.

Although ethics and integrity in business reflect a clear similarity as far as trust and truth are concerned, there are differences that rest on two Aristotelian demarcations, whereby Ethos reflects a community or national character that propel ethical standards on the individual, and Pathos reflects the passions or emotions of the individual, which builds integrity, or dismisses it. Therefore, in general, it can be argued that the CEO of a start-up company will be more prone to promote his personal integrity, whereas a counterpart in a large international corporation must promote both the corporate ethics as well as his personal integrity. In both cases, sooner or later they could confront the “survival-of-the fittest” dilemma, and then what would they do? The Case 1.2 on page 10 of “Defining Business Ethics” describes that quandary with a dramatic example.

The subject of this article is too complex for a minimalist description, and for the underlying interpretations we search. We may be tempted to choose this simple solution: that an organic business enterprise or a startup one are both correct, however one could, or can benefit if they adopt and display a code of ethics and that its top executive echelon stands out for their professional and personal integrity. But that is too easy a choice if a strategy to counteract the appeal emanating from a “survival-of-the-fittest” is not taken into consideration.

Recommended links and reading resources

Picture Credit:  Business metaphor of a question mark in front of a man’s head, Microsoft Word 2010, Clip Art

Life Sciences in 2013: Startup Opportunities and Challenges

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Use these Life Sciences market insights from 2012 to maximize your opportunities in 2013

By:  Michael Kaiser

The New Frontier: Bioinformatics, Genomics and Proteomics
The Human Genome Project opened the floodgates for three closely intertwined disciplines:

  • Bioinformatics provide new database methods to store genomic information, evaluation of experimental data and improvement of molecular techniques.
  • It incorporates data from multiple departments within pharma/biotech companies and it is a critical tool for the design and management of smart databases.
  • Genomics is an area that is the vehicle for a dramatic increase in therapeutic and diagnostic pipelines, with a worldwide market potential in the billions of dollars. Genomics is divided into structural and functional areas, the former involving the use of genetic and molecular methods to develop genome maps, the latter aims to discover the biological function of particular genes in health and disease, primarily through high-throughput screening techniques.
  • Proteomics has been described as the link between genetics and pharmaceuticals. The fulcrum of this discipline lies in the proteome, the complement of proteins that are key to the discovery and development of new drugs and this fact explains its scientific and commercial importance for the biopharma sector.

The foregoing demands exposure and experience in dealing with academia, scientific personnel and the highest levels of corporate decision marketing.

The analysis of epidemiological trends allows biotech and pharmaceutical companies to direct their drug discovery and/or marketing efforts. Significant business opportunities exist for development and licensing. For instance, biomaterials may include implant prosthesis, fiber optics for minimally invasive implant or corrective surgery, and biochemical suturing, a significant business opportunity in improving healthcare and a significant contribution in reducing healthcare costs.

Home work
An essential component of the life sciences, it covers areas such as intellectual property, field of use, royalties, head-of-agreement terms, etc. Complex negotiations require the expert advice of specialized legal counsel, experience in business and corporate development, inclusive of technology evaluation (licenses, patents, time-to-market) and last but definitely not least, investor relations.

Here the key is: “Understand your competition as well, if not better than thyself“.
To that end the development of net-centric skills in knowledge management and data mining proved to be very useful to start-up and established life sciences companies in the planning of their corporate strategies. A clear understanding of e-commerce and sales and marketing tools is now an essential requirement in competitive analysis.

To be one is to understand one. A background in multinational corporations and start-up companies is a plus. Ideally, the entrepreneur will thrive by working in an innovative, fast-paced environment. However, the reality of the economic marketplace dictates that equal attention be given to the ‘intrapreneurs’, those individuals who, from within a formalized corporate structure, implement effectively the vision of the entrepreneur. This is a truly symbiotic relationship.

The liberalization of world trade and the integration of regional markets such as the EU, NAFTA and ASEAN dovetail with organizations such as the WTO and GATT. Paradoxically, in the process of lowering trade barriers the pendulum has swung too far and we see an increase in protectionism by both industrial countries and newly industrialized ones. The fact that the Internet has become an effective business facilitator has not replaced the personal contact in science and humanities. In a global economy, dealing with diverse cultures is a clear and professional success marker.

Mergers and Acquisitions; Strategy; Technology Evaluation
The impact of IT on the life sciences has accelerated the process of consolidation and integration in the life sciences, particularly in those cases where a large pharmaceutical concern and a biotechnology company with a valuable technology platform are concerned. Shareholders, institutional investors and venture capitalists have much higher expectations, with a short time horizon, for a return on their investment.

To meet this challenge, due diligence and expert advice in investor relations, marketing and corporate development will allow start-ups to identify and execute the driving forces of this process. The cost of mergers and acquisitions requires careful analysis of corporate synergies, innovative financial instruments and fundamentals, experienced investment bankers and financial institutions, assessment of net present valuation and internal rate of revenue, evaluation of technology and future corporate strategy, top management succession, and ability to transfer technology across corporate and international boundaries.

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