Roy Vagelos Case Summary

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, self- confidence, 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 self- confidence 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.