ROY VAGELOS CASE SUMMARY
Roy Vagelos is caught in the moral dilemma of
making a decision that will save millions of lives but
cost Merck hundreds of millions of dollars.
Badaracco (1998) points out that this type of
decision, making a choice between right and right, requires us to examine and
understand our values. As a person, Vagelos needed to answer the question,
"Who am I?" As a leader of the company, he also needed to answer the
question, "What is this organization?" Vagelos, because of his position, will be
watched. His actions will send a message that helps define the organization.
Similar to Cristiani, who needed to understand and
balance the needs and interests of the different
factions in El Salvador, Vagelos must also
understand and balance the interests of his various
constituencies, including himself. Vagelos is
responsible to the stockholders of the organization.
As an officer of the corporation he has a fiduciary responsibility to maximize the
value of their investment. He also has a responsibility to uphold the values and
culture of an organization that "put patients and customers first, company and
stockholders second" (p. 22). If the decision was simply about
spending money, it would probably have been easier. However,
going ahead with the drug presents other potential problems. A
number of the company's patents were expiring; spending money on
a drug that has no potential market could take away funds from
developing a much needed profitable drug. Going ahead with the
drug also had the potential to jeopardize the lucrative animal care
products if there were unexpected side effects in humans, not to mention the
potential lawsuits from such reactions. Finally, giving the drug away might set a
precedent for future donations of medicine.
How does a leader make such decisions? As Useem states,
"...some decisions require a transcending of self-interest, whether
personal or organizational" (p. 33). Sherman (1994) argues that
such transcendence requires introspection. He says reflection leads
to the following outcomes: greater objectivity, learning, selfconfidence, a sense of personal responsibility, increased tolerance
for ambiguity and paradox, enabling of action, achievement of life balance,
increased creativity, and egolessness. These outcomes form a foundation that
the leader draws upon in making decisions. Let us look at some of these
outcomes and how they serve the leader.
Vagelos faces a moral dilemma where he must balance his responsibility to
society with his responsibility to the stockholders. The foundation built by
introspection provides objectivity and a sense of responsibility to all
constituencies. It allows him to sit with the dilemma and reframe it such that a
solution is possible. Once a decision is made, reflection provides the selfconfidence needed to effectively act on the decision. After months of meetings
debating both sides of the issue, "Vagelos brought the debate to a close: Merck
would give the drug away forever" (p.33).
Vagelos understood his responsibilities and he knew who he was, what he
valued, and what the company stood for. This was not an either/or decision to
him, it was a matter of finding a solution that benefited all constituencies, "The
challenge is to identify areas of mutual gain—ways in which the company and
society benefit together rather than at the cost of each other" (p. 30). As
Cristiani did in bringing together the factions in El Salvador, Vagelos too seeks a
win-win solution. Such a reframing of the issue from either/or to both/and is at
the heart of resolving seeming intractable dilemmas.
Reframing the issue from either/or to both/and is related to what Useem
describes as defining the greater purpose. Doing so effectively requires
objectivity, a sense of responsibility, and egolessness, all outcomes of reflection.
Am I really defining a greater purpose, or am I furthering my self-interest? Am I
truly trying to examine and understand the various perspectives and interests in
this situation? What do I value? What am I trying to accomplish? What are my
emotional responses to this situation? How are they affecting my decisions?
Badaracco (1998) also suggests that a leader must think about the politics of the
situation and orchestrate "a process that can make manifest the values I care
about in my organization" (p. 119). Thus, reflection not only helps one
understand oneself, but also the system and its dynamics, both of which are
necessary to define the greater purpose.
The foundation provided by reflection is equally important to other types of
decision. As we saw, Gutfreund must make ethical decisions in the midst of a
crisis, as did James Burke during the Tylenol crisis, and more recently the
executives at Firestone regarding the tire recall. A clear sense of one's values
and responsibilities provide guidance in making these decisions. Last week we
discussed the Cristiani case where we examined the use of power and influence
to move the system to a higher level. Unlike those before him, Cristiani did not
abuse the power of his position. He was able to transcend self-interest for the
good of his country. The objectivity, sense of responsibility, and egolessness
built through introspection helps avoid abuses of power.
When one finds oneself faced with moral dilemmas, ethical situations, or the
opportunity to use one's power for personal gain, the situation is filled with
emotion. As we saw, in such situations there is a natural tendency to avoid
psychological pain. But avoiding pain does not always lead to the best course of
action. Avoiding pain often involves distorting reality. For example, perhaps our
behavior is a cause of the problem; perhaps our actions are self-serving and not
in the interest of the organization. Admitting this can be painful, thus, we lie to
ourselves about our effect on the situation. Introspection leads to objectivity; it
helps one examine and confront the truth in the situation.
Finally, we must recognize that Vagelos makes his decision in the context of
Merck's history and culture. The company has a long history that has reinforced
the value that "health precedes wealth" (p. 19). In other words, the culture "puts
patients and customers first, the company and stockholders second" (p. 22).
This makes it easier for Vagelos to make the decision he does but by no means
does it dictate giving the way the drug. Furthermore, Vagelos' actions will either
strengthen or undermine the company culture. As Badaracco (1998) points out,
when one is leading the organization, not only are you responsible for being true
to your values, you are responsible for shaping the company's values. By
shaping the company's values and culture, the leader's decision indirectly
influences the decisions of others in the future, and thus, the direction of the
company (or department/group for those in lower level positions). This is not a
responsibility to be taken lightly; it is not a responsibility to be taken without the
foundation provided by introspection.