Business Law Issues in Monsanto Company - Case Study Example

? Business Law Monsanto Company is a multinational agricultural biotechnology corporation and it is oneof the world’s biggest companies with regard to revenue. The following paper would include a brief account of the history of the company, the products by the company and the position of the company in the global market. Along with the profile of the company all the ethical issues related to the company’s operations and the criticism raised against such issues would be analyzed as well. The company has been subject to ethical implications like; environmental pollution, bribery and false advertisement of its products. The company has been in the midst of legal issues for multiple times and there has been heavy criticism on the products and operations of the company. Recently the company has issued the statement that it has realized the errors and it is on the path to greater corporate social responsibility. The following paper would take all such issues into account and it would be determined whether the position of the company is justified. History of Monsanto Company Monsanto is the world’s leading producer of genetically engineered seeds, herbicides and other agricultural products. The company is headquartered in Creve Coeur, Missouri. The company was founded in St. Louis in 1901 (Monsanto.com). The first product by the company was artificial sweetener which was sold by the company to Coca-Cola Company. Criticism has followed the company from its very first product. The company faced criticism by health experts for the adverse impacts of the artificial sweetener produced by the company on the health of the consumers. After the production of artificial sweetener, the company introduced caffeine and vanillin to Coca-Cola Company and after the introduction of these products it became the main supplier of the Coca-Cola Company. The company entered the European market in 1919 when it entered into a partnership with Graesser’s Chemical Works to produce vanillin, aspirin, salicylic acid, and chemicals for processing rubber. In the third decade of the company, it expanded its production of industrial chemicals such as sulfuric acid. The company accelerated its production of chemicals and stayed as one of the leading suppliers of industrial chemicals in the market. The company then initiated the production of a number of other products such as; polystyrene, synthetic fibers, herbicides, DDT, and the artificial sweetener. The company had to face a controversy again for the production of DDT when the environmentalists put forth their reservations regarding the adverse effects of DDT on the environment and the side effects of its use on human health. In 1970s, the company became the pioneer producer of optoelectronics. Monsanto became the first company to start mass production of Light Emitting Diodes (LEDs). In this era, the company witnessed tremendous growth in its revenues and the overall sales of the company doubled after every few months. The LED products of the company were the pioneer products and they became the standards of the industry. The company has engaged in several other controversial products in the past as well. The company was one of the most important producers of Agent Orange for US military operations in Vietnam. Agent Orange manufactured by the company was found to be defective as it was contaminated with carcinogenic dioxin. The Agent Orange produced by the company caused immense damage to the health of US soldiers. The current core business of the company was initiated in 1982 when the company was the first to genetically modify a plant cell. The company holds primary status for a number of products and in case of genetic modification of plants, the company holds the pioneer status. Five years after the company succeeded in genetically modifying a plant cell, the company conducted the first field test of genetically engineered crops. Thus, due to the immense success of the company in producing genetically engineered crops, the company started transitioning towards biotech industry. Thus, after a number of mergers and spin-offs till the year 2002, the company completely transitioned from being a chemical giant to a biotech giant. The company sold its chemical production facilities to focus exclusively on its biotech business. The company has been involved in a number of legal issues regarding the patents of the company. The genetically engineered seeds and patented breeding techniques of the company were protected by copyright and as a result, a number of farmers who knowingly or unknowingly used the company’s seeds and breeding techniques without any specific licensing by the company were sued by the company. Introduction to the Case The company has been affiliated with a very large number of ethical issues and controversies. Such issues include; exploiting the consumers due to holding monopoly in the industry, issue of child labor in India, exploitation of consumers in India which led to suicides by farmers, and the involvement in political contributions by the company. The case that would be considered in this paper is regarding the ethical implications involved in the products manufactured by the company such as genetically modified seeds and the ethical misconduct committed by the company in other aspects of its business. Some products manufactured by the company are highly controversial because the company holds monopoly in the market and the environmental and health effects of such products are not completely known. These are the ethical issues involved with the production of genetically modified seeds. According to environmentalists who criticize the company for its unethical operations, the impact of the genetically modified seeds produced by the company on the environment and human health cannot be known for sure and since these products are not produced in the way they are supposed to be, i.e., natural way, the products are bound to be bad for the environment and human health (CBS News). However, the company has denied all such criticism and according to the company, these products are not only safe for human consumption but they are also helpful in growth of agriculture in the society. The critics are not convinced because the company’s word cannot be bought in this regard because the company would advertise its product notwithstanding the adverse effects the product has. Other unethical tactics used by the company are making the GM seeds compatible with only those herbicides which are produced by the company. This is just a tactic to increase the revenue of the company and the farmers who buy the seeds from the company are bound to buy the herbicides from the company as well. The company holds monopoly in the production of GM seeds for soybeans, corn, cotton, and canola. The company has been criticized for exploiting its monopoly at the expense of the consumers’ health, biodiversity, and the environment. Since the company has sufficient resources and facilities to conduct the required research, it would be hard for any other company to enter the market and to create all the facilities from scratch. Thus, the company is anti-competitive and according to the critics, it is clearly exploiting this non competitive environment of the industry. The criticism has not had any significant results because the claims by the critics have not been proven right. However, the company has a long history of getting into unethical acts therefore the criticism cannot be ignored completely. The factors that have kept the company safe from being impacted from such criticism are that; any harmful impacts of the GM seeds on the environment and the human health have not been proven so far and the seeds produced by the company are more draught resistant, pest resistant and they produce a good crop. The GM seeds by the company can also be viewed as an opportunity by the farmers in less developed countries in Africa, Asia and Latin America. Charitable Donations by the Company It is not only the controversial products by the company or the ethically challenged business methods the company has also attracted significant criticism due to its lack of philanthropy. The company has been subject to heavy criticism regarding its lack of interest in corporate social responsibility. The company has been exploiting the industry standards due to its monopoly in the market and this complete disregard for the corporate social responsibility has worsened the goodwill of the company in the market. This lack of philanthropy shows that the company does not want to give anything back to the society and its one and only objective is to make as much profit as it can notwithstanding the prosperity of the society. In the year 2007 the company made charitable donations amounting to $24,514,660 while the annual profit made by the company amounted to $3.74 billion. The amount of charitable donations made by the company was less than 0.66% of the annual profit of the company which is a significantly less proportion as compared to other companies and small business. On an average, each individual in the United States donates up to 2.2% of his or her disposable income, however the proportion of the profits donated by Monsanto are significantly less than that of an average person. Small business in the United States that earned between $250,000 and $1 million donated up to 6% of their annual profits which is a significantly higher proportion than the donations made by Monsanto. Thus, it can be inferred that the company does not take active part in making any charitable donations despite the fact that it earns enormous amounts as annual profit. This is one of the factors due to which the company is heavily criticized. Sustainability by the Company Sustainability is a term which has been in frequent use recently. It means utilizing the resources of an organization in such a manner that it makes the organization more environment friendly without having any impact on the operations of the organization. There are a number of companies all around the globe that have initiated projects to bring sustainability in their operations. One of the biggest examples in this regard is that of Marks & Spencer which implemented a comprehensive sustainability plan and the plan fetched positive results too. In case of Monsanto, the issue of sustainability is again a controversial topic. According to the critics, the impact of the products of the company on the environment and the human health are not known therefore the products cannot be definitively termed as sustainable. However, the company denies such claims and clarifies that the genetically modified seeds produced by the company are helping the farmers all around the world to grow more food in less space using comparatively less amount of water. These claims by the company are apparently true because the products by the company are helping the farmers in a number of ways. However, the company has exploited its monopolistic position and the farmers are bound to use the herbicides and pesticides produced by the company in order to grow the seeds by the company. This fact cannot be denied that the products by Monsanto are not natural since they are genetically modified therefore the issue of the sustainability of the products cannot be determined conclusively. Environmental Issues The company has also faced heavy criticism due to its utter disregard for environment. The company has also been heavily fined for illegally polluting ground water. In the year 2003, the company’s illegal pollution came into foreground when the case was taken to court and the residents of the impacted area were awarded $700 million as compensation for decades of ground water contamination by the company. Following this situation, the company’s stock lost 50% of its value. Therefore, it can be said that the company has disregarded corporate governance regulations from a number of aspects. The company has shown no respect for environmental protection or human health and therefore it can be inferred that the company needs to revise its ethical guidelines. Ethical Issues One of the most talked about ethical issues attributed with the company is the patenting of company on the food products. According to critics, seeds and food products should not be considered technology and should remain generic however the company has patented its seeds and it has also initiated legal proceedings against a number of farmers who knowingly or unknowingly used the seeds of the company. The company also admitted bribing an Indonesian official to avoid the ‘environment impact assessment’ on the genetically modified cotton seeds of the company (BBC). This is highly unethical on part of the company and it can be inferred from this fact that the company does not respect any laws or regulation and focuses only on making huge profits. Works Cited BBC. Monsanto Fined $1.5 million for Bribery. BBC.co.uk, 7 January. 2005. Web. 13 December 2011. http://news.bbc.co.uk/2/hi/business/4153635.stm CBS News. Monsanto Strong-Arms Seed Industry. Cbsnews.com, 4 January. 2011. Web. 14 December 2011. http://www.cbsnews.com/stories/2009/12/14/business/main5978152.shtml Monsanto. Company History. Monsanto.com. 2011. Web. 14 December 2011. http://www.monsanto.com/whoweare/Pages/monsanto-history.aspx Read More