Tuesday, 10 July 2012
Monsanto Attempts to Balance Stakeholder Interests
Monsanto is one of the world’s largest industrial agriculture businesses. For much of its history, Monsanto has dealt in controversial products from artificial sweeteners to Agent Orange, to pesticides and herbicides. One of the more recent additions to Monsanto’s product portfolio has been genetically modified seeds. GM products have stirred up controversy everywhere they are distributed, and Monsanto, being a huge multinational corporation and a major producer, is at the center of the debate. This case deals with the ethical implications involved in producing and selling a product with unknown health and environmental side effects. Monsanto claims that its products are safe, even beneficial for society. However, critics are not convinced. A major issue in this case pertains to the debate over whether genetically modified plants (GMO) and substances (milk) are safe both for the environment and for human consumption. Other issues Monsanto faces have to do with intellectual property and patent protection, and the question of whether seeds can be proprietary goods. Traditionally, farmers save seeds from one year to plant in the next year, but Monsanto wanted to introduce a “kill gene” to force farmers to purchase new seeds from the company every year. The case also covers Monsanto’s long history of ethical misconduct, including instances of hiding illegal pollution, and taking bribes. Finally, the case goes on to cover Monsanto’s corporate responsibility initiatives, charitable giving, and how its GM seeds may actually help farmers in less developed countries (LDCs). The case concludes by asserting that Monsanto claims to have realized the errors of its ways and is on the path to greater corporate responsibility. The question to students remains: Do they believe Monsanto, or is it just lip service to avoid further criticism?
To summarize the Monsanto Case:
1. Monsanto is a powerful company, with a history of making what many would find questionable or unethical business decisions in the quest for profits.
2. The company holds a virtual monopoly on GM seeds for soybeans, cotton, corn, and canola. Many of these seeds require the use of Roundup herbicide, also produced by Monsanto.
3. Critics accuse Monsanto of seeking to profit at the expense of consumers’ health, the environment, biodiversity, and of being anticompetitive. While GM seeds have not been conclusively proven to be harmful, these critics’ claims are not without merit, as Monsanto has a long history of cutting corners and covering up illegal and/or unethical activity.
4. However, GM seeds have not been proven harmful to humans or to the environment, and plants that are hardier, more drought resistant, and resistant to pests present a huge opportunity for farmers in less-developed countries, particularly in Africa, Asia, and Latin America.
This is a very complex and contentious case, and students should be encouraged to conduct further research at Monsanto’s website (http://www.monsanto.com/). Students should find the exercise of perusing the website interesting, as much for what is left out, as for what is included. The instructor should point out that such websites, which are theoretically designed for all stakeholders, often only contain the positive information on the company and do not address any negative press. Given what they know about Monsanto’s past ethical misconduct, students may find its Public Policy and Corporate Responsibility webpage interesting (http://www.monsanto.com/responsibility/corp_gov/committees/public_policy.asp). Instructors may want to ask students how they think Monsanto is measuring up to its own objectives.
The Public Policy and Corporate Responsibility Committee shall:
1. Review and monitor the performance of the Company as it affects communities, customers, other key stakeholders and the environment. Hold periodic meetings with stakeholders to understand external perspectives.
2. Review issues affecting the acceptance of Company products in the marketplace, including issues of agricultural biotechnology.
3. Identify and investigate significant emerging issues.
4. Receive periodic reports on the state and effectiveness of the Business Conduct Program from the Company's Director of Business Conduct.
5. Receive periodic reports regarding the Company's political contributions.
6. Receive periodic reports regarding the Company's charitable contributions.
7. Perform such other duties and responsibilities as may be assigned to the Public Policy and Corporate Responsibility Committee by the Board of Directors and/or the Chairman of the Board.
8. Make delegations of authority and responsibilities of the Public Policy and Corporate Responsibility Committee as the Public Policy and Corporate Responsibility Committee deems appropriate, and to periodically review such delegations.
In 2007 Monsanto made charitable donations of $24,514,660, which represented less than .66% of its $3.74 billion in annual profits. The average individual in the United States donates 2.2% of his or her disposable income. (http://www.america.gov/st/washfile-english/2007/June/200706261522251CJsamohT0.8012354.html). Small businesses contribute an average of 6% of their profits to charitable causes Small businesses that earned between $250,000 and $1-million contribute, on average, 6% of their profits to charity. (http://philanthropy.com/news/prospecting/6349/most-small-companies-make-charitable-donations-survey-finds) Discussing these numbers and Monsanto’s true level of interest in charitable donations should result in a lively debate.
Monsanto has long been plagued with accusations of environmental law violations. In 2003 the corporation’s bad reputation for illegal pollution came to a head when courts in Anniston, Alabama awarded $700 million to 20,000 residents for decades of ground water contamination. Because of the notoriety of this ruling, Monsanto’s stock lost 50% of its value. The company replaced its CEO and proceeded to create SBUs for its more controversial products under the names Pharmacia, Seminis, and Solutia. One could argue that this move was calculated to put less familiar and less controversial names on these products.
The issue of sterile seed technology as well as the firm’s “seed police” can lead students into a discussion of whether patents on food products, particularly seeds, are ethical. Within the U.S., patent infringement lawsuits are increasing, especially within pharmaceuticals and gene therapy for specific diseases. At the heart of this issue is whether seeds, no matter how scientifically manipulated, should be considered technology, considering how essential they are to the basic acts of agriculture and eating. Does Monsanto have any sort of moral obligation to farmers and consumers to make its seeds available at prices affordable to even the poorest of farmers? Students should also debate the question of piracy and lack of intellectual property protection in LDCs. How, do they think, large MNCs with widespread distribution should handle this problem?
While Monsanto is the first to assert that it has increased food production wherever its seeds are planted, many ask “at what cost?” Sustainability is an increasingly popular word in the business community, as is organic. While Monsanto claims that it has helped farmers grow more food in less space using less water, no one can make the argument that what Monsanto sells is a natural product. Students should discuss the products introduced in this case, and whether or not they think they offer advantages and hope to farmers. Do they believe that it is a problem that farmers grow dependent on Monsanto for their seeds, pesticides, and herbicides? Or do they think there are better solutions out there? The case touches on the growing importance of organic farming, which purports to be a more thoughtful, sustainable solution to food problems, and that takes care of the land instead of maximizing output. Students can discuss the pros and cons of Monsanto’s products, and what they think the long-term costs to people, animals, and society will be.
1. Does Monsanto maintain an ethical culture that can effectively respond to various stakeholders?
2. Compare the benefits of growing GM seeds for crops with the potential negative consequences of using them.
3. How should Monsanto manage the potential harm to plant and animal life when using products such as Roundup?